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Kerr-McGee sees potential in four Gulf prospects Company plans to spud 10 exploration wells in next two months, with prospects onshore U.S., offshore Brazil, China, as well as Gulf of Mexico Ray Tyson Petroleum News Houston Correspondent
Kerr-McGee has launched drilling on the first of about 10 exploration wells the company plans to spud over the next two months alone. Seven of the prospects are in the Gulf of Mexico and four of them hold combined potential reserves of nearly 300 million barrels of oil equivalent, the company said.
The Oklahoma-based independent said it also will be doing its exploratory drilling this year on a smaller budget: roughly $300 million versus $354 million last year. Still, the company has an aggressive work schedule ahead.
The company already has commenced drilling on the deepwater Ticonderoga prospect at Green Canyon block 768, using the offshore rig Amos Runner. Located in about 5,200 feet of water, Ticonderoga contains estimated reserves upward of 50 million barrels of equivalent and is considered a “satellite” to Kerr-McGee’s Constitution field, the company said.
Kerr-McGee said it also expects to spud another satellite, Tin Cup, near its Gunnison field on Green Canyon block 582. Tin Cup is said to hold estimated reserves up to 40 million barrels of oil equivalent.
“These lower risk satellite prospects provide an overall balance to our exploration program,” said Rick Buterbaugh, Kerr-McGee’s head of investor relations. The company operates both Ticonderoga and Tin Cup with a 50 percent interest in each prospect.
Kerr-McGee noted that it recently completed satellite tiebacks of its East Boomvang well on East Breaks blocks 686 and 688 and Boomerang well on East Breaks blocks 598 and 599, as well as completing tiebacks at Garden Banks block 197 and East Cameron block 373. A tieback from Viosca Knoll Block 869 was expected by the end of March, the company said.
“These tiebacks carry very attractive individual economics, given their leverage of the nearby existing infrastructure,” Buterbaugh said.
An appraisal well was spud on Kerr-McGee’s Garden Banks 244 discovery, Buterbaugh said, adding that the company has acquired new 3-D seismic around the initial discovery “to better define the potential of this area.”
He said that in the 2004 second quarter the company intends to spud deepwater wildcats at its Chilkoot prospect on Green Canyon block 320 and at its Essex prospect covering Mississippi blocks 23, 24 and 25.
“These prospects offer a total gross resource potential of approximately 200 million barrels of equivalent,” Buterbaugh said.
He said exploration wells also are planned in April at Kerr-McGee’s deepwater San Jacinto prospect on DeSoto Canyon block 618 in the Eastern Gulf and on the Gulf’s continental shelf at Main Pass block 113. San Jacinto is just a few blocks removed from Anadarko Petroleum’s Spiderman discovery which, along with other nearby Anadarko finds, as well as Kerr-McGee’s Merganser discovery to the west in Atwater Valley, is a candidate to join a proposed production hub to serve the Eastern Gulf. Kerr-McGee also plans onshore U.S., Brazil, Bohai Bay wells Onshore in the United States, Kerr-McGee is planning a three-well program to further evaluate the Niobrara biogenic gas play in northeastern Colorado, Buterbaugh said. The company currently is reviewing results from five exploratory wells already drilled in the Niobrara.
Internationally, the first of two exploratory wells held 33.3 percent by Kerr-McGee is expected to be spud this year in Brazil on the offshore Dragon prospect in the Campos Basin, Buterbaugh said. The BM-C-7 Block encompasses 161,000 acres and is situated in 400 feet of water.
Additionally, Kerr-McGee was expected to spud its first exploratory well this week on the company’s 100 percent owned 09-18 block in China’s Bohai Bay, the company said. Gulf development on schedule Meanwhile, “Our major oil and gas capital development programs are each developing well and remain on schedule,” Buterbaugh said, noting that a “milestone” was reached at the Red Hawk prospect in the Gulf when the hull for the world’s first cell spar was successfully towed from the construction yard at Corpus Christi, Texas, and “up ended” on location at Garden Banks 877.
Red Hawk’s “topsides” were en route to the spar and expected to be set by the end of March, with first production anticipated by mid-year, Buterbaugh said. The field is expected to produce about 120 million cubic feet of natural gas per day. Kerr-McGee operates Red Hawk with a 50 percent interest.
Buterbaugh said Kerr-McGee also has signed a contract with fabricator Technip for a hull to service the company’s 100 percent owned Constitution field in the deepwater Gulf. Construction is scheduled to begin in late spring in Pori, Finland, location of the same yard that produced hulls for Kerr-McGee’s Neptune, Nansen, Boomvang and Gunnison spars in the Gulf.
First production from Constitution, on Green Canyon blocks 679 and 680, is expected late in the second quarter of 2006, the company said. The field contains proven and probable reserves of 110 million barrels of oil equivalent and is expected to produce at peak daily rates of 40,000 barrels of oil and 75 million cubic feet of natural gas. Including expenses associated with leases and drilling, Constitution will require $600 million in investment, Kerr-McGee said.
In Bohai Bay, Kerr-McGee said it now believes the company should achieve first production ahead of schedule sometime during the fourth quarter of this year. “All work related to the Bohai Bay development is moving along very well,” Buterbaugh said. He said the field should reach peak rates of 40,000 to 45,000 barrels per day of oil in 2005.
Since exploration activities began in Bohai Bay, Kerr-McGee has announced at least six discoveries in this area. The company plans to use a floating production, storage and offloading facility and two fixed platforms for dry wellheads. The facility will establish a hub-and-spoke type development in about 75 feet of water. Kerr-McGee operates the project with a 40 percent interest.
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