A state agency is selling its interest in a Cook Inlet drilling rig for $25.7 million, with its partners from Singapore now planning to take it to South Africa before the end of the month, the Alaska Industrial Development and Export Authority says.
AIDEA had invested $23.6 million in a company that owns the Endeavour drill rig, which became tied up in the bankruptcy of Buccaneer Energy, which had chartered the $120 million rig for Cook Inlet oil and gas exploration.
Under the agreement, AIDEA was to be repaid over five years, with 8 percent interest on the outstanding balances during that time. The rig had to remain in Alaska and drill a minimum of four exploration wells as long as AIDEA held preferred stock.
The rig has been idle this year and the operator was unable to get a drilling commitment for 2015. "At this time, insufficient need for the rig has made it uneconomic for the Endeavour to remain in Cook Inlet," AIDEA told legislators this week in a confidential briefing.
AIDEA said there was interest in 2016 drilling but no contract. Still, the partners in Kenai Offshore Ventures, the company that owns the rig, have kept up their commitments to make loan payments and perform rig maintenance, even with no revenue from the rig for most of this year.
As a requirement to be allowed to remove the rig from Alaska, the owners of the common stock in KOV are exercising their rights under the contract to buy out AIDEA. The agency said it is in discussions on plans for getting a new drilling rig in Cook Inlet to replace the Endeavour.
In addition to the $25.7 million, the agency had previously collected $4 million in dividends over two years on its investment. AIDEA said that after expenses it would clear just under $5 million.
"Although there continues to be great interest in having the Endeavour available for Cook Inlet drilling, there has been no long-term commitment and the economics of this situation have led KOV to find another customer. Pending final AIDEA approval of the sale of its preferred ownership in the Endeavour, the rig will leave Cook Inlet on a heavy lift vessel for transport to South Africa for use in offshore exploration," AIDEA said in a press release.
AIDEA said the drill rig "helped spur a renaissance of exploration in Cook Inlet" and was key to a major oil and gas discovery at the Cosmopolitan Unit.
"Even though the rig has not been chartered for much of this year, KOV common owners have lived up to the operating agreement and have invested additional funds into KOV to enable it to pay for rig operating and maintenance costs, as well as on-going refurbishment costs in anticipation of the Endeavour's continued Cook Inlet use," AIDEA said.