Houston-based and Alaska-focused Buccaneer Energy, which has struggled to fund its Cook Inlet drilling program as its shares have languished, is facing a move to replace its entire board by two dissident shareholder groups that argue the company needs to streamline its operations and tone down its ambitions.

Investor groups Pacific Hill International Ltd. and Harbour Sun Enterprises Ltd. maintain that Buccaneer is floundering and that management does not have a coherent direction for the company. Their resolutions to change the board are to go before shareholders Tuesday (July 2). Buccaneer shares are traded on the Australian Securities Exchange; since hitting a high of A39 cents in May 2008, Buccaneer has traded around A4 cents/share.

The dissident shareholders own 8.69% of the company. In a letter to shareholders last week, Buccaneer Chairman Alan Broome touted the company’s “world-class Alaskan asset portfolio, where we anticipate a substantial ramp-up in value creation — with production due to accelerate at the company’s onshore Kenai Loop project and development drilling in progress at the company’s offshore Cosmopolitan project.”

In January 2012, Buccaneer began production from its Kenai Loop No. 1 well in gas-hungry Southcentral Alaska (see NGI, Jan. 23, 2012). It now has two wells producing onshore and is drilling a third offshore.

Buccaneer had previously struck a deal to supply gas to local utility Enstar Natural Gas Co. (see NGI, Aug. 29, 2011). The Alaska driller is based in Houston but its shares are traded on the Australian Stock Exchange, a fact that makes the bar lower for dissident shareholders wishing to challenge management.

In Alaska, Buccaneer holds a 100% working interest in the Southern Cross Unit offshore Alaska with a net revenue interest of 79.25%. Proved plus probable reserves are estimated at 12.7 million boe. The company’s North West Cook Inlet unit adjoins ConocoPhillips’ North Cook Inlet field, which has produced 1.85 Tcf of gas from the Sterling and Beluga formations, according to Buccaneer. Additionally, Buccaneer holds 25% working interest in the Cosmopolitan Project and is the appointed operator. The undeveloped oil and gas field is in 84 feet of water in the Cook Inlet and is near the shoreline near Anchor Point on the Kenai Peninsula.

In May, Buccaneer said it was funded for its first Cosmopolitan well and its next three Kenai Loop wells with cash on hand and debt.

The dissident shareholders wrote that Buccaneer “has experienced permitting delays, drilling delays and costs overruns on both drilling activities and the refurbishment of the [Buccaneer-owned] jack-up rig.” In response, Broome conceded delays and cost overruns but said these were similar to those experienced by most resources companies.

He touted the Kenai Loop production and utility supply contracts as accomplishments of the company over the last three years, as well as increasing net revenue from nothing to an annualized $18 million per year.

In his own letter to shareholders, CEO Curtis Burton struck a similar tone. “When we were told that bringing a jack-up rig to the Cook Inlet wasn’t possible, we made it happen,” Burton wrote. “When our major funder pulled from the market in 2012 and we were told that nothing could be done, we found a solution. When the markets fell apart in 2008 and our lender was squeezed due to low gas prices, we found another path.”

Burton said the dissident investors “…would see Buccaneer pull back from bold moves and reduce its exposure to offshore production…In their view, to move from a micro-cap to a mid-cap, the company must get a smaller vision of its role in the industry and what is possible…I can tell you that thinking small has never achieved great results, nor has it provided significant returns on investments.”

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