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Vol. 10, No. 31 Week of July 31, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

More Gulf hubs

Kerr-McGee unveils more ‘hub-and-spoke’ prospects, estimates 140M-850M bbls

Ray Tyson

Petroleum News Houston Correspondent

Big exploration and production independent Kerr-McGee has disclosed the names, locations and reserve estimates for three large Gulf of Mexico prospects, any one of which the company believes holds the potential to serve as the center of another Kerr-McGee “hub-and-spoke” development in the U.S. Gulf.

Kerr-McGee also unveiled for industry analysts in its July 27 conference call on 2005 second-quarter earnings other smaller targets in the U.S. Gulf that could provide the company with immediate proved reserves to book.

The larger prospects with hub potential were identified as Claymore, Mission Deep and Norman. Together, the three prospects are said to hold possible reserves ranging widely from 140 million to 850 million barrels of oil equivalent. Kerr-McGee holds a 50 percent interest in each of the sub-salt plays.

A hub typically produces from one major field and later from any satellite discoveries in the area. Development is arranged in a hub-and-spoke pattern, with the largest field as the anchor. Kerr-McGee has developed a number of these production hubs in the U.S. Gulf, including the Nansen-Boomvang complex at East Breaks.

One well expected by year-end

“We are in the final stages of working out some potential arrangements to get some large new field wildcats on the schedule,” said David Hager, Kerr-McGee’s chief operating officer. He said that at least one of them likely would be spud before year-end.

Reserve estimates for Claymore, on Atwater Valley block 96, range from 40 million to 300 million barrels of oil equivalent, Hager said, adding that the play is similar to Tahiti in nearby Green Canyon, among the larger oil discoveries in deepwater U.S. Gulf.

Mission Deep, on Green Canyon block 955, is said to hold estimated reserves ranging from 80 million to 250 million barrels of oil equivalent. Norman, with reserve estimates of 120 million to 300 million barrels of oil equivalent, is on Garden Banks block 435.

“Those will not be the primary reserve booking opportunities, but they are the large new field wildcat opportunities that can be new hubs in the future,” Hager said.

Some reserve bookings this year

He said Kerr-McGee has several “moderate size” prospects in the U.S. Gulf that could provide additional reserve bookings as soon as this year, including Nansen Northwest, Castleton, Covington, Doubloon and Conquest. Kerr-McGee recently spud an appraisal well at the Conquest discovery, located in Kerr-McGee’s Constitution corridor at Green Canyon Block 767.

“Some of those (such as) Covington are a little bit on the larger size, on the order of 80 to 200 million barrels,” Hager said. “The others are more moderate size and will be our primary booking opportunities.”

Meanwhile, Kerr-McGee reported net income for the 2005 second quarter of $370.8 million or $2.60 per share, a more than three-fold increase over $110.6 million or $1.01 per share the company earned in the 2004 second quarter.

The increase in profit was attributed largely to higher oil and natural gas prices during this year’s second quarter and higher production and increased profits from its chemical unit. The higher oil and gas sales volumes were attributed primarily to the acquisition of Westport Resources and production start ups in China’s Bohai Bay and at the Red Hawk field in deepwater U.S. Gulf.

Kerr-McGee’s oil production in the 2005 second quarter rose 25 percent to average 175,000 barrels per day, compared with 140,500 barrels per day for the same period last year. Natural gas sales averaged 1.118 billion cubic feet per day, up 51 percent from the 2004 second quarter.



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