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Vol. 10, No. 16 Week of April 17, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

Thunder booms again

500 feet of net pay uncovered before severe currents halt drilling at Thunder Hawk

Ray Tyson

Petroleum News Houston Correspondent

Thunder Hawk, with at least another 500 feet of net pay to its credit, is rapidly shaping up into a deepwater field that could rival some of the larger oil discoveries in the Gulf of Mexico.

But the curious will have to wait for the final results. Drilling at Thunder Hawk has been halted because of severe ocean currents in the Mississippi Canyon area, operator Murphy Oil said April 13. And the owners are uncertain when drilling might resume.

Nevertheless, before drilling operations were shut down at the 23,765-foot level, the No. 2 appraisal well on Mississippi Canyon Block 734 encountered more than 500 feet of hydrocarbon pay in two high-quality zones, already placing it in the same league as other large deepwater discoveries in the U.S. Gulf, based on pay thickness alone.

The Thunder Hawk prospect also happens to be located on the northeastern fringe of the BP-operated Thunder Horse field, the largest discovery ever in the U.S. Gulf with estimated oil reserves of 1 billion barrels. Thunder Horse is scheduled to begin first production this year with eventual peak rates of 250,000 barrels of oil per day and 200 million cubic feet of natural gas per day.

One of BP’s Thunder Horse wells is said to have encountered around 780 feet of net pay thickness.

“We are obviously encouraged by the thickness of the pay intervals seen in this (Thunder Hawk) well which confirms the lateral extent of the reservoir to the west,” said Claiborne Deming, Murphy’s chief executive officer.

Still, with several thousand more feet to drill before touching down at 28,216 feet, the No. 2 appraisal well is poised to uncover yet more pay.

At least two untested objectives

“We have at least two significant objectives below us that haven’t been tested,” said Roger Jarvis, chief executive officer of Thunder Hawk partner Spinnaker Exploration. “We are eager to resume drilling to our deeper objectives once loop currents subside,” Murphy’s Deming added.

The No. 2 appraisal well, located in 5,716 feet of water, is situated about one mile west of the initial discovery well and sidetrack that encountered about 300 feet of pay thickness. The latest well was designed to test the far western portion of the Thunder Hawk prospect, Murphy said. Prior to the recent discovery, the owners estimated Thunder Hawk’s recoverable reserves at 50 million to 150 million barrels of oil equivalent. But the owners are not yet prepared to adjust estimates in light of their latest find.

“It’s a significant pay count in a very significant basin,” Spinnaker’s Jarvis said. “It’s at least as good as our expectations and maybe better. But we wouldn’t consider the field completely delineated at this point.”

Murphy holds a 37.5 percent stake in Thunder Hawk, followed by Dominion Exploration and Spinnaker each with 25 percent of the prospect, and Pioneer Natural Resources with a 12.5 percent stake.

Murphy’s volumes down for first quarter

Meanwhile, Murphy said it expects its net income for the 2005 first quarter to be between $1.10 and $1.15 per share, substantially below Thompson-First Call’s mean estimate of $1.34 per share.

For the 2005 first quarter, production and sales volumes are now estimated to have averaged 127,000 barrels of oil equivalent per day, Murphy said, adding that both production and sales volumes represent a decline from previous guidance, primarily due to an extended turnaround at Syncrude Canada Ltd., the leading oil sands miner.

Murphy is a partner in Syncrude, which is capable of pumping about 250,000 barrels of synthetic crude oil a day. But during the first three months of 2005, the facility has averaged just 155,000 barrels per day.

Dry hole charges for the 2005 first quarter should be about $52 million with worldwide exploration expense, including dry hole charges, running a hefty $71 million, Murphy added. Also, in its worldwide downstream business, Murphy said it expects a first-quarter loss of $5 million, mainly because of weakness in retail gasoline margins in the United States.



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