April 2015
AIDEA agreed to sell its
interest to the common
owners (Ezion and Teras)
in the Endeavour – Spirit of
Independence jackup drilling
rig in November 2014.
AIDEA received the funds for
its investment on February 9,
2015. The sale was warranted
due to the inability to obtain
long-term charter (drilling)
contracts for the rig in Alaska.
For the approximately three
years that AIDEA was
invested in the rig, an annual
return of roughly 6.1% was
realized. Importantly, the
rig’s activities contributed to
the renaissance of the oil and
gas industry in the Cook Inlet.
The successful drilling by
the Endeavour in 2013 of the
Cosmopolitan #1 well led to
the significant investment for
new oil production now being
planned by BlueCrest Energy.
PROJECT DESCRIPTION
In support of the 26th Legislature’s Senate Bill (SB) 309 that was passed to
promote oil and gas exploration in the Cook Inlet, AIDEA, in conjunction with
other partners, formed a limited liability corporation (LLC): Kenai Offshore
Ventures, LLC (KOV) to purchase and retrofit a jack-up drilling rig for oil and
gas exploration and development in the inlet. The rig, originally designed for
North Sea exploration, has been modified to meet current safety, environmental,
and other northern ocean exploration requirements. Specifically, the rig is:
•
Capable of drilling to 20,000 feet at up to 300 feet of water depth,
enabling it to drill nearly anywhere in Cook Inlet or other Alaskan Outer
Continental Shelf (OCS) waters, such as the Beaufort or Chukchi Seas.
•
Capable to lift up to 60 feet, enabling drilling for many of the existing
Cook Inlet platforms.
•
Capable of operating in temperatures as low as -10 degrees F.
•
Capable of maintaining stability in strong currents such as those present
in the Cook Inlet.
Through the operation of the rig in Cook Inlet, KOV helped to ensure the
continued exploration and development of a local supply of natural gas for
southcentral Alaska. A successful exploration well was drilled in Summer
2013 in the Cosmopolitan leases as owned at the time by Buccaneer Energy
and BlueCrest Energy. BlueCrest bought out the Buccaneer Cosmopolitan
leases in January 2014 and are now working to develop the oil and gas from
these leases.
ENDEAVOUR - SPIRIT OF INDEPENDENCE DRILLING RIG
CURRENT STATUS
FINANCE STRUCTURE ($MILLION)
(After 2014 Buccaneer sale to Teras)
Ezion/Teras
OCBC
$66.0
BUDGET/FINANCE
AIDEA invested $23.6 million in KOV, LLC for the
purchase of the rig, which was intended to be paid back
through revenues generated via Cook Inlet oil and gas
exploration or development activities. Originally, Kenai
Drilling, Ltd., a subsidiary of Buccaneer Energy, held
the exclusive bareboat charter for the use of rig. The
Buccaneer bankruptcy resulted in the dissolution of this
agreement. The common shares owners, were responsible
for overseeing and marketing of rig operations. Under the
LLC agreement, KOV is also required to keep the rig in
Alaska and drill a minimum of four exploration wells as
long as AIDEA’s preferred ownership continues. Kenai
Drilling drilled two wells in 2013 that produced good
prospects for further oil/gas development.
Total purchase, maintenance/refurbishment, and relocation
costs for the rig were approximately $120 million at the end
of 2013. A 2012 appraisal valued the rig at approximately
$127 million.
PROJECT/ ECONOMIC BENEFITS
In addition to the financial benefits as described above, the
following additional benefits were recognized from the
project:
•
Over 100 direct jobs for the operation of the rig
•
More than 75 support industry jobs
•
More than 300 indirect jobs created in the local
communities as a result of the new spending
$30.4
AIDEA
$23.6
Oil and gas discovered and developed through the
Endeavor’s operations support the Alaskan economy
through ensuring the availability of local natural gas for
Southcentral utilities and oil for continued local refinery
operations.
PARTNERS
KOV, LLC was formed through three primary partners:
•
AIDEA, who had “preferred” status in the partnership.
•
Ezion Holdings Limited, a large Singapore-based
company that owns and operates a large fleet of
support and drilling vessels for the oil and gas
industry. Ezion currently has operations in many
other parts of the world. Ezion with its subsidiary
Teras, own the common shares of KOV.
• Teras Investments Pte, Ltd., a subsidiary of Ezion.
In January 2014, Teras purchased the common
ownership shares of KOV held by Buccaneer Energy.
Oversea-Chinese Banking Corporation (OCBC), a
Singapore-based bank that has a long-term relationship
with Ezion has also provided a long-term, low-interest loan
for the rig purchase and refurbishment.
Due to the Buccaneer bankruptcy, the rig charter held by
Kenai Drilling, Ltd. (a Buccaneer subsidiary) was dissolved
and Ezion/Teras are now responsible for identifying a new
charter firm or directly marketing the rig to other oil/gas
developers/explorers. Long-term charter agreements were
not able to be obtained resulting in the decision to sell
AIDEA’s stake and move the rig out-of-state.
Information updated April 2015 • www.aidea.org • 813 West Northern Lights Blvd, Anchorage, Alaska 99503
Phone: (907) 771-3000 • Fax: (907) 771-3044 • Toll Free (Alaska Only) 888-300-8534