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April 2006

Vol. 11, No. 17 Week of April 23, 2006

Redrock discovery unveiled

Three independents lock up U.S. Gulf leases in pursuit of deepwater play

Ray Tyson

For Petroleum News

An exploration alliance consisting of three E&P independents has locked up at least four contiguous federal leases in the Gulf of Mexico, strongly indicating the trio could be pursuing a significant deepwater play anchored by its recently announced Redrock discovery on Mississippi Canyon block 204.

Redrock operator Noble Energy and partners Samson Offshore and Energy Partners Ltd., EPL, did not publicly disclose their discovery until after the March 15 Central Gulf of Mexico lease sale, in an apparent effort to minimize bidding competition on exploration blocks adjacent to the Redrock prospect.

Sale 198 was the federal government’s most successful Central Gulf offering in eight years, generating $588.3 million in apparent high bids on 405 offshore blocks, a 66 percent increase over last year’s Central Gulf sale on 428 blocks. It also was one of the more competitive lease sales in recent memory, with an unusually high number of blocks receiving multiple bids, and an unusually large number of individual blocks attracting bids greater than $1 million.

Exploration alliance submitted only bids

As it turned out, the Noble-Samson-EPL alliance submitted the only bids on two Mississippi Canyon blocks adjoining the Redrock discovery, with combined high bids of less than $1 million. The trio doled out single winning bids of just $411,840 for Mississippi Canyon 160, located on Redrock’s northern flank, and $475,200 for Mississippi Canyon 203, situated on Redrock’s western flank.

Thus far the partners are saying little about the size and reach of the Redrock discovery, spud last December in 3,334 feet of water and drilled to a total measured depth of 23,365 feet. Noble holds a 50 percent stake in Redrock, with Samson and EPL each holding a 25 percent interest.

“While it is premature to estimate resources, one objective encountered high quality pay as expected,” Noble said April 12. “Pay was identified in a second objective, the quality and extent of which is currently under evaluation.”

Noble added that the partners are currently performing reservoir modeling on the Redrock discovery and intend to carryout further appraisal work this year and into 2007.

Rig moved to Raton prospect

Meanwhile, the rig used to drill Redrock was to be moved to the alliance’s Raton prospect on Mississippi Canyon 248, on the discovery’s southern flank and acquired by the alliance prior to the March 15 Central Gulf lease sale. The Raton well was to be spud in April in 3,378 feet and drilled to a total measured depth of roughly 20,000 feet, Noble said, adding that drilling operations were expected to be completed early in the 2006 third quarter.

“With our new discovery at Redrock and another exploration well under way at Raton, we expect deepwater Gulf of Mexico to continue to increase its already substantial contribution to (our) North America operations,” said Dave Stover, Noble’s senior vice president of North America.

EPL has 64% success in ‘05

An up and coming E&P independent, New Orleans-based EPL drilled 44 exploratory wells in 2005 and posted 28 discoveries, an envious 64 percent success rate. Of the total, the company had 16 discoveries in 28 wells offshore and 12 discoveries in 16 wells onshore.

However, Redrock represents EPL’s first deepwater discovery in the Gulf of Mexico, following a December 2005 agreement in which EPL acquired a 25 percent interest in 23 undeveloped Gulf leases held by Noble, a large E&P independent based in Houston, Texas. The agreement called for EPL to participate in a minimum of two exploratory wells in 2006.

“This is precisely the sort of jump start to our deepwater program that we envisioned when we partnered up with Noble and Samson,” said Richard Bachmann, ELP’s chairman and chief executive officer.

Samson, an independent producer with acreage positions both in the United States and abroad, agreed to participate in at least four exploratory wells on Noble acreage through the end of 2008, in exchange for a 25 percent working interest covering 37 deepwater leases.

“Noble has assembled a high quality portfolio of deepwater prospects,” said David Adams, Samson’s executive vice president of exploration. “Given Noble’s experienced and highly talented employees, we are confident this partnership will be profitable and rewarding.”






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