Homer Alaska - Business

Story last updated at 1:36 PM on Wednesday, April 25, 2012

Buccaneer to purchase drilling rig from Marathon subsidiary

Morris News Service — Alaska

Buccaneer Energy announced last week it has agreed to purchase the Glacier No. 1 Drilling Rig from Glacier Drilling Company, a subsidiary of Marathon Oil, for $7.5 million.

The acquisition is scheduled to settle on June 7 and will be funded by a $20 million project finance facility, according to a press release.

"The purchase of the Glacier rig is a significant milestone and key component of our onshore Alaska strategy, as it will allow us to immediately secure enabling assets in the Cook Inlet," Buccaneer Director Dean Gallegos said in the release. "The purchase of the rig insures timely drilling of our Kenai Loop project and also assists in the control of costs associated with the project."

The Glacier rig is a Mesa 1000 carrier mounted land drilling rig built in 2000 and designed with the input of Kenai Peninsula drill rig operators. The rig can drill to depths of about 12,000 feet and was designed to operate close to neighborhoods.

"The small size is ideal for pad drilling, minimizing the drilling footprint and impact to its surroundings," according to the release.

The rig was used to drill both of Buccaneer's Kenai Loop wells in 2011 and, according to the release, the company considers it an "important development in its ability to develop its onshore projects."

Buccaneer announced it expects high demand for use of the rig from other lease operators in the area and has already received interest in leasing it.

"Ultimately though we see the Glacier rig becoming a profit center for the company," Gallegos said. "There is a shortage of high-capability rigs on the Kenai Peninsula and we expect to be able to sign leasing deals with third parties while still protecting our interests."

Buccaneer has interest in oil and gas onshore and offshore in Cook Inlet including the Kenai Loop onshore gas project and offshore jack-up rig, the Endeavour — Spirit of Independence, which is expected in Cook Inlet waters from Singapore in early summer.