Spinnaker Exploration and its deepwater partners have raised their exploration sights in Mississippi Canyon, naming three prospects near their promising Thunder Hawk discovery and the BP-operated Thunder Horse field, the largest oil find ever in the Gulf of Mexico.
“We feel like we’ve leveraged our knowledge in that basin to the tune of another eight blocks,” said Roger Jarvis, Spinnaker’s chief executive officer.
The three new prospects are Thunder Ridge, Thunder Edge and Thunder Hawk West. Leases making up the prospects were all acquired in last March’s Central Gulf of Mexico Lease Sale 194. The Thunder Hawk West lease alone went for $20.1 million, the second highest bid in the entire $354 million sale.
“From those names you can probably ascertain they’re in and around the Thunder Horse-Thunder Hawk basin,” Jarvis noted.
Spinnaker and partners Murphy E&P, Dominion E&P and Pioneer Natural Resources raised a few eyebrows in April when they announced more than 500 feet of net pay had been uncovered on the western portion of their Thunder Hawk prospect, rivaling some of the largest discoveries made in deepwater Gulf based on pay thickness alone.
Position assembled before announcement
Before the announced discovery at Thunder Hawk, the partners — either together or in separate groups — assembled a formidable position near Thunder Hawk, as well as the 1 billion barrel Thunder Horse field, owned 75 percent by BP and 25 percent by ExxonMobil. Thunder Hawk, which is rapidly expanding into a large discovery with standalone potential, is situated on the northeastern flank of the huge Thunder Horse field.
Thus far, Spinnaker and its partners have provided no drilling schedule for the three new prospects, although a spokesman for the company told Petroleum News March 17 that the partners would like to drill at least one of the prospects next year. Before commencing drilling, however, the company would have to submit an exploration plan to the U.S. Minerals Management Service, which also would have to approve the plan.
Nevertheless, given Thunder Hawks’ proximity to the new prospects and Thunder Horse, “Thunder Hawk figures pretty prominently in our deepwater program for the future and probably for some time,” Jarvis said, noting that the new prospects are located in the so-called Thunder Horse-Thunder Hawk basin.
Three Mississippi Canyon blocks
Thunder Eagle consists of three Mississippi Canyon blocks (736, 780 and 781) located just a few miles east of Thunder Hawk and Thunder Horse. Spinnaker holds a 25 percent interest in the blocks, while Murphy is the operator with 37.5 percent stake. Dominion also holds a 25 percent interest in the Thunder Eagle prospect and Pioneer has a 12.5 percent interest. The partners anted up $6.58 million for the three blocks against little or no competition.
The same foursome shelled out the $20.1 million winning bid for Mississippi Canyon Block 819, which houses the Thunder Hawk West prospect located on the southwestern fringe of the Thunder Horse complex. The group easily topped Mariner Energy’s $8.5 million bid and Anadarko Petroleum’s $478,656 bid.
On the eastern side of Thunder Horse and Thunder Hawk, just below the Thunder Eagle prospect, Spinnaker and Murphy separately teamed up to win Mississippi Canyon Block 825, home of the Thunder Ridge prospect, with a high bid of $1.85 million. That also easily topped Dominion’s bid of $324,726, Kerr-McGee’s bid of $377,600 and a $519,970 joint bid submitted by Hunt Oil and Tana Exploration.
Spinnaker and Murphy also scooped up three Mississippi Canyon blocks (905, 950 and 995) adjacent to the Thunder Horse-Thunder Hawk basin in the far southern Mississippi Canyon area near the border of Mississippi Canyon and Atwater Valley. Those bids were uncontested.
Spinnaker drilling plans
Meanwhile, Spinnaker unveiled plans to drill or participate in six deepwater exploration wells during the balance of 2005. Five of them are in the Gulf of Mexico and one is offshore Nigeria.
Among the first wells to be drilled is the Q prospect on Mississippi Canyon Block 961, Spinnaker’s Jarvis said, adding that the company plans to use the deepwater rig Cajun Express to drill the well in 7,900 feet of water. He said Spinnaker will operate the well with a 50 percent interest and plans to spud within 60 days. The well will cost about $22 million, he said.
“We’re calling a mean (reserve) case of about 100 billion cubic feet of gas equivalent,” Jarvis said. “It could be a little bigger; it could be a little smaller, if successful.”
Also in Mississippi Canyon, Spinnaker plans to spud its Egmont prospect on Block 413 sometime late in the second quarter or possibly in the third quarter, Jarvis said. He said the prospect could hold around 140 billion cubic feet of natural gas equivalent, or about 20,000 barrels of oil, and that drilling costs will run around $20 million. Spinnaker currently owns the block 100 percent but is looking for a drilling partner, the company said.
“We think the probability is an oil accumulation, if successful, although there is some chance it could be gas,” Jarvis said. “And while it has some risk, it’s certainly a prospect that needs and deserves to be drilled.”
Perhaps the most expensive exploration well to be drilled by Spinnaker and partner Murphy this year is on their Krakatoa prospect on Mississippi Canyon Block 540, which “looks more like a Thunder Hawk, Thunder Horse basin prospect,” Jarvis said, adding that because of the anticipated well depth costs would run in excess of $35 million to as much as $40 million.
“It’s an excellent prospect — 50 to 100 million barrels mean case — and we’re anxious to see that drilled,” Jarvis said. “Krakatoa is a larger prospect that could justify its own infrastructure.”
Jarvis said that Spinnaker partner Anadarko plans to drill a third well this year at the Spiderman natural gas discovery in DeSoto Canyon in the eastern Gulf of Mexico, an effort he said could produce 30 billion to 35 billion cubic feet of incremental reserves. The well is expected to cost between $20 million and $22 million, he added.
Spinnaker and its partners hope to drill a deep test well at their Front Runner field in the deepwater Gulf of Mexico, which is currently producing around 30,000 barrels of oil equivalent per day with additional producing wells planned. The test well, which is expected to cost about $35 million, could be spud in late 2005, but there is a 50 percent chance it could slip into 2006, Jarvis said.
Second well on Nigerian concession
In Nigeria, Spinnaker partner Devon Energy this year plans to drill a second exploration well on its OPL Block 256 concession. Located about 124 miles off the coast of Nigeria in water depths ranging from 4,921 to 9,186 feet, the block encompasses 631,000 gross acres and represents an area about three-quarters the size of Spinnaker’s entire deepwater holdings in the Gulf of Mexico.
OPL Block 256 represents Spinnaker’s first venture into the international area. The Houston-based company holds a 12.5 percent interest in the concession. The second well will cost about $30 million, Jarvis said.
On the earnings front, Spinnaker reported a 2005 first-quarter profit, excluding charges, of $16.3 million or 47 cents per share on record revenues of $78.3 million, compared to first quarter 2004 earnings of $13.7 million or 40 cents per share on revenues of $59.8 million.
Total first quarter 2005 production of 11.8 billion cubic feet of gas equivalent exceeded the company’s guidance by 8 percent and included about 6.7 billion cubic feet of gas, a record 693,000 barrels of oil and 6.7 million gallons of natural gas liquids.
