ExxonMobil, Statoil to Begin Developing Julia Oil Field in Gulf of Mexico

Exxon Mobil Corp. and Statoil ASA have agreed to begin jointly developing the Julia oil field, estimated to hold nearly six billion barrels of resources, in the Gulf of Mexico.

The companies each own a 50% stake in the field, located about 200 miles south of New Orleans, La., and which is expected to take about three years to develop.

Exxon said capital cost for the project, which is expected to begin oil production in 2016, is estimated to be more than $4 billion.

The field will initially produce 34,000 barrels of oil a day and includes six wells with subsea tie-backs to the Jack & St. Malo production facility operated by Chevron U.S.A. Inc.

Two weeks ago, Exxon reported its first-quarter profit rose slightly compared with last year but its production of oil and natural gas fell for the seventh consecutive quarter on a year-over-year basis.

Shares of Exxon slid seven cents to $91.08 in after-hours trading. The stock is up 7.9% over the past 12 months.

Last week, Norwegian oil and gas company Statoil posted 58% lower first-quarter net profit on the year, missing expectations amid lower production volumes and lower prices.

Copyright (c) 2013 Dow Jones & Company, Inc.

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Deepwater Gulf of Mexico Drilling Activity to Keep Rising

Drilling activity in the deepwater U.S. Gulf of Mexico continues its recovery, according to data from Rigzone's database RigLogix.

As of April 23, 37 semisubmersibles and drillships are under contract in the deepwater Gulf of Mexico, according to RigLogix. Shell has seven deepwater rigs under contract – currently the highest number of rigs for an operator in the Gulf of Mexico. BP has the second largest number of deepwater rigs under contract with six, followed by Chevron with five, and Anadarko with four.  

Other operators currently active in the U.S. Gulf include Petrobras, BHP Billiton Plc, Eni S.p.A., LLOG Exploration and Hess. , which have two deepwater rigs each under contract.  Walter Oil & Gas, Noble Energy, ExxonMobil Corp., Cobalt International Energy and Apache Corp. each have one deepwater rig under contract in the region.

The number of deepwater semisubmersibles and drillships working in the U.S. Gulf of Mexico could rise to 52 in June 2014 and 54 in December 2014 if all of the deepwater rigs currently under contract remain so  according to data from Rigzone's RigLogix database.

Operators with rigs under firm contract in the U.S. Gulf in December 2014 will include BP plc, which will have six rigs, the most from any operator. Royal Dutch Shell plc will have five rigs under firm contract during that time. Anadarko Petroleum Corp. is expected to have four rigs working, followed by Chevron Corp. and LLOG Exploration Co. LLC, with three rigs each under firm contract.

Exxon Mobil Corp., Petroleo Brasiliero S.A. (Petrobras), Plains Exploration & Production Company, and Statoil ASA each are expected to have two rigs under contract in the Gulf of Mexico in December 2014.  At that time, BHP Billiton Ltd., Eni S.p.A, and Murphy Oil Corp. will each have one rig under firm contract.

Eight of these units have unexercised options, while 13 units do not have any future contracts. If these options are exercised and 13 units without contracts receive awards, the number of rigs under contract will reach 54, according to RigLogix.

Since the beginning of the year, 10 new contracts have been awarded, plus two options exercised, for a total of 12 contracts. Of those 10 contracts, two were sublet contracts.

Optimism over the Gulf of Mexico's exploration and production outlook continues to grow as drilling activity and bidding activity resumes following the post-Macondo moratorium imposed by the Obama administration. Earlier this month, Parks Paton Hoepfl & Brown Managing Director G. Allen Brooks noted that the results of Central Gulf of Mexico Lease Sale 227 suggest the oil and gas industry is bullish on prospects in the region.

Shell, Anadarko, Noble, ExxonMobil, BHP and Murphy Oil Corp. have drilled successful appraisal wells since the beginning of 2011. Statoil, Chevron, Noble, LLOG, Cobalt and Anadarko have also drilled successful exploration wells during that time.

Last month, Chevron reported making a deepwater U.S. Gulf oil discovery at the Coronado prospect. In November 2012, Noble reported it had made a discovery in the Big Bend exploration area of the deepwater Gulf. 

Challenging conditions of the Lower Tertiary, including deep well depths, high pressure, high temperature conditions, and dense sub-surface salt have raised questions over the potential and timing for exploration success in this frontier Gulf play. Barclays analyst James C. West said in an April 23 research note.

The Coronado, Shenandoah and other Lower Tertiary discoveries have helped confirm the potential and drive further operator interest in the Lower Tertiary play in the deepwater Gulf, West added.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
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Deepwater Gulf of Mexico Drilling Activity to Keep Rising

Drilling activity in the deepwater U.S. Gulf of Mexico continues its recovery, according to data from Rigzone's database RigLogix.

As of April 23, 37 semisubmersibles and drillships are under contract in the deepwater Gulf of Mexico, according to RigLogix. Shell has seven deepwater rigs under contract – currently the highest number of rigs for an operator in the Gulf of Mexico. BP has the second largest number of deepwater rigs under contract with six, followed by Chevron with five, and Anadarko with four.  

Other operators currently active in the U.S. Gulf include Petrobras, BHP Billiton Plc, Eni S.p.A., LLOG Exploration and Hess. , which have two deepwater rigs each under contract.  Walter Oil & Gas, Noble Energy, ExxonMobil Corp., Cobalt International Energy and Apache Corp. each have one deepwater rig under contract in the region.

The number of deepwater semisubmersibles and drillships working in the U.S. Gulf of Mexico could rise to 52 in June 2014 and 54 in December 2014 if all of the deepwater rigs currently under contract remain so  according to data from Rigzone's RigLogix database.

Operators with rigs under firm contract in the U.S. Gulf in December 2014 will include BP plc, which will have six rigs, the most from any operator. Royal Dutch Shell plc will have five rigs under firm contract during that time. Anadarko Petroleum Corp. is expected to have four rigs working, followed by Chevron Corp. and LLOG Exploration Co. LLC, with three rigs each under firm contract.

Exxon Mobil Corp., Petroleo Brasiliero S.A. (Petrobras), Plains Exploration & Production Company, and Statoil ASA each are expected to have two rigs under contract in the Gulf of Mexico in December 2014.  At that time, BHP Billiton Ltd., Eni S.p.A, and Murphy Oil Corp. will each have one rig under firm contract.

Eight of these units have unexercised options, while 13 units do not have any future contracts. If these options are exercised and 13 units without contracts receive awards, the number of rigs under contract will reach 54, according to RigLogix.

Since the beginning of the year, 10 new contracts have been awarded, plus two options exercised, for a total of 12 contracts. Of those 10 contracts, two were sublet contracts.

Optimism over the Gulf of Mexico's exploration and production outlook continues to grow as drilling activity and bidding activity resumes following the post-Macondo moratorium imposed by the Obama administration. Earlier this month, Parks Paton Hoepfl & Brown Managing Director G. Allen Brooks noted that the results of Central Gulf of Mexico Lease Sale 227 suggest the oil and gas industry is bullish on prospects in the region.

Shell, Anadarko, Noble, ExxonMobil, BHP and Murphy Oil Corp. have drilled successful appraisal wells since the beginning of 2011. Statoil, Chevron, Noble, LLOG, Cobalt and Anadarko have also drilled successful exploration wells during that time.

Last month, Chevron reported making a deepwater U.S. Gulf oil discovery at the Coronado prospect. In November 2012, Noble reported it had made a discovery in the Big Bend exploration area of the deepwater Gulf. 

Challenging conditions of the Lower Tertiary, including deep well depths, high pressure, high temperature conditions, and dense sub-surface salt have raised questions over the potential and timing for exploration success in this frontier Gulf play. Barclays analyst James C. West said in an April 23 research note.

The Coronado, Shenandoah and other Lower Tertiary discoveries have helped confirm the potential and drive further operator interest in the Lower Tertiary play in the deepwater Gulf, West added.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
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RigLogix can provide the information that you need about the offshore rig fleet, whether you need utilization and industry trends or detailed reports on future rig contracts. Subscribing to RigLogix will allow you to access dozens of prebuilt reports and build your own custom reports using hundreds of available data columns. For more information about a RigLogix subscription, visit http://www.riglogix.com/.

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Bill Seeks to Allow Drilling Near US Mexico Maritime Border

A legislative hearing will take place Thursday in Washington D.C. as lawmakers consider a bill that would lift the current moratorium on drilling along the U.S.-Mexico maritime border in the Gulf of Mexico.

H.R. 1613, the Outer Continental Shelf Transboundary Hydrocarbon Agreement Authorization Act, would amend the Outer Continental Shelf Lands Act and implement the terms of the U.S.-Mexico Transboundary Hydrocarbon Reservoirs Agreement. That agreement, signed in February 2012 by then Secretary of State Hillary Clinton and Mexico's Minister of Foreign Affairs Patricia Espinosa Castellano at the G-20 Summit in Los Cabos, Mexico, would govern development of shared oil and natural gas resources in the U.S. Gulf between the United States and Mexico maritime border.

The agreement lifts the current moratorium on exploration and production along the Western Gap section of the boundary, opening up 1.5 million acres in the Gulf previously off limits due to border issues, and provides a framework for the safe management of oil and gas resources in the boundary area. Leaseholders on the U.S. side of the boundary and Petroleos Mexicanos would be able to explore and exploit a transboundary reservoir as a unit as leaseholders are permitted to do on the U.S. side of the boundary. The agreement also would allow a means of resolving disputes and establish a system of joint inspections.

"This bill is another step towards embracing an all of the above approach to energy that safely develops our natural resources to help achieve North American energy independence," said Rep. Jeff Duncan (R-S.C.), who co-authored the bill along with House Natural Resources Committee Chairman Doc Hastings (R-Wash.) and House Foreign Affairs Subcommittee on Western Hemisphere Chairman Matt Salmon (R-Ariz.), in a statement. "This bill will help lower energy costs while creating American jobs by safely opening up more areas in the Gulf of Mexico for exploration and production."

"Approval and implementation of this agreement is unquestionably in the national interests of the U.S. as a step towards energy security and job creation in the United States, as well as much needed energy reform in Mexico, and Western Hemisphere energy independence," said Salmon in a statement. "We can achieve energy independence and better energy cooperation with our neighbor and this is an important step in that direction."

Mexico's Senate ratified the agreement in April 2012. The agreement was negotiated pursuant to the 2000 Treaty on the Continental Shelf, which called for the United States and Mexico to establish a mechanism that transboundary oil and gas reserves would be shared equitably, according to a December 2012 report prepared for the U.S. Senate's Committee on Foreign Relations. At the time, concern that companies would drain Mexican reserves from the United States side of the border was reportedly a hot button political issue in Mexico. The United States placed a moratorium on oil and gas exploration on the U.S. side of the maritime border upon conclusion of the 2000 Treaty.

Former Sen. Richard Lugar (R-Indiana) last year urged the Obama administration to send the U.S. Mexico Transboundary Agreement to Congress and for his colleagues to pass the agreement. Lugar, who requested senior staff members review opportunities for enhanced U.S.-Mexico engagement on oil and gas issues including the transboundary agreement, said congressional attention to the Mexican energy situation is critical for understanding bilateral issues between our countries and for consideration of U.S. energy security.

"Mexico is a reliable supplier of oil to the United States," said Lugar in a December 2012 report. "The question for U.S. policymakers is what volumes Mexico will be able to export in the future."

Mexican production has dropped by over a quarter in the past decade, and the collapse of Venezuelan heavy oil production and insufficient pipeline infrastructure to bring Canadian oil sands production to Gulf Coast refineries means the United States in effect has had to increase imports of Middle East crudes to make up for Mexico production shortfalls, Lugar added.

"After the Obama administration did the important work of negotiating the Transboundary Hydrocarbon Agreement, they have failed to either send the agreement to the Senate as a treaty or decide that the agreement is an Executive Agreement," said Daniel R. Simmons, director of regulatory and state affairs, with the Institute for Energy Research in an a Congressional hearing last month. "So far, the administration's actions on the agreement are similar to its actions (or really, lack of action) on the Keystone XL pipeline."

The U.S.-Mexico maritime border area could hold up to 172 million barrels of oil and 304 billion cubic feet of natural gas, according to the U.S. Department of the Interior.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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Noble, PXP Shake Hands on UDW Drillships for Gulf of Mexico

Noble Corp. and Plains Exploration & Production Company (PXP) have entered into two three-year term drilling contracts for the Noble Sam Croft (UDW drillship) and the Noble Tom Madden (UDW drillship), two new ultra-deepwater drillships under construction at the Hyundai Heavy Industries Co. Ltd. shipyard in Ulsan, South Korea.

In the second quarter of 2014, the Noble Sam Croft is expected for delivery followed by the Noble Tom Madden, which is expected for delivery in the second half of 2014.

"With the addition of these units to our U.S. Gulf of Mexico fleet, Noble will have one of the most modern and capable fleets in the region, a fact that demonstrates the fundamental change going on across the company," noted David W. Williams, chairman, president and Chief Executive Officer, in a released statement. "At the same time, these contracts provide us with significant additional backlog, while expanding and diversifying our customer base as we grow our relationship with an important new customer."

Noble expects for the contracts to commence following mobilization of the drillships to the Gulf of Mexico and customer acceptance. Revenues generated over the three-year terms are expected to total about $693 million per rig, including mobilization fees, stated Noble in a press release.

"In the U.S. Gulf of Mexico, which accounted for 31 percent of contract drilling services revenues in the first quarter, four of the region's seven active rigs experienced improved operating performance," stated Williams, in the company's first quarter 2013 earnings report. "Contract opportunities remain strong, especially for rigs addressing customer needs in deepwater."

In September 2012, Plains Exploration acquired more than $6 billion of oil and gas properties in the deepwater Gulf of Mexico.

"Since its acquisition of strategic deepwater oil and gas properties in the Gulf of Mexico, analysts and investors are bullish that Plains can significantly increase its revenues," stated Joe Thomas, an analyst at Wall Street Source, in a press release. "The company's fourth quarter and full-year 2012 financial and operating results highlighted the success of its one-month benefit from its Gulf of Mexico assets."

The company plans to grow its offshore oil and gas production to 275,000 barrels of oil equivalent per day by 2020.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
For More Information on the Offshore Rig Fleet:
RigLogix can provide the information that you need about the offshore rig fleet, whether you need utilization and industry trends or detailed reports on future rig contracts. Subscribing to RigLogix will allow you to access dozens of prebuilt reports and build your own custom reports using hundreds of available data columns. For more information about a RigLogix subscription, visit http://www.riglogix.com/.

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Noble, PXP Shake Hands on UDW Drillships for Gulf of Mexico

Noble Corp. and Plains Exploration & Production Company (PXP) have entered into two three-year term drilling contracts for the Noble Sam Croft (UDW drillship) and the Noble Tom Madden (UDW drillship), two new ultra-deepwater drillships under construction at the Hyundai Heavy Industries Co. Ltd. shipyard in Ulsan, South Korea.

In the second quarter of 2014, the Noble Sam Croft is expected for delivery followed by the Noble Tom Madden, which is expected for delivery in the second half of 2014.

"With the addition of these units to our U.S. Gulf of Mexico fleet, Noble will have one of the most modern and capable fleets in the region, a fact that demonstrates the fundamental change going on across the company," noted David W. Williams, chairman, president and Chief Executive Officer, in a released statement. "At the same time, these contracts provide us with significant additional backlog, while expanding and diversifying our customer base as we grow our relationship with an important new customer."

Noble expects for the contracts to commence following mobilization of the drillships to the Gulf of Mexico and customer acceptance. Revenues generated over the three-year terms are expected to total about $693 million per rig, including mobilization fees, stated Noble in a press release.

"In the U.S. Gulf of Mexico, which accounted for 31 percent of contract drilling services revenues in the first quarter, four of the region's seven active rigs experienced improved operating performance," stated Williams, in the company's first quarter 2013 earnings report. "Contract opportunities remain strong, especially for rigs addressing customer needs in deepwater."

In September 2012, Plains Exploration acquired more than $6 billion of oil and gas properties in the deepwater Gulf of Mexico.

"Since its acquisition of strategic deepwater oil and gas properties in the Gulf of Mexico, analysts and investors are bullish that Plains can significantly increase its revenues," stated Joe Thomas, an analyst at Wall Street Source, in a press release. "The company's fourth quarter and full-year 2012 financial and operating results highlighted the success of its one-month benefit from its Gulf of Mexico assets."

The company plans to grow its offshore oil and gas production to 275,000 barrels of oil equivalent per day by 2020.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
For More Information on the Offshore Rig Fleet:
RigLogix can provide the information that you need about the offshore rig fleet, whether you need utilization and industry trends or detailed reports on future rig contracts. Subscribing to RigLogix will allow you to access dozens of prebuilt reports and build your own custom reports using hundreds of available data columns. For more information about a RigLogix subscription, visit http://www.riglogix.com/.

View the original article here

Noble, PXP Shake Hands on UDW Drillships for Gulf of Mexico

Noble Corp. and Plains Exploration & Production Company (PXP) have entered into two three-year term drilling contracts for the Noble Sam Croft (UDW drillship) and the Noble Tom Madden (UDW drillship), two new ultra-deepwater drillships under construction at the Hyundai Heavy Industries Co. Ltd. shipyard in Ulsan, South Korea.

In the second quarter of 2014, the Noble Sam Croft is expected for delivery followed by the Noble Tom Madden, which is expected for delivery in the second half of 2014.

"With the addition of these units to our U.S. Gulf of Mexico fleet, Noble will have one of the most modern and capable fleets in the region, a fact that demonstrates the fundamental change going on across the company," noted David W. Williams, chairman, president and Chief Executive Officer, in a released statement. "At the same time, these contracts provide us with significant additional backlog, while expanding and diversifying our customer base as we grow our relationship with an important new customer."

Noble expects for the contracts to commence following mobilization of the drillships to the Gulf of Mexico and customer acceptance. Revenues generated over the three-year terms are expected to total about $693 million per rig, including mobilization fees, stated Noble in a press release.

"In the U.S. Gulf of Mexico, which accounted for 31 percent of contract drilling services revenues in the first quarter, four of the region's seven active rigs experienced improved operating performance," stated Williams, in the company's first quarter 2013 earnings report. "Contract opportunities remain strong, especially for rigs addressing customer needs in deepwater."

In September 2012, Plains Exploration acquired more than $6 billion of oil and gas properties in the deepwater Gulf of Mexico.

"Since its acquisition of strategic deepwater oil and gas properties in the Gulf of Mexico, analysts and investors are bullish that Plains can significantly increase its revenues," stated Joe Thomas, an analyst at Wall Street Source, in a press release. "The company's fourth quarter and full-year 2012 financial and operating results highlighted the success of its one-month benefit from its Gulf of Mexico assets."

The company plans to grow its offshore oil and gas production to 275,000 barrels of oil equivalent per day by 2020.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
For More Information on the Offshore Rig Fleet:
RigLogix can provide the information that you need about the offshore rig fleet, whether you need utilization and industry trends or detailed reports on future rig contracts. Subscribing to RigLogix will allow you to access dozens of prebuilt reports and build your own custom reports using hundreds of available data columns. For more information about a RigLogix subscription, visit http://www.riglogix.com/.

View the original article here

Caza Confirms Multiple Pay Zones in New Mexico

Caza Oil & Gas, Inc. provided an operational update on the Company's Bone Spring drilling activities in Southeast New Mexico.

Lennox Property, Lea County, New Mexico.  The Lennox State Unit 32 No. 2H horizontal well reached the intended total vertical depth of approximately 11,850 feet subsurface on March 12, 2013, and log data was obtained.  There were good mud log shows for oil and natural gas throughout the Bone Spring formation while drilling the vertical section, notably in the 1st, 2nd and 3rd Bone Spring Sand intervals.  Based on analysis of the log data, Caza and its partners have drilled the lateral section of the well through the primary objective 3rd Bone Spring Sand to a total measured depth of approximately 15,914 feet.  Caza plans to fracture stimulate ("frac") the lateral section of the well in multiple stages.  Once completed, the well will be flowed back to establish initial production rates, and the market will be updated accordingly.

Notwithstanding certain operational issues during drilling, including a mechanical failure on the rig requiring a replacement drilling rig to complete the hole, all issues were resolved and the resultant increase in drill time and well cost are not considered material to the economics of the well.

Caza has a 40.00% working interest before payout (31.88% net revenue interest) and a 50.00% working interest after payout (39.85% net revenue interest) in the Lennox State Unit 32 No. 2H well.

Roja Property, Lea County, New Mexico.  Caza has elected to participate in a proposal from Occidental Petroleum (OXY), as operator, to drill a horizontal Delaware well on the Roja property.  The well is called the Madera 17 Federal #1H and is currently scheduled for June 2013.  Caza has a 20% working interest (16% net revenue interest) in the Roja property.

Gateway Property, Lea County, New Mexico.  The Company completed a trade on March 25, 2013 with The Blanco Company to acquire a 318 acre lease to be called the Gateway Property.  Gateway will target the Bone Spring formation and is a nice addition to Caza's Bone Spring property inventory.  Caza has a 100% working interest (77% net revenue interest) in the Gateway property.

Quail Ridge Property, Lea County, New Mexico.  The Quail "16" State No. 4H horizontal well, operated by Fasken Oil and Ranch, Ltd. ("Fasken") reached total measured depth of approximately 15,605 feet on January 26, 2013, and was successfully fracture stimulated and completed in the 3rd Bone Spring Sand on February 15, 2013.  The average daily production rate over the first thirty days was approximately 828 bbls/d of oil and 947 Mcf/d of natural gas, which equates to 986 Boe/d.  This is the second well completed on this property to date and is another very good result.  The Quail Ridge wells offset Caza's Lynch property and have helped to further de-risk the Company's acreage position while providing valuable information for future drilling at Lynch.  Caza has a 0.25% working interest (0.1875% net revenue interest) in the Quail "16" State No. 4H well.

Company Bone Spring Prospects, Lea and Eddy Counties, New Mexico.  The Bone Spring play in Lea and Eddy Counties, New Mexico, contains multiple potential pay zones for oil and liquids-rich natural gas, which include but are not limited to: Delaware, Lower Brushy Canyon, Avalon Shale, 1st, 2nd and 3rd Bone Spring Sands and Wolfcamp.  Caza's current prospects and properties in the horizontal Bone Spring play are: Lynch, Forehand Ranch, Forehand Ranch South, Lennox, Copperline, Mad River, Azotea Mesa, Bradley 29, Two Mesas, Quail Ridge, Chaparral 33, Rover, West Rover, West Copperline, Madera, Roja,and Gateway.  The Company has acquired approximately 4,100 net acres in the play to date.  Leasing and drilling activity continues to be competitive in the play, and initial producing well rates continue to improve with technological advances in drilling and frac designs.  The Company is well positioned in the play, and continues to exploit opportunities to build on its current acreage position.

W. Michael Ford, Chief Executive Officer commented:

"We are pleased to provide this operational update after announcing the Company's positive year-end results last week.  We made significant progress in 2012, and after laying the groundwork for continued success in the Bone Spring play, we look forward to advancing the Company's prospects and properties during the course of 2013, including the successful completion of the Lennox well."

"The log results from the Lennox well are in-line with predrill expectations and have confirmed the presence of multiple potential pay zones containing oil and liquids-rich natural gas.  After difficulties with the original rig, we are happy to have reached our intended total measured depth in the 3rd Bone Spring Sand interval.  We look forward to scheduling the frac and completing the well in order to bring it online in the near future.  Given success, this well will help establish a substantial development program, as the Lennox Unit contains 1,920 acres."

"We are also very pleased to have acquired the lease at Gateway.  No reserves were assigned to this property at year-end, because it is too new.  However, the Company believes the lease has good reserve potential and expects to drill a test well at Gateway during 2013."

"Finally, we are looking forward to participating in the Roja well with OXY.  The Delaware is another formation being successfully exploited for oil and liquids-rich natural gas as part of the broader horizontal Bone Spring play.  Multiple potential pay zones are what make this play such an exciting investment proposition."

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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Musings: The Gulf of Mexico Is Back Based On Lease Sale Results

Two weeks ago the Department of the Interior reported the results of the Central Gulf of Mexico lease sale 227, which, based on the total amount of money oil and gas companies bid, suggested the industry is bullish on prospects in this region. As usual, the media focused on the total dollar figures and the bidding intensity among companies over a few tracts, but it may have missed some of the underlying trends that are shifting and will shape the Gulf's future.

The media focused on the total dollar figures and the bidding intensity among companies over a few tracts

Some 52 oil and gas companies submitted 407 bids on 320 tracts offered by the government. BP plc did not submit a bid, although they were told by the Interior Department that they could. BP is currently prohibited from securing government contracts due to the settlement terms of the Macondo oil spill. The Interior Department told BP they could submit a bid and after a review would be informed whether they were able to be awarded the tract. We assume BP declined to invest the time and effort in what was likely to be nothing more than an exercise. What we don't know is whether BP bid as a partner with others, although their legal status could impact the award status. The 320 tracts bid on represented only 4.5% of all the tracts offered, which was the smallest percentage since 2001, as shown in Exhibit 6 on the next page.

The 320 tracts bid on represented only 4.5% of all the tracts offered, which was the smallest percentage since 2001

When the results of the sale are examined from the perspective of the total number of tracts bid on, the post-2000 period has generally demonstrated a downward trend, although there have been some very successful lease sales such as in 2007 and 2008. Those years appear to have been an aberration from the general trend of bidding in a mature oil and gas province. The high sale results were consistent with the speculative fever that gripped the U.S. and global economy immediately prior to the 2008 financial crisis.

BOEM altered some of the terms of the lease bids from prior sales

Federal officials, such as Interior Secretary Ken Salazar and Bureau of Ocean Energy Management (BOEM) Director Tommy Beaudreau, cheered the results of the sale, and pointed out that comparisons of this Central Gulf of Mexico sale to the prior one in 2012 should be made with caution since the prior sale reflected pent-up industry demand due to the absence of a sale in 2011 following the Macondo oil spill. Additionally, BOEM altered some of the terms of the lease bids from prior sales. Deepwater acreage minimum bids were boosted to $100 per acre compared to prior sale amounts of only $37.50 an acre. The minimum bid hike came following extensive analysis by BOEM showing that deepwater leases with high bids of less than $100 per acre experienced virtually no exploration and development. The deepwater tracts leased in this sale also carried escalating rental rates and tiered durational terms with relatively short base periods followed by additional time under the same lease if the operator drills a well during the initial period. This is the federal government's attempt to make sure that acreage leased offshore is drilled rather than becomes a Congressional talking point whenever gasoline prices soar about how many idle offshore leases the oil industry holds.

Extensive analysis conducted in the mid-1980s showed that between 1974 and 1984, the industry always acquired lease acreage that was never drilled

While we have not seen the BOEM analysis, we would be cautious about interpreting the data. Since the federal government shifted its offshore leasing program to area-wide lease sales in 1983, oil and gas companies have often purchased acreage with minimum bids as they attempt to lock up sufficient acreage spreads to cover geological/exploration theories they planned to test. Extensive analysis conducted in the mid-1980s showed that between 1974 and 1984, the industry always acquired lease acreage that was never drilled. That analysis shocked many in the industry who had always assumed that, prior to the introduction of area-wide leasing, all the acreage ever leased offshore was drilled. The practice of not drilling all leased tracts mushroomed once the industry was freed from the "nomination process for identifying acreage to be leased" in order to test unconventional geologic theories. If the theory proved wrong with a test well, then multiple tracts were often condemned and never drilled. We tend to believe that the shift to area-wide leasing in the Gulf and away from the acreage nomination system previously in effect contributed to the successful development of sub-salt plays, Lower Tertiary plays and the entire deepwater phenomenon.

We attribute this consistency to the exploration philosophy of the modern oil and gas industry that companies are in the business of replacing and growing their reserves and production and they must continue to reinvest in the business every year if they expect to remain in business long-term

A measure we follow when attempting to assess the success of a Gulf of Mexico lease sale is the ratio of bids made to tracts bid on. We have examined this ratio going back to the very first Central Gulf sale but more importantly since area-wide lease sales began in 1983. Exhibit 8 shows the tracts bid on, the number of bids made and the ratio of those figures for each Central Gulf sale since 1983. The sale results should be read from right to left, but what they show is how relatively consistent the ratio has been over this 30-year period. With commodity prices rising and falling and the fortunes of the industry ebbing and flowing, one might have expected greater variability in the bids-to-tracts trend. We attribute this consistency to the exploration philosophy of the modern oil and gas industry that companies are in the business of replacing and growing their reserves and production and they must continue to reinvest in the business every year if they expect to remain in business long-term. This investment trend goes counter to the "speculator" view of oil company managements. Under that theory, oilmen would not be bidding during periods when oil prices were high and rising but would only bid when commodity prices were low. Yes, high oil prices, which provide incremental cash flows for the companies, are often the justification for accumulating greater exploration acreage inventory than when industry times are lean. But the stability of the bids-to-tracts ratio suggests greater, and more consistent, financial discipline than the speculator thesis.

The shallow Gulf of Mexico segment may be on the cusp of a revival after having been ‘left for dead’ by the emergence of the shale revolution onshore

The most notable figures to come from the lease sale results were the number of bids in deep and shallow water depths. According to data from BOEM, there were 131 bids for tracts located in water depths of 1,600 meters of water depth or greater but 85 bids for tracts in less than 200 meters of water depth. Those figures suggest to us that the shallow Gulf of Mexico segment may be on the cusp of a revival after having been 'left for dead' by the emergence of the shale revolution onshore. If accurate, it means better times for many of the more traditional domestic suppliers of offshore oilfield services. It has been the absence of activity in shallow water that has retarded the Gulf of Mexico recovery, but that may be about to change.

G. Allen Brooks works as the Managing Director at PPHB LP. Reprinted with permission of PPHB.

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Helix to Provide BP Well Intervention Services in Gulf of Mexico

Helix Energy Solutions Group, Inc. announced Thursday that it has entered into a five-year contract with BP to provide well intervention services to BP in the US Gulf of Mexico with Helix's deepwater well intervention semisubmersible vessel, the Q5000, currently being constructed in Singapore. The contract is for a minimum 270 days each year and is expected to commence between April and August 2015 following the delivery of the vessel from the shipyard. The contract also includes a first right of refusal for additional days each year and an option to extend for two successive one-year terms.

"We appreciate the confidence BP has shown in our Company's well intervention services, and look forward to this integral step in further executing our business strategy," said Helix President and Chief Executive Officer Owen Kratz.

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Apache Confirms 14 Blocks from Gulf of Mexico Lease Sale

Apache Corporation announced that its subsidiaries were the apparent high bidders on nine shallow water blocks and five deepwater blocks in the recent Gulf of Mexico (GOM) lease sale held by the U.S. Department of the Interior's Bureau of Ocean Energy Management. Lease Sale 227, held March 20 in New Orleans, received 407 bids from 52 companies on 320 tracts, with the high bids totaling more than $1.2 billion.

On the continental shelf, Apache was the sole bidder on all nine blocks where it submitted bids. The company partnered on seven blocks in the Main Pass area, forming a new joint venture with Apache as the operator and holding a 75-percent working interest. The JV is currently shooting seismic over a 633,000-acre area using new wide azimuth technology to collect data and images under and around salt dome structures.

The company holds a 100-percent working interest in its two other shelf leases acquired in the sale. Apache is currently the largest leaseholder on the Gulf of Mexico's continental shelf with interests in more than 500 blocks.

In the deepwater, Apache was high bidder on five of nine bids, with a 50-percent working interest in each lease. Leases were acquired in the DeSoto Canyon, Green Canyon and Mississippi Canyon lease areas, growing the company's prospect inventory with properties near existing industry discoveries. With the exception of one block, all bids were competitive with other GOM operators.

Overall, the company's net exposure for its winning bids was $2.2 million for the shelf and $24.6 million for deepwater blocks.

"With new acreage, new investments and new ideas, we expect that the Gulf of Mexico will continue to generate strong cash flows and excellent returns," said Jon Jeppesen, executive vice president.

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ProSep Clinches Gulf of Mexico Contract

ProSep Inc. announced Tuesday it was awarded a contract for the supply of a produced water treatment system valued at approximately $1.3 million, for installation on a floating production storage and offloading (FPSO) vessel that will operate in a deep-water field in the Gulf of Mexico. The equipment is expected to be delivered during the first half of 2014.

"ProSep offers one of the industry's most advanced portfolio of solutions for the treatment of produced water. Our equipment is specifically designed to operate under the strictest operating and environmental standards, a key value proposition for oil and gas companies," said Jacques L. Drouin, president & CEO.

The solution provided consists of an induced gas flotation unit (IGFU) which recovers oil and reconditions produced water for overboard discharge or re-injection. ProSep's IGFU design delivers high efficiency removal of oil and solids with a separation efficiency of up to 98%, allowing the customer to meet stringent Gulf of Mexico specifications.

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ProSep Clinches Gulf of Mexico Contract

ProSep Inc. announced Tuesday it was awarded a contract for the supply of a produced water treatment system valued at approximately $1.3 million, for installation on a floating production storage and offloading (FPSO) vessel that will operate in a deep-water field in the Gulf of Mexico. The equipment is expected to be delivered during the first half of 2014.

"ProSep offers one of the industry's most advanced portfolio of solutions for the treatment of produced water. Our equipment is specifically designed to operate under the strictest operating and environmental standards, a key value proposition for oil and gas companies," said Jacques L. Drouin, president & CEO.

The solution provided consists of an induced gas flotation unit (IGFU) which recovers oil and reconditions produced water for overboard discharge or re-injection. ProSep's IGFU design delivers high efficiency removal of oil and solids with a separation efficiency of up to 98%, allowing the customer to meet stringent Gulf of Mexico specifications.

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Petrofac Wins Deepwater Contract, Offshore Mexico

Petrofac announced Monday that it has been awarded a project management contract by Petróleos Mexicanos (PEMEX) for the Lakach project, offshore Mexico.

The contract, which Petrofac's Engineering & Consulting Services business won in partnership with Doris Engineering of Houston, covers specialized technical assistance and supervision for the construction, installation, commissioning, testing and start-up of deep-water subsea wells and infrastructure for the project. The scope also involves drilling activities and tie-ins to existing onshore facilities.

Initially involving around 25 engineers, based in Mexico and Houston, the project is scheduled to complete towards the end of 2015.

Petrofac ECS Managing Director Craig Muir commented in company statement:

"I am delighted that Petrofac's Engineering & Consulting Services business has been selected to support such a significant project for PEMEX with this its first major deepwater development. PEMEX will benefit from the full breadth of Petrofac's specialist subsea pipeline consulting and engineering services in addition to our well management capabilities. We look forward to working closely with PEMEX on this significant project and further building Petrofac's presence in Mexico."

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Petrofac Wins Deepwater Contract, Offshore Mexico

Petrofac announced Monday that it has been awarded a project management contract by Petróleos Mexicanos (PEMEX) for the Lakach project, offshore Mexico.

The contract, which Petrofac's Engineering & Consulting Services business won in partnership with Doris Engineering of Houston, covers specialized technical assistance and supervision for the construction, installation, commissioning, testing and start-up of deep-water subsea wells and infrastructure for the project. The scope also involves drilling activities and tie-ins to existing onshore facilities.

Initially involving around 25 engineers, based in Mexico and Houston, the project is scheduled to complete towards the end of 2015.

Petrofac ECS Managing Director Craig Muir commented in company statement:

"I am delighted that Petrofac's Engineering & Consulting Services business has been selected to support such a significant project for PEMEX with this its first major deepwater development. PEMEX will benefit from the full breadth of Petrofac's specialist subsea pipeline consulting and engineering services in addition to our well management capabilities. We look forward to working closely with PEMEX on this significant project and further building Petrofac's presence in Mexico."

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Petrofac Wins Deepwater Contract, Offshore Mexico

Petrofac announced Monday that it has been awarded a project management contract by Petróleos Mexicanos (PEMEX) for the Lakach project, offshore Mexico.

The contract, which Petrofac's Engineering & Consulting Services business won in partnership with Doris Engineering of Houston, covers specialized technical assistance and supervision for the construction, installation, commissioning, testing and start-up of deep-water subsea wells and infrastructure for the project. The scope also involves drilling activities and tie-ins to existing onshore facilities.

Initially involving around 25 engineers, based in Mexico and Houston, the project is scheduled to complete towards the end of 2015.

Petrofac ECS Managing Director Craig Muir commented in company statement:

"I am delighted that Petrofac's Engineering & Consulting Services business has been selected to support such a significant project for PEMEX with this its first major deepwater development. PEMEX will benefit from the full breadth of Petrofac's specialist subsea pipeline consulting and engineering services in addition to our well management capabilities. We look forward to working closely with PEMEX on this significant project and further building Petrofac's presence in Mexico."

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InterMoor Wraps Up Apache IRIS Installation, Recovery in Gulf of Mexico

InterMoor, an Acteon company, has completed an installation and recovery project for Apache Deepwater LLC (Apache) in Mississippi Canyon Block 148, Well 5 in the Gulf of Mexico. The work scope included the overboard, wet transfer, deployment and recovery of a 30-ton interchangeable riserless intervention system (IRIS) owned by Blue Ocean Technologies. InterMoor undertook the work in water approximately 168 meters deep from Cal Dive's Uncle John semisubmersible vessel.

InterMoor delivered the project using its compensated anchor handler subsea installation system (CASIM) which reduces heave motions relative to vessel motions. CASIM units are pre-charged at the surface to deliver the needed heave compensation for the load at depth. InterMoor's proprietary CASIM method requires less deck space and demands fewer deck operations than the traditional buoy-based heave-compensated landing system. The company also provided the associated rigging equipment and a technician to help facilitate the subsea compensation.

"Apache selected InterMoor for this project on the basis of our service record, the fact that we had the necessary equipment available and because of our experience in subsea operations of this kind," said InterMoor project manager Jacob Heikes. "Although we have used CASIM to deploy and recover many types of subsea equipment, this is the first time that we have used CASIM for IRIS deployment and recovery, and the project's success shows that this proven installation method is suitable for a wide range of subsea equipment."

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Chevron All Smiles over St. Malo Production Test in Gulf of Mexico

Chevron Corporation announced Thursday that it had conducted a successful production test on the St. Malo PS003 well in the prolific Lower Tertiary trend in the deepwater Gulf of Mexico. Oil flow rates, though limited by testing equipment constraints, exceeded 13,000 barrels of oil per day.

The test, in Walker Ridge Block 678, targeted Lower Tertiary sands more than 20,000 feet (6,096 meters) under the sea floor and was conducted during August and September 2012. This is the first development well in the St. Malo field, which is being jointly developed with the Jack field.

"The well test is a further demonstration of the potential of the Lower Tertiary and highlights our leadership in developing deepwater resources globally," said Chevron Vice Chairman George Kirkland.

"The results of this production test further confirm the significance of the St. Malo field," said Gary Luquette, president, Chevron North America Exploration and Production Company. "The jointly developed Jack and St. Malo fields are expected to provide a major step-up in Chevron's production from 2014 and produce domestic energy for decades to come."

The Jack and St. Malo fields are located within 25 miles (40 kilometers) of each other and are being jointly developed with a host floating production unit located between the two fields in 7,000 feet (2,134 meters) of water, approximately 280 miles (450 kilometers) south of New Orleans, Louisiana. The facility is planned to have a design capacity of 177,000 barrels of oil-equivalent per day to accommodate production from the Jack/St. Malo development, which is estimated at a maximum total daily rate of 94,000 barrels of oil-equivalent, plus production from third-party tiebacks. Total project costs for the initial phase of the development are estimated at $7.5 billion.

Chevron has a working interest of 51 percent in the St. Malo field. Other owners of the St. Malo field are Petrobras (25 percent), Statoil (21.5 percent), ExxonMobil (1.25 percent) and ENI (1.25 percent).

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Apache Prevents Blowout in Gulf of Mexico Well

HOUSTON - Apache Corp. has detected an underground flow of natural gas at the site of a shallow-water exploratory well in the U.S. Gulf of Mexico, the company and U.S. regulators said.

Apache evacuated 15 nonessential workers and shut in the well, located about 50 miles east of Venice, La., after the company prevented a blowout at the well. About 50 workers remained on board, and there were no injuries.

In a statement posted on its website Thursday, the Bureau of Safety and Environmental Enforcement, which oversees the safety of offshore energy operations, said Apache successfully activated the blowout preventer aboard the jack-up rig to stop natural gas from flowing to the surface. No gas or other pollution has been detected at the location, but additional testing found an underground flow of natural gas, the BSEE said.

A blowout preventer is a tall stack of valves that can supply thousands of pounds of pressure to seal off a well in case of an emergency. The 2010 Deepwater Horizon accident, which has been attributed to a combination of factors including a failed cement job at the bottom of the well and a blowout preventer that failed to close, prompted an increase in regulatory scrutiny in the Gulf. That has included stricter blowout-preventer inspection and maintenance requirements.

In a statement, Apache said natural gas began flowing from the well during drilling operations on Feb. 4. Tests revealed natural gas had migrated from the bottom of the well, about 8,261 feet below the seafloor, to a sand formation about 1,100 feet below the seafloor. The rig was drilling in 218 feet of water.

Michael Bromwich, the former director of the BSEE, said it appeared the company and the government acted properly, but the incident is a sobering reminder that offshore drilling is a risky business.

The incident "undermines the often-repeated but erroneous claim that drilling in shallow water has few risks, and reinforces the conclusion that heightened safety and environmental standards should be applied across the board," Mr. Bromwich said in an email.

Apache said it is now working with well-control experts to stop the flow of natural gas below the seafloor. At the BSEE's direction, Apache is readying another rig to bring to the site in case a relief well needs to be drilled.

Angel Gonzalez contributed to this article.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Apache Prevents Blowout in Gulf of Mexico Well

HOUSTON - Apache Corp. has detected an underground flow of natural gas at the site of a shallow-water exploratory well in the U.S. Gulf of Mexico, the company and U.S. regulators said.

Apache evacuated 15 nonessential workers and shut in the well, located about 50 miles east of Venice, La., after the company prevented a blowout at the well. About 50 workers remained on board, and there were no injuries.

In a statement posted on its website Thursday, the Bureau of Safety and Environmental Enforcement, which oversees the safety of offshore energy operations, said Apache successfully activated the blowout preventer aboard the jack-up rig to stop natural gas from flowing to the surface. No gas or other pollution has been detected at the location, but additional testing found an underground flow of natural gas, the BSEE said.

A blowout preventer is a tall stack of valves that can supply thousands of pounds of pressure to seal off a well in case of an emergency. The 2010 Deepwater Horizon accident, which has been attributed to a combination of factors including a failed cement job at the bottom of the well and a blowout preventer that failed to close, prompted an increase in regulatory scrutiny in the Gulf. That has included stricter blowout-preventer inspection and maintenance requirements.

In a statement, Apache said natural gas began flowing from the well during drilling operations on Feb. 4. Tests revealed natural gas had migrated from the bottom of the well, about 8,261 feet below the seafloor, to a sand formation about 1,100 feet below the seafloor. The rig was drilling in 218 feet of water.

Michael Bromwich, the former director of the BSEE, said it appeared the company and the government acted properly, but the incident is a sobering reminder that offshore drilling is a risky business.

The incident "undermines the often-repeated but erroneous claim that drilling in shallow water has few risks, and reinforces the conclusion that heightened safety and environmental standards should be applied across the board," Mr. Bromwich said in an email.

Apache said it is now working with well-control experts to stop the flow of natural gas below the seafloor. At the BSEE's direction, Apache is readying another rig to bring to the site in case a relief well needs to be drilled.

Angel Gonzalez contributed to this article.

Copyright (c) 2012 Dow Jones & Company, Inc.

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