Operational Update and Kenai Loop Reserves
Sydney, Dec 19, 2013 AEST (ABN Newswire) - Buccaneer Energy Limited (
ASX:BCC) ("Buccaneer" or "the Company") provides the following operational update on its Cook Inlet, Alaska projects.
West Eagle - Glacier Rig
The Glacier Rig is on site at the West Eagle Unit. The Company will provide a further update when the well spuds.
The primary objective of the West Eagle #1 well targets a 150' Upper Tyonek interval of sandstones that had gas shows in a down-dip offset well, the Standard Oil of California, Anchor River #1. Up-structure on a northeast to southwest trending ridge, the West Eagle well will test a large amplitude anomaly mapped on 233 miles of 2D seismic data. The anomaly size is estimated at more than 4,000 acres.
Under the terms of the Unit Agreement with the Alaskan Department of Natural Resources ("DNR") the Company was required to spud the West Eagle #1 well before 1 December 2013 to retain a US$600,000 bond. Additionally, it is required to complete the West Eagle #1 well to approximately 5,200' by 31 January 2014 in order to retain a second US$600,000 bond and the acreage within the approved unit. Once the well has been completed, the Company will explore its options with the DNR regarding the status of the first bond. When drilling operations are finished, testing of the well is expected to take an additional 8 days.
Cosmo #2 - Endeavour Jack-Up Rig
The Endeavour jack-up rig is currently stationed at Port Graham, Alaska. The Company is awaiting advice from the various Alaskan regulatory groups regarding approval of its applications for winter drilling operations.
The Cosmopolitan Project is located in the southern reaches of the Cook Inlet, these areas are typically considered to be ice-free during the winter. The Company, in its role as Operator of the Cosmopolitan Project, applied to the Alaskan Oil and Gas Conservation Commission ("AOGCC") on October 8, 2013 to drill the Cosmo #2 well. It has yet to receive clear guidance from the agency with respect to its drilling plan and timing.
The Cosmo #2 well will be limited to the gas zones intersected in the Cosmo #1 well. It will be drilled as a field delineation well, so as to further understand the extent of the gas field. Deepening the well to further explore the oil-bearing sands may be done at a later date.
Partnering and Capital Management
The Company has received interest from multiple parties to both farm-in and/or acquire assets from the Company's portfolio. The total amount of these proposals is material to the Company and its short and medium term funding requirements.
Currently, these proposals are conditional and non-binding. Accordingly, further releases will be made if and when binding agreements are executed in respect to these proposals.
Kenai Loop - Operations
The Kenai Loop #1-1 and #1-3 wells continue to produce consistently and are problem free. Additional gas sales through the winter are possible if cold weather causes an increase in demand. Additional spot sales may also be possible to industrial clients. Updates will be provided as they occur.
Kenai Loop - Reserves & Resources
The Company commissioned a revised reserve certification report from Houston based independent engineering firm Ralph E Davis. The current reserves attributed to only the 9,700' and 10,000' sand within the 9,308 acres of the Kenai Loop project, as at 1 October 2013, are as follows:
9,700' & 10,000' Sands Co-mingled------------------------------------------------------- Reserves (1P) (2P) (3P) ------------------------------------------------------- Gas-BCF Proved Developed Producing (PDP) 13.4 13.4 27.6MMBOE 2.2 2.2 4.6------------------------------------------------------- 9,700' Sand Only-----------------------------------------------------------------Prospective Resources Low Estimate Best Estimate High Estimate----------------------------------------------------------------- Gas-BCF 18.8 37.6 56.4MMBOE 3.1 6.3 9.4-----------------------------------------------------------------1 Gas to oil conversion using a Gas to Oil ratio of 6 - 12 Net of all royalties
The PDP Reserves have an estimated Future Net Income of US$80 million and a Present Value (at a 10% discount) of US$63.0 million.
The Company has previously reported reserves and resources based on the working interest it has in each project. Consistent with amendments to the ASX Listing Rules that came into effect on the 1 December 2013, the above reported estimate of Reserves and Prospective Resources are on a Net basis after deducting the interest of royalty holders.
To date the Kenai Loop field has produced 4.7 BCF of Gross gas, and the current daily production rate is approximately 8.8 million cubic feet per day ("MMCFD") from the Kenai Loop #1-1 and #1-3 wells. Pressure monitoring on the 9,700' Sand in the Kenai Loop # 1-4 well has determined that the well is in communication with the 9,700' Sand from the two wells which are currently in production.
Possible Reserves and Prospective Resources are reported on an un-risked basis using a recovery factor of 90% of original gas in place. In accordance with ASX Listing Rule 5.28.2, the estimated quantities of gas that may potentially be recovered by the application of a future development project relate to undiscovered accumulations. These estimates have both an associated risk of discovery and a risk of development. Further exploration appraisal and evaluation is required to determine the existence of a significant quantity of potentially developable hydrocarbons.
Kenai Loop - Future Drilling Locations
Mapping of the 9700' Sand within the Company's acreage position has also been completed. This mapping provided the technical support for the above Possible Reserves and Prospective Resource estimates.
Kenai Loop - Possible Reserves
The Possible Reserves were mapped in two separate areas (areas # 4 and 6) with a total aerial extent of 735 acres and with total recoverable Possible Reserves of 19.3 BCF (3.2 MMBOE) gross; 14.2 BCF (2.4 MMBOE) net.
The Company estimates that, if successfully delineated, up to 3 wells could be required to fully drain these Possible Reserves.
Kenai Loop - Prospective Resources
The Prospective Resources were mapped in six separate areas (areas # 1-3, 5 & 7-8) with a total aerial extent of 2,038 acres with Best Estimate (P50) Prospective Resources of 53.4 BCF (8.9 MMBOE). The Company estimates that, if successfully delineated, up to 8 wells could be required to fully drain these Prospective Resources.
The Company believes that there are potentially additional multiple production horizons other than the 9700' Sand within the Tyonek Formation in the 9,308 acre lease position. As these horizons are proven to be productive, additional reserves and resources are expected to be delineated.
Kenai Loop - Operating Netbacks
The term "Operating Netback" is a measure of oil and gas sales net of royalties, production and transportation expenses and is a common metric against which to compare companies operating in the energy industry.
The Company enjoys relatively high Operating Netbacks compared to its peers operating in the US energy industry with net operating margins of approximately 75%, see Figure 1.
Figure 1.Kenai Loop Production----------------------------------------------Production Month Operating Net Back US$/MCF----------------------------------------------December 2012 $7.48January 2013 $6.70February 2013 $5.83March 2013 $4.95April 2013 $4.27May 2013 $4.75June 2013 $4.62July 2013 $4.68August 2013 $4.79September 2013 $4.75October 2013 $4.79November 2013 $4.57-------------------------Average $5.07-------------------------
Cook Inlet Regional Authority ("CIRI") - AOGCC Hearing
The AOGCC has set down a public hearing date on 30 January 2014 to hear CIRI's objections in respect to the Company producing from wells at its Kenai Loop project. A further release will be made when the AOGCC has made a decision after that hearing.
Management Statement
Curtis Burton, MD and CEO of Buccaneer Energy commented, "The Buccaneer management team is working with its new board to bring them up to speed on the various operations under way within the Company. We are also working with the board to reduce overhead and to map out tactical and strategic plans for the Company going forward. These plans include revisiting our capital position, our holdings and our near term development plans."
Contact
Buccaneer Energy Limited
T: +61-2-9233-2520
F: +61-2-9233-2530
WWW: www.buccenergy.com
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