Entering text into the input field will update the search result below

AIDEA Buys into Kenai Offshore Ventures with Buccaneer Energy (BCC) and buys a rig from TransOcean with EZION behind them - and we're not sure if this is a good deal?

Apr. 08, 2011 5:44 PM ETCOP, APA, DVN, CVX, SHEL
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

As we watch the numerous reports about AIDEA and their investment with Buccaneer Energy (BCC) in Kenai Offshore Ventures (KOV) some facts keep coming up while others have been elusive.  We have heard for days that Buccaneer is bringing a LeTourneau 116-C type rig to the inlet.  AIDEA let us know that the rig was owned by Transocean and would need to be transported from Singapore to the Cook Inlet.  Well now we discover that the rig is in fact Transocean’s Adriatic XI, thanks to the Petroleum News.


Other details are coming out as well, AIDEA doesn’t consider their rig to be in competition with the Spartan 151.  They suggest that having an ownership stake in the rig means that it will remain in the Inlet for some time.  I have to agree with them on that one, the Spartan 151 is leased and if it doesn’t qualify to drill any other prospects I assume it will be heading home.  Everyone, including the media, keeps asking about this pesky Jones Act waiver.  Tim Sutherlin keeps referring to getting a “fresh waiver” or simply paying a fine.  His mantra seems to be, we have one from 2006.  But the one from 2006, which is posted on his website, says it is for the TAI AN KOU for use to transport a jack-up rig and in parentheses (the “Tellus Rig”).  A quick Google search will show you that people have gone to jail for violating the Jones Act, so he should hope he just gets a fine.


Other details in this deal are interesting as well.  Buccaneer Energy took ten months to solidify the deal with AIDEA, EZION, and Transocean.  EZION is a major operator on the Pacific Rim and regardless of recent history; Transocean is the largest drill rig operator in the world.  Directly on Buccaneer’s website it states that Hercules Offshore is a “preferred” provider so they will undoubtedly be involved.  On the Buccaneer team you have direct offshore operating experience through Andy Rike and they are currently operating offshore platforms in the Gulf of Mexico with Clint Wainwright heading up the team.  A team of 11 with additional consultants on call is listed on the Buccaneer site.  Even Danny Davis is worried because the KOV appears to have “deep pockets”.


Beyond the deal, it is also interesting to look at the equipment. First of all the Adriatic XI was designed to be operated in the North Sea.  It stands in water up to 300 feet on legs that are 410 feet long, it has upgraded Caterpillar 3516-B diesel engines (4 of them), 1,855 hp, driving four Caterpillar SR4 generators,  The variable deck weight is 8,890 kips at 300 ft. so it can carry everything it needs to drill successfully, fully extended it can handle a 20 ft. wave and 50 knot winds with a 1.5 knot current.   The rig can handle a 15k BOP and all ready has a Choke and kill manifold rated at 15,000 psi.


Suffice it to say that Spartan Offshore and the Spartan 151 don’t match up to any of the specifications above.  The Spartan is smaller and it barely stands in 150ft of water.  It was built for the Gulf of Mexico, not the North Sea, it doesn’t have new engines and the variable deck weight is comparatively very low.  Spartan is a small operator in the Gulf of Mexico with no cold water experience.  Escopeta has Danny Davis and we all know he has ex-Petroleum News writer Steve Sutherlin; hardly an offshore drilling specialist.  One has to wonder if this was one of those deals done on a handshake and a napkin over cocktails.


Which do we really want operating a drilling rig in the sensitive waters of the Cook Inlet?


Apparently AIDEA would agree with that assessment.


"AIDEA does not believe it is offering competition to anyone. Rather, AIDEA is facilitating the presence of a jack-up rig which otherwise would not have come to Cook Inlet. There is good reason to have more than one rig in such a very large exploration area."

The Buccaneer rig has different capabilities than the Escopeta rig, Rodvik said. It can handle different work in Cook Inlet for other lease owners on the basis of those capabilities, such as the ability to work in deeper water, deck size, crew size and pressure capacity.” From the Petroleum News.


"AIDEA is aware that Escopeta is planning to bring a smaller, leased rig to Cook Inlet. Escopeta's rig will initially drill that company's leases. Likewise, the AIDEA-financed rig will be drilling at least four wells on leases held by Buccaneer, as committed in the agreement with Buccaneer and Ezion," said AIDEA spokesman Karsten Rodvik.”  Alaska Daily News

So AIDEA knows a little rig is coming to the Inlet, they know Danny Davis is a small operator, without a Jones Waiver or a long-term deal with a very small operator from the Gulf of Mexico.

Why does every article from every one of our illustrious media feature a quote from Steve Sutherlin and one or two from AIDEA, but none from EZION, Buccaneer Alaska, Buccaneer Energy, or Transocean?

Why does everyone bring up the Jones Act, but not the consequences if you don’t have one?

Why hasn’t anyone checked to see if the 22 well identified by AIDEA can even be drilled with the Spartan 151?

Why do these two companies even get dual billing in these articles?

What happens if EZION decides we are a bunch of lightweights and takes it’s dollars elsewhere?

What happens if Transocean decides that they are tired of being compared to Spartan Offshore?  Could make for interesting times if they decide to drop out of this deal for lack of appreciation.

A deal like this should be nurtured.  We are getting a tip flight rig into the inlet, an operating team with lots of experience and a relationship with a top rig operator like Hercules.  We are getting a company that is based in Kenai, bringing us up to 500 new jobs.  As the State of Alaska, we are getting an equity position in the deal, we need to make sure we support this effort and not let someone else screw it up either directly or indirectly.


Just my opinion though.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.