AIDEA approves amended loan for BlueCrest

Kay Cashman

Petroleum News

An amendment to BlueCrest Alaska Operating’s loan agreement was approved by the Alaska Industrial Development and Export Authority on Aug. 12, allowing the company to make interest only payments for one year that will be applied to the loan’s principal.

BlueCrest, which operates the Cosmopolitan unit off the coast of the southern Kenai Peninsula, has been developing the field using increasingly complex well designs intended to improve production. The Cook Inlet unit, which is three miles offshore and five miles north of Anchor Point, is being developed from onshore; it produces mainly oil.

On July 24, 2015, AIDEA entered into a loan agreement with BlueCrest Alaska Operating, as borrower, and BlueCrest Alaska Oil & Gas, BlueCrest Cosmopolitan, and BlueCrest Energy as co-borrowers, under which it agreed to provide a line of credit of up to $30 million to finance the acquisition, transportation, set up and commissioning of a drilling rig, associated equipment and a camp facility for Cosmopolitan. The funds were fully disbursed.

In March 2016, Cosmopolitan went into production utilizing state-of-the-art extended-reach drilling technology to access the offshore oil reserves from its onshore drill site.

The wells are being drilled approximately 3 miles out and 1.5 miles down to reach the reservoir. Then the wells traverse an additional 1.5 miles horizontally through the productive sands. The specially built drilling rig is owned by BlueCrest and is the most powerful rig in Alaska.

After COVID-19 first hit Alaska and oil prices plummeted, AIDEA amended its loan agreement with BlueCrest, providing temporary relief from payments.

Due to ongoing COVID concerns and the inability of the State of Alaska to pay development tax credits owed BlueCrest, the company requested further relief.

AIDEA’s staff recommendation was to allow BlueCrest to make interest only (at the current rate) payments that would be applied to the loan principal, with principal and interest payments resuming on Aug. 1, 2022.

Alan Weitzner, executive director, spoke in favor of the amendment. “The board is aware from a previous BlueCrest Operating modification that they were very much impacted by drop in oil prices when COVID was first impacting Alaska. … They’ve come back as they are impacted by the same issues even with the increase in oil prices.”

In his comments to the board, Morgan Neff, chief investment officer for the loan, said that “BlueCrest has been a very good borrower and in good standing and has always made payments on time on their existing agreement and the modified agreement. Not only that, they continue to produce oil and gas hydrocarbons that generate a significant amount of royalty revenue for the state.”

To date, he said, Cosmopolitan has generated approximately $13.8 million in royalty revenue and has increased property values in the Kenai Peninsula Borough from $699 million to about $1.4 billion.