By Naomi Klouda
Companies owed money by Buccaneer Alaska Energy are in the process of filing necessary paperwork with South Texas District Court, among them the village of Port Graham, where the Endeavour jack-up rig presently moors, idle.
The small Alutiiq tribe will need to stand in line along with an assortment of companies owed money by Buccaneer. The bankrupt Australian energy concern owes $30.8 million in outstanding liabilities to a long list of creditors.
Villagers who like to fish on the old Load-Transfer Freight Dock, which juts out into the tranquil channel, aren’t liking the way the rig “hovers” over them, said resident Daryl Kreun. The Spartan 151 jack-up also remains in the bay, though this is peak drilling season.
“The LTF (dock) is where most youth and elders fish for halibut, salmon, rock cod, flounder … , ” Kreun wrote in an email. “We do not like fishing from LTF and the docks. Both rigs just seem to hover over you.” The Load-Transfer Freight Dock, used for fisheries in the 1980s, became a popular spot for young people and others to access the deeper water for fishing.
A series of requests by Buccaneer’s attorneys were scheduled to be taken up in separate hearings this month in South Texas U.S. District Court. On Wednesday, the court hears arguments on whether to allow Buccaneer and its subsidiaries employment so work can carry on while bankruptcy decisions move. It also hears motions asking to proceed with paying for and receiving services.
On July 23, the court hears motions to allow stock voting and disclosures to proceed. It also takes up an emergency motion to approve bidding procedures in a future auction.
On Aug. 12, the court will hear an expedited motion for consolidating cases under Chapter 11.
While plans for paying its debts are getting worked out in a distant Houston courtroom, the Endeavour rig can still proceed with work, said Karsten Rodvik, external affairs officer with the Alaska Industrial Development and Export Authority. It isn’t tied to the Buccaneer or the bankruptcy. AIDEA owns $24 million interest in the $137 million-valued Endeavour.
The jack-up rig is no longer tied to Buccaneer or the bankruptcy, but it needs more fittings to make the rig suitable for working in harsh Alaska conditions, Rodvik said.
“The rig can work,” Rodvik said. “The bankruptcy does not relate to the rig since Buccaneer has no ownership of the Endeavour.”
Kenai Offshore Ventures is the entity that owns the rig, Rodvik said. AIDEA is a preferred member in KOV. Ezion Holdings Limited and its affiliate, Terras Investments, are the common members, and Buccaneer is no longer a member of KOV, Rodvik said.
Now KOV is working with Spartan to continue refurbishment work on the rig in anticipation of late summer drilling activities, he added.
KOV, as owner of the rig, also has the authority to lease the Endeavour. Under the bankruptcy action, the charter agreement Buccaneer subsidiary Kenai Drilling had with KOV was canceled. KOV is therefore actively looking at other leaseholders that might have an interest in chartering the rig.
“It is important to remind again that the bankruptcy has nothing to do with the rig,” Rodvik said
The season isn’t a wash yet. Spartan Drilling, on behalf of KOV, is working with BlueCrest Energy to determine how the Endeavour might help meet BlueCrest’s needs. KOV and Spartan continue to investigate new opportunities for use in Cook Inlet, Rodvik said.
Another question relates to the Port Graham Corp., which is owed fees for the Endeavour moorage this winter. Rodvik said that any amounts Buccaneer may owe to Port Graham or any other entity will be handled through the bankruptcy court.
Lloyd Stiassny, CEO of Port Graham Corp., said that bills for moorage owed to the village corporation are part of the bankruptcy filings.
“We have a claim in the proceedings, and we’re also working closely with the existing owner now to see how we can settle these matters,” Stiassny said. “It’s unusual business activity, with Buccaneer as the operator and their structure through an Australian firm. Anyway, they were not a bad organization. They’ve always been supportive of our concerns in Port Graham and we want to be engaged and supportive in the next chapter.”
One of Port Graham’s roles as a steward of Kachemak Bay is this opportunity to safeguard the moorage of Endeavour and Spartan rigs, Stiassny said. Villagers recall all too well the horrors of the Exxon Valdez Oil Spill.
“As stewards it’s good to be involved and good to have ongoing relationships with the companies. I have traveled to Houston to meet with Buccaneer and they were responsive to our concerns. They had strong safety plans in place,” Stiassny said.
The plan set forth to the Texas District Court last week lays out steps ahead, awaiting the judge’s approval. One key request is for an Aug. 4 auction to proceed that could raise a proposed $58 million by selling off assets. A company called AIX Energy out of Houston is listed as a major creditor. If the auction is approved by the Texas court, AIX is offering to act as the “stalking horse bidder” on Buccaneer’s assets. This means it would do the initial bids in order to assure minimum auction asking prices.
Another asset sitting idle is the Glacier drilling rig, known as Glacier No. 1. It remains unused on the West Eagle Unit about 23 miles from Homer off East End Road. Though Buccaneer announced it had spudded Jan. 22 to a depth of about 3,700 feet, the company later announced the well proved dry. They were unwilling to drill deeper, according to HotCopper, the Australian Stock Market Forum. Buccaneer decided to focus instead on its more lucrative Kenai Loop and Cook Inlet projects.
Soon after finding the well dry at the drilled level, the West Eagle prospect disappeared from the maps marking Buccaneer’s projects on the company’s website. Currently only the North Cook Inlet, Southern Cross, West Nicolai and Kenai Loop are delineated on the map, available to view at www.buccaneerenergy.com/alaska-onshore.htm.
Like the Endeavour jack-up rig, Buccaneer has relinquished ownership of the Glacier rig, which is under the operation of Spartan Drilling.
The list of creditors named in the South District Court bankruptcy filing includes subcontractors, such as Kenai Offshore Ventures LLC, Archer Drilling LLC, Terras Oilfield Support Ltd., Franks International LLC and AIM Technologies Inc. Other significant debts are owed to companies, such as a prominent New York public relations firm that fielded media questions the past two years, JMR World Wide. These companies are not listed in the court documents.
Bankruptcy proceedings require that individual companies owed money from Buccaneer file their claims with the court. The Office of the United States Trustee then conducts joint informal meetings with Buccaneer and its creditors, if one is required.
Jane Limprecht, media spokesperson for the Department of Justice bankruptcy trustee program, said the proceedings are reviewed to “supervise the integrity of the bankruptcy system.” While no party in bankruptcy court advocates for those owed money, this oversight is meant to ensure the law is upheld, Limprecht said.
The deadline for Kenai Peninsula and other companies submitting debt information was set by the court for Sept. 29. Claims are made before the U.S. District Court for Southern Texas.
What’s in a name
An auction, which Buccaneer hopes will take place in August, will allow AIX Energy, of Houston, rights to cast first bids on $58 million in assets. AIX Energy, not to be confused with a Dallas company by the same name, is listed as a primary investor in Buccaneer, first coming to the overextended company’s rescue in April, according to Buccaneer, which made an announcement in April.
But AIX’s undisclosed infusion of cash didn’t save Buccaneer from its fall into debt.
On May 31, Buccaneer filed for bankruptcy, listing all nine of its subsidiary arms — Buccaneer Resources LLC, Buccaneer Energy Limited, Buccaneer Energy Holdings Inc., Buccaneer Alaska Operations LLC, Buccaneer Alaska LLC, Kenai Land Ventures LLC, Buccaneer Alaska Drilling LLC, Buccaneer Royalties LLC and Kenai Drilling LLC.
Kenai Operating Ventures was a Buccaneer subsidiary, but KOV was sold to Terras Investments Pte. Ltd. for $23.95 million in January 2014, according the company’s announcement at the time. But KOV’s website continues to list contact people shared with Buccaneer, such as the media spokesman from the New York firm, JMR Worldwide.
Buccaneer Alaska Energy has declined to answer media questions during the bankruptcy proceedings.
South Texas District Judge David R. Jones hasn’t yet ruled that the nine companies listed with parent company Buccaneer would be joined under the same bankruptcy filing. Buccaneer’s attorneys argued these companies share administrations and finances and should stand as one collective court case.
Bob Shavelson, of Cook Inletkeeper, which tracks industries that do business in the inlet, also must keep tabs on a variety of company names that continuously change, he said. The Endeavour first arrived in Cook Inlet, brought by a company named Escopedia, which sold the majority of its rig interest to Furie Operating. Then Buccaneer arrived to buy the rig.
“It’s a huge shell game. These guys are spending other people’s money. Who regulates these businesses?” Shavelson said.
In the early days of corporations, they were supposed to have a public purpose for existing, he said. Now, when one fills out an application for forming a business, the line asking for “purpose” is typically filled out as “any legal (purpose),” Shavelson said. “It’s so far gone. These are legal shields of liability that allow people to shuffle things around and protect their financial interests. They put fisheries at risk because they didn’t know what they are doing.”
Buccaneer was attracted to Alaska by the promising oil and gas reserves when major companies, such as Marathon Oil, moved out of the inlet in 2008. The prospect of drilling leftover reserves was sweetened by the lucrative energy tax incentives adopted by the state in 2008 and 2010 to lure energy companies to Cook Inlet.
Those incentives were approved by state lawmakers at a time when natural gas and oil production faced potential shortages. Alaska’s natural gas users began making contingency plans. Local utility companies joined forces to study whether they needed to import liquefied natural gas to provide heat and electricity to Southcentral population centers.
To lure new investment to the inlet, the Alaska Legislature created a generous rebate program that refunds up to 65 percent of a company’s exploration costs associated with drilling at offshore or onshore leases. Alaska also rebates up to 45 percent of the development costs. Both cash incentives were available regardless of whether the company succeeds in producing oil or gas.
Buccaneer alone has received $31 million in tax rebates under the Alaska drilling incentive program and accrued another $25 million to $30 million of eligible expenses, ENEWS Energy reported in October, reporting on the exchange of information at a Houston teleconference between Buccaneer officials and investors last fall.
“It’s about the closest thing you’re going to get to free money from a government in the world,” Buccaneer’s Dean Gallegos said at the conference.