Buccaneer Energy Signs New Cook Inlet ENSTAR Gas Contract
NEW ENSTAR GAS SALES CONTRACT
- New gas sales contract at US$6.80 / MCF
- Currently producing at 10.0 MMCFD increasing to 11 – 11.5 MMCFD
- Operating cash flow of US$21.0 million per annum
- Proved Developed Reserve increased 98%
- Proved Developed PV10 US$70.0 million
Buccaneer Energy Limited (“Buccaneer” or “the Company”) is pleased to advise that it has executed a short term gas sales contract with Alaska Pipeline Company (“APC”), a wholly owned subsidiary of SEMCO Energy, Inc. The gas will be provided to APC’s affiliate, ENSTAR Natural Gas Company, a division of SEMCO Energy, Inc. (“ENSTAR”). APC and ENSTAR are regulated public utilities in Alaska and ENSTAR is the largest gas utility in Alaska, supplying approximately 135,000 residential and commercial users in South Central Alaska.
The short term gas sales contract allows for the commencement of gas sales to ENSTAR from the Kenai Loop # 4 well during the period 20 March – 30 September 2013. Buccaneer and APC are also in discussions for a new multi-year contract.
The short term gas sales contract is a firm commitment by Buccaneer to deliver and a firm commitment by ENSTAR to purchase volumes of between 4.37 and 5.0 million cubic feet per day (“MMCFD”) at a set price of US$6.80 / MCF. ENSTAR is responsible for transportation costs after the receipt points.
This new contract is additional to the existing gas sales agreement with ENSTAR to sell 5.0 MMCFD at an estimated annual weighted average price for 2013 of approximately US$6.19 / MCF. Under that contract ENSTAR is also responsible for transportation costs after the receipt points.
The Company is currently negotiating a third gas sales contract to a private third party user to deliver gas at a rate of 1.0 – 1.5 MMCFD commencing on 1 April 2013, the pricing of this contract is expected to be at a premium to the most recent ENSTAR gas sales contract.
The Kenai Loop field is currently producing 10.0 MMCFD and is anticipated to increase to 11.0 – 11.5 MMCFD from 1 April 2013. This is expected to deliver approximately US$21.0 M in net operating cash flow at the wellhead after royalties and operational expenses.
The Company has received a revised reserve certification from Ralph E Davis for the Proved Developed Producing (“PDP”) and Proved Developed Non Producing (“PDNP”) components of the Kenai Loop reserves.
The PDP Reserves have increased to 19.9 BCF (3.3 MMBOE) with an additional Proved Developed Non Producing (“PDNP”) reserves of 2.4 BCF (400,000 BOE). The total Proved Developed Reserve category is therefore 22.3 BCF (3.7 MMBOE) for a 98% reserve increase.
The PDP and PDNP Reserves have a Future Net Income of ~US$100 million and a Present Value (at a 10% discount) of US$70.0 million.
The Company is currently finalising subsurface mapping at the Kenai Loop Field so Ralph E. Davis can certify the Proved Undeveloped (“PUD”), Probable and Possible reserves. Additionally the Company is seeking an estimate from Ralph E. Davis on the total Resource potential of the Kenai Loop Field which will require further analysis of subsurface mapping and which includes the 25 square mile 3D seismic acquired over the area in 2012.