Three new directors were named to the board of Australian independent Buccaneer Energy in a special July 2 shareholder meeting, a development that puts the company’s current focus on Cook Inlet offshore exploration in question.
The board is now split three-to-three, with the three new directors — Nicholas Davies, Shaun Scott and Clinton Adams — critical of Buccaneer’s current exploration with the Endeavour jack-up rig, which is also partly owned by the State of Alaska.
Three other directors — company CEO Curtis Burton, Dean Gallegos, who is also the board chairman, and newly-appointed director Brian Moller — are supportive of the Alaska strategy, sources familiar with the shareholder election said.
Under the company’s rules, Gallegos, as chair, is entitled to an extra vote if there is a tie vote among the directors. However, a new investor in the company, Meridian Capital International Fund, is entitled to appoint a director, although it has not yet done so, Buccaneer said in a press release.
That would give the company seven directors.
The special board meeting came about at the request of two financial companies with offices in Hong Kong and Singapore — Pacific Hill International and Harbor Sun Enterprises Ltd., respectively — which purchased 8.69 percent of Buccaneer’s shares last December.
Under Australian law, shareholders with more than 5 percent of a company have the right to request a special shareholder meeting and to name new directors.
The company’s Alaska strategy is being questioned because of concerns for costs of the Cook Inlet offshore exploration and a preference for a less-risky onshore strategy.
However, the connection of Pacific Hill International and Harbor Sun Enterprises Ltd. with Hong Kong and potential mainland Chinese investment sources has caught the attention of state officials in Alaska.
Buccaneer’s CEO Curtis Burton, who was in Alaska recently touring company operations, defended the current plan of exploring both offshore and onshore in Southcentral Alaska because it gives the company access to potential oil production, which is offshore, as well as potential gas, which is both offshore and onshore.
The leases Buccaneer is exploring in Cook Inlet are known oil discoveries that can be evaluated for development with the Endeavour jack-up rig.
At this point it may be difficult for Buccaneer to change course, at least soon, because of contractual commitments and lease obligations to the state.
A spokesman for the Alaska Industrial Development and Export Authority, the state development finance agency that has partnered with Buccaneer and Ezion Holdings in the Endeavour rig, says it is watching developments with the company’s new board closely.
AIDEA has invested $23.6 million in Kenai Offshore Ventures, which owns the rig and is co-owned by Buccaneer and Ezion.
AIDEA feels its investment is protected by contracts signed with Buccaneer to drill additional wells on the company’s Cook Inlet leases beyond the current drilling at the Cosmo well, spokesman Karsten Rodvik said.
“All of Buccaneer’s obligations to AIDEA, including their commitment to drill four wells in Cook Inlet, are clearly and contractually defined, and must be fulfilled,” Rodvik said.
Buccaneer is also obligated to drill wells on its offshore leases under lease extension agreements signed with the Department of Natural Resources. If the wells are not drilled, Buccaneer is likely to lose the leases.
Buccaneer meanwhile announced new results on its Cosmo No. 1 offshore text in Cook Inlet on July 2.
The well is at approximately 6,000 feet and wireline testing has been completed on 170 feet of possible gas-bearing zones in the Upper Tyonek formation, which Buccaneer has drilled through.
“At least one zone is known to be capable of gas production as a gas sample was taken using MDT,” or a Measurement-While-Drilling tool, Buccaneer said in a press release.
The company plans now to deepen the well through known oil-bearing reservoir sections in the Starichkoff and Hemlock formations, where oil samples will be taken.
The company plans to do a production test of the shallower potential gas-bearing zones.
Buccaneer hopes to do a subsea production system at the site to avoid the cost and permitting issues related to a platform. The location is also near an existing onshore gas pipeline.
Tim Bradner can be reached at email@example.com.