Buccaneer Energy has experienced another setback in its oil and gas exploration efforts in Alaska. After spending millions of dollars to begin an onshore project east of Homer, the company is pulling up stakes and abandoning its only well at the site.
It wasn’t long ago that officials with Australia-based Buccaneer Energy were very excited about the company’s prospects at West Eagle. Speaking to investors in a video uploaded to YouTube in November. Buccaneer CEO Curtis Burton said that the geology of the West Eagle very promising, as were the results of 2-D seismic testing conducted at the site.
"We have both oil and gas targets at West Eagle," said Burton at the time. "If it's typical to the other structures like it that have been drilled on the peninsula, it will be hydrocarbon-bearing."
After weeks of drilling, however, Buccaneer officials admitted Monday that the West Eagle prospect has fallen short of their expectations.
In a news release, officials said that after drilling to a level of 3,700 feet, the company did not find the hydrocarbon reserves that had been hoped for. As a result, Buccaneer is calling it quits at West Eagle #1. It will be plugging and abandoning the only well it dug there.
The disappointing results come after Buccaneer spent more than $9.4 million to mobilize at West Eagle. Those costs include more than $1.8 million to improve sections of East End Road and build a camp at the drilling site, plus $3.4 million to prepare and move the Glacier drilling rig from Kenai to Homer.
Buccaneer says the State of Alaska will be on the hook for more than half of that total, thanks to the return of bond funds and expected payment of tax credits through ACES.
In his quarterly report, Burton said Buccaneer has so far recovered $30.5 million dollars from the state through ACES, with another $24.5 million dollars co-invested on its Endeavor jack-up rig through the Alaska Industrial Development and Export Authority.
Burton applauds the tax incentives and investment Buccaneer has received from the State of Alaska but at the same time, says the state’s regulatory agencies have sometimes acted as a hindrance to the company’s plans.
"Those guys can inadvertently ... and sometimes overtly cost you time and money in going out and executing a program," he said. "The state has .... been slow to rule and in other cases, ruled against what we were doing in ways that cost us time and money."
Officials with Buccaneer Energy did not return telephone calls in time for this story but in Monday’s news release, Burton said the company would now focus its attention on its onshore leases at Tyonek Deep and its onshore operation at Kenai Loop.
Kenai Loop has been one of the company’s few success stories in Alaska but even that project has come under a shadow. Court hearings are scheduled for later this week to settle ownership disputes about the wells between Buccaneer, Cook Inlet Region, Incorporated and the Alaska Mental Health Trust.
In a statement, the Buccaneer board of directors said the failure at West Eagle would force it to seek out additional working capital, which could include the sale of existing assets, in order to make a scheduled payment to the Chicago investment firm Meridian Capital by June 30th.