Buccaneer Buys Stake in Cosmo Project in Alaska, USA

Buccaneer Energy Limited advised that it was acquiring an interest in the Cosmopolitan Project (“Cosmo”). Cosmo was being jointly acquired with privately owned Fort Worth, Texas based BlueCrest Energy II, LP (“BlueCrest”) acquiring a 75% working interest, with Buccaneer acquiring a 25.0% working interest and assuming operatorship of the project.

The parties have mutually agreed with the vendor Pioneer Natural Resources Alaska, Inc. to extend settlement of the acquisition until the 28 June 2012.

Background
Cosmo is an undeveloped oil and gas field located in 50 feet of water in the Cook Inlet of Alaska and is in close proximity to the shoreline at Anchor Point on the Kenai Peninsula. Cosmo has regional proximity to Buccaneer’s other Alaskan assets and will utilise the capabilities of the Endeavour rig during the northern hemisphere winter.
The strong interest in the region, which contains the Cosmo project, is demonstrated by Apache Corporation acquiring leases surrounding and adjoining the leases near Cosmo during the last State lease sale conducted in June 2011.
Reserves
As part of its due diligence on Cosmo, Buccaneer and BlueCrest engaged respected consulting firm Ralph E Davis to conduct an independent reserve estimate on the project. The 2P Reserves of Cosmo increase Buccaneer’s independently assessed Alaskan 2P Reserves from 17.5 million barrels of oil equivalent (“MMBOE”) to 31.3 MMBOE. These Reserves estimates for the Cosmo project are supported by drilling, production testing and 3D seismic.

Preliminary Development Plans

Development of the Cosmo project involves two separate plans:

– A shallow gas development (3,000 – 4,000 feet) to be drilled with a jack-up rig; and

– A deeper oil development (6,000 – 8,000 feet) that can be exploited using directionally drilled wells from the shoreline.

An offshore well using the Endeavour jack-up rig is planned for late 2012 that will further quantify both the oil and gas zones of the project.
Development of the Cosmo project will begin in the northern hemisphere winter of 2012 and continue through to 2014. The preliminary development plan includes drilling and producing oil wells from the existing onshore production site and drilling offshore water injection wells for reservoir pressure maintenance.
Separately, offshore gas wells will be drilled and tied back to the existing onshore site which will be connected to ENSTAR’s recently completed gas transportation line.

Increased Jack-Up Rig Utilisation Improves Economics

The acquisition will allow the use of the Endeavour jack-up rig to provide a more efficient development plan than was previously available to Pioneer. Without access to a jack-up rig, all wells, including water injection wells needed to be drilled as long reach directional wells from onshore. Further, the shallower gas reserves could only be reached by an offshore drilling program that will utilise the Endeavour. Utilisation of the Endeavour jack-up rig materially improves the economic parameters of the overall project.

The Cosmo project is located in the southern part of the Cook Inlet which is free of ice flows during winter. Cosmo will provide a winter operational location for the Endeavour jack-up rig to utilise the rig when ice flows in the northern part of the Cook Inlet preclude drilling during the November – March period.

This provides several years of winter drilling business and is expected to materially improve the profitability of the Company’s offshore drilling division which was previously based on a 240 day drilling season.

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Source: Buccaneer Energy Ltd., April 3, 2012