Kerr-McGee, historically among the more successful deepwater explorers in the Gulf of Mexico, came up short of company expectations in 2004, a record chief executive Luke Corbett said was a disappointment and unacceptable.
“And if we don’t execute cleanly this year and have the success we need to have, I’m prepared to change our strategy in that region,” Corbett said in a Jan. 26 conference call with industry analysts.
Kerr-McGee’s deepwater record last year in the U.S. Gulf was marred by dry holes at high profile prospects Essex on Mississippi Canyon Block 23 and Fawkes on Garden Banks Block 303, both operated by the big Oklahoma-based independent. Essex was thought to contain from 40-150 million barrels of oil equivalent, while Fawkes was expected to hold 25-50 million barrels.
“I’m not only disappointed in our execution in the Gulf of Mexico deepwater, it’s unacceptable,” Corbett asserted. “But we’ve shown in the past that we can have a successful program in the area. We have to get it back on track.”
In fact, Kerr-McGee last year participated in two notable deepwater successes at prospects Ticonderoga on Green Canyon Block 768 and San Jacinto on DeSoto Canyon blocks 618 and 619.
The Kerr-McGee-operated Ticonderoga discovery well and sidetrack, located in about 5,250 feet of water, encountered more than 250 feet of net hydrocarbon pay with an estimated 30-50 million barrels of oil equivalent. The field, in which Kerr-McGee holds a 50 percent interest, is expected to be tied back to the company’s 100 percent owned Constitution truss platform five miles north of Ticonderoga.
Kerr-McGee has a 20 percent interest in the San Jacinto prospect, which is operated by Dominion Exploration with a 53 percent interest. The natural gas discovery, confirmed by an appraisal well that encountered about 100 feet of net pay in multiple reservoir sand, will be tied back with other fields in the eastern Gulf to the so-called Independence Hub, which is scheduled to come on stream in 2007. Spinnaker Exploration holds a 27 percent interest in San Jacinto.
Scored successes in Alaska, Brazil and China
Corbett noted that despite Kerr-McGee’s shortcomings in the deepwater Gulf last year, the company scored successes in Alaska, Brazil and China.
Kerr-McGee, which actually is expected to see production increases from deepwater Gulf of Mexico over the next few years from previous discoveries, has committed four drilling rigs to its 2005 exploration and development program. The company currently produces 90,000 barrels of oil equivalent per day in the Gulf, 70,000 barrels of which come from the deepwater.
“We still think we have an inventory of strong prospects, but it’s time to show the results of that,” said David Hagar, Kerr-McGee’s senior vice-president of exploration and production. “We recognize that this year we need to execute.”
Kerr-McGee has an array of Gulf prospects ready to drill this year, both in the deepwater and in the relatively shallow waters of the continental shelf.
Chilkoot, located in 2,700 feet of water on Green Canyon Block 320, will be operated by Kerr-McGee with a 33 percent working interest. The company said it is currently preparing to move the drilling rig Noble Amos Runner to the prospect.
King Pao, in 900 feet of water on Garden Banks 171, will be operated by Kerr-McGee with a 50 percent working interest. The company said it is preparing to spud the prospect using the Ocean Valiant deepwater semi-submersible.
Doubloon, in 290 feet of water on Grand Island Block, will operate this deep-shelf prospect with a 50 percent working interest. The company said it could spud the prospect during the first quarter of the year.
Castleton is in 3,100 feet of water on Garden Banks Block 668 and will be operated by Kerr-McGee will a 50 percent working interest. The company plans to drill the prospect in the second quarter of this year.
Covington is in 3,900 feet of water on Green Canyon blocks 766 810 and will be operated by Kerr-McGee with a 50 percent working interest. Plans call for this prospect to be spud in the second quarter.
Other Kerr-McGee prospects include Mission Deep on Green Canyon Block 955, Nassau on Garden Banks Block 521, and Kingstown on Garden Banks 566.
(See latest on Kerr-McGee’s activities in Alaska on page 11 of this issue.)
