Buccaneer Energy announced Wednesday it has agreed to purchase the Glacier No. 1 Drilling Rig from Glacier Drilling Company, a subsidiary of Marathon Oil, for $7.5 million.
The acquisition is scheduled to settle on June 7 and will be funded by a $20 million project finance facility, according to a press release.
"The purchase of the Glacier rig is a significant milestone and key component of our onshore Alaska strategy, as it will allow us to immediately secure enabling assets in the Cook Inlet," Buccaneer Director Dean Gallegos wrote in the release. "The purchase of the rig insures timely drilling of our Kenai Loop project and also assists in the control of costs associated with the project."
The Glacier rig is a Mesa 1000 carrier mounted land drilling rig built in 2000 and designed with the input of Kenai Peninsula drill rig operators. The rig can drill to depths of about 12,000 feet and was designed to operate close to neighborhoods.
"The small size is ideal for pad drilling, minimizing the drilling footprint and impact to its surroundings," Buccaneer wrote in a press release.
The rig was used to drill both of Buccaneer's Kenai Loop wells in 2011 and, according to the release, the company considers it an "important development in its ability to develop its onshore projects."
Buccaneer announced it expects high demand for use of the rig from other lease operators in the area and has already received interest in leasing it.
"Ultimately though we see the Glacier rig becoming a profit center for the company," Gallegos wrote. "There is a shortage of high-capability rigs on the Kenai Peninsula and we expect to be able to sign leasing deals with third parties while still protecting our interests."
Buccaneer has interest in oil and gas onshore and offshore in Cook Inlet including the Kenai Loop onshore gas project and offshore jack-up rig, the Endeavour -- Spirit of Independence, which is expected in Cook Inlet waters from Singapore in early summer. Endeavour is also equipped to drill in the Beaufort and Chukchi seas, Buccaneer reported.
Buccaneer also announced Wednesday execution of a new term sheet for a $20 million project finance facility, which will be finalized in the next few weeks. The funds raised from the project will be used for the purchase of the drill rig, vendor payments and transaction, and general and operational expenses, according to the release.
"Buccaneer is firmly committed to its Alaska strategy and we are looking forward to progress on our Kenai Loop project including our next well at Kenai Loop and our first offshore well later this year," Gallegos wrote in the release.