Buccaneer Energy, an Australia-based independent company exploring for oil and gas in Cook Inlet, has suspended its CEO Curtis Burton and asked that trading of its shares on the Australian stock exchange be suspended while a restructuring of the company’s finances is accomplished.
The events appear connected with a series of problems Buccaneer has encountered with its Cook Inlet program that were complicated when a major investor failed to provide money that had been promised last year.
Buccaneer also announced March 14 that the company’s board will not be able to sign a half-year financial statement for the period ending Dec. 31 due to the restructuring now underway.
Sources familiar with Buccaneer said the actions are not expected to have an immediate impact on Alaska operations — Buccaneer is now a natural gas producer at its small Kenai Loop field on the Kenai Peninsula — but since Burton is a key architect of the company’s strategic plan to focus on Cook Inlet, his suspension may signal a move by the company’s board to refocus assets elsewhere, such as the U.S. Gulf of Mexico where Buccaneer is also active.
“Curtis Burton has been suspended with pay allowing for a (financial) review to be conducted. Mr. Burton has filed a lawsuit in the District Court of Harris County, Texas claiming improper termination of his employment contract,” Buccaneer announced in a March 6 press release.
The company has appointed John Young Jr. as its Chief Restructuring Officer effective immediately, according to the press release. Buccaneer asked for suspension of trading of its shares Feb. 19.
“The company will make further announcements as soon as it is able, but no later than April 30,” according to the March 14 press release.
The shakeup at the top at Buccaneer follows a series of difficulties for the company. One financial hit came when an investor in Buccaneer’s planned Inlet offshore wells and its West Eagle gas exploration well east of Homer, EOS Petro, failed to come through with money. That left the company scrambling for funds to drill the wells.
Money was advanced as a loan by Meridian Capital, which is also a part owner of Buccaneer, but the shortfall also led to a decision not to continue drilling late last summer at Southern Cross, an offshore prospect.
Meanwhile, the West Eagle exploration well turned up dry, which exacerbated problems.
Buccaneer has had its successes in Cook Inlet, though. The company was successful with 2011 natural gas exploration and has developed its small Kenai Loop field that now has two wells producing gas.
However, an expansion of the field is stymied by a complex dispute with Cook Inlet Region Inc., which owns adjacent acreage.
CIRI says Buccaneer’s existing wells may be draining resources from its land and has asked the Alaska Oil and Gas Conservation Commission, the state regulatory agency that sorts out such conflicts, to intervene. The commission held one hearing on the question Jan. 30 and plans a second hearing April 8.
With that issue unresolved, the commission has not given Buccaneer permission to turn on a third gas well at Kenai Loop that was been drilled but it not yet producing.
Ironically, Buccaneer had CIRI land under lease but the Anchorage-based Native regional corporation for Southcentral cancelled the lease in a dispute over terms. That issue is now in court.
Another success for Buccaneer, however, was drilling an exploration well at Cosmopolitan, an offshore prospect near Anchor Point, which found gas at shallower intervals that overlie a deeper oil deposit, which had been discovered earlier by ARCO Alaska, a previous owner of the leases. An estimate of new gas resources is still pending, but a second well, to delineate the discovery, is also needed.
Buccaneer was the operator of the exploration program but held a 25 percent minority interest in Cosmopolitan with Fort Worth, Texas, independent BlueCrest Energy, which held 75 percent.
When Buccaneer’s cash crunch hit in mid-2013, however, the company had to sell its 25 percent share to BlueCrest following the gas discovery along with a 50 percent ownership stake in the jack-up rig Endeavour, which was used in the drilling at Cosmopolitan.
Ezion Holdings, a Singapore-based investment firm that held the other 50 percent, purchased Buccaneer’s share of the jack-up rig. The Alaska Industrial Development and Export Authority, which helped Buccaneer and Ezion finance the acquisition of the Eneavour, also holds an interest in the rig.
Following the Cosmopolitan drilling, the Endeavour rig was moved into North Cook Inlet in late summer 2013 to begin drilling at the Southern Cross prospect, but then experienced problems setting the rig’s steel legs into the sea bottom due to unexpected soil conditions.
An alternative nearby site was surveyed, but faced with funding problems due to failure of the EOS Petro deal, Buccaneer had to terminate the drilling and move the rig to Port Graham, a port in south Cook Inlet, for winter storage.
That also meant the company missed a deadline with the state to drill the well, which prompted the state Division of Oil and Gas to terminate the unit late last fall. Buccaneer still has one lease within the former unit but the clock on a 2018 expiration is now ticking.
Meanwhile, Buccaneer has a 2014 commitment to ConocoPhillips to drill a well in deep parts of the North Cook Inlet field, where gas is now being produced from shallower intervals. Buccaneer’s “farm-out” agreement is to test deeper parts of North Cook Inlet for oil.
The company’s plan was to drill the deep intervals at North Cook Inlet, move the rig back to Cosmopolitan to drill a second well for BlueCrest, and to then return to North Cook Inlet to drill a second deep test.
However, to accomplish those things, the Endeavour rig, still in storage at Port Graham, must be mobilized soon. Whether that happens will depend on if Buccaneer has the funding to drill the expensive deep tests at North Cook Inlet, and whether the company’s board decides to stick with the overall Cook Inlet strategy pushed by Burton, the CEO who is now suspended.
Tim Bradner is a reporter for the Alaska Journal of Commerce. He can be reached at firstname.lastname@example.org.