Independents Find Gulf Opportunities
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JUNE 2015 The “Better Business” Publication Serving the Exploration / Drilling / Production Industry Independents Find Gulf Opportunities By Al Pickett crude oil production, and federal natural in the Gulf.” Special Correspondent gas production in the Gulf accounts for 7 He says the key is good exploration, percent of total U.S. dry gas production. and he credits Houston Energy for de- Deeper drilling and new reservoir dis- • There are more than 3,000 platforms veloping many of the prospects that Red coveries are but two of the reasons why operating in waters up to 650 feet deep, Willow participates in. In fact, Zahradnik the Gulf of Mexico remains an exciting and an increasing number of rigs are says, Red Willow Offshore and Houston area for development and exploration. drilling in ultradeep waters up to 9,000 Energy partnered to submit the largest While the nation’s unconventional shale feet deep. Additionally, there are more single bid of $52 million for Walker plays seemingly have garnered much of than 25,000 miles of oil and gas pipeline Ridge Block 107 in more than 5,000 feet the attention these days, the Gulf of on the Gulf of Mexico seafloor. of water in Central Gulf Lease Sale 235 Mexico still is enormously important to “We have been in a lot of unconven- in March. the nation’s energy production. tional plays, such as the Bakken and the “It looks like a good prospect,” he Consider a couple GOM facts from Anadarko Basin, as well as coalbed says matter-of-factly. “We believe it is the U.S. Energy Information Adminis- methane,” remarks Bob Zahradnik, op- the last Miocene turtle structure left to tration: erating director for the Southern Ute drill in the Gulf. It is similar to Thunder • Gulf of Mexico federal offshore Growth Fund, which owns Red Willow Horse, only smaller.” oil production (1.8 million barrels a day) Offshore/Red Willow Production. “The The Bureau of Ocean Energy Man- accounts for 23 percent of total U.S. ‘find and develop’ economics are better agement reports that 42 oil and gas com- panies submitted 195 bids on 169 tracts in Sale 235. Twice as many deepwater blocks received bids as shallow-water blocks, according to the BOEM, indicating the deepwater focus companies are taking in the Gulf. Nonoperating Partner Red Willow may be one of the more unique players in the Gulf of Mexico, suggests Zahradnik, who says he was the company’s first employee when the South- ern Ute Indian Tribe founded Red Willow Red Willow’s first Gulf of Mexico Production Company to operate the tribe’s partnership was a Mississippi energy resources. Canyon project with Houston En- “Red Willow bought hundreds of small ergy in 2003. The company’s leases, many of which were on tribal GOM holdings have since grown land,” he recounts. “In 1994, we bought to interests in six producing deepwater wells, five more that a small gathering company in the northern will begin producing this year, San Juan Basin. We built it until we were and 30 exploration projects. handling 700 million cubic feet a day Here, Technip’s Deep Blue lays from coalbed methane, but we saw the pipe to Red Willow’s first well in Mississippi Canyon 519, oper- peak was coming in 2000, and we needed ated by Noble Energy, while the to reorganize.” Ensco 8501 drills a second well. So the Southern Ute Growth Fund was formed, which has a business plan Reproduced for Hess Corporation with permission from The American Oil & Gas Reporter www.aogr.com Special Report: Offshore & Subsea Technology that Zahradnik says separates the tribes’ economics are still good, even at today’s toil’s drilling efficiency with Yeti was business activities from its governmental prices.” among the best of any well drilled in activities. Noting that the growth fund Walker Ridge, achieving a penetration was authorized to begin investing off the Yeti Discovery rate of 400 feet a day. The rig now is reservation, he adds, “We buy and operate Another heretofore nonoperating part - drilling Statoil’s Thorvald prospect in properties, including real estate from San ner in the Gulf is headed in the direction Mississippi Canyon Block 814. Diego to Baltimore. It is a multibillion- of taking the reins. “When we entered the Gulf 10 years dollar fund.” Statoil has four main producing fields ago,” Averty relates, “we did so because Included in those holdings, Red Willow in its Gulf of Mexico portfolio: Caesar it fit our core strengths: deepwater pro - has an active role as a nonoperator in the Tonga, which is operated by Anadarko duction and complex fields that with the Gulf of Mexico. Petroleum; and St. Malo, Jack and Tahiti right investment in technology can become “We formed a partnership with Houston operated by Chevron Corp. Statoil’s pro - long-lasting producers.” Energy in 2003,” Zahradnik relates. “Red duction is 40,000 barrels of oil a day, The downward pressure on industry Willow and Helis (later replaced by Ridge - which the company hopes to increase to margins, which Averty contends started wood Energy) each had 47.5 percent of more than 100,000 bbl/d by 2020, ac - long before the collapse in oil prices, and that initial project in Mississippi Canyon. cording to a spokesman Jim Schwartz, then the fall in oil price are forcing a Houston Energy had a 5.0 percent working who notes that would make Statoil the change in focus toward lower-cost solutions interest and developed it. Helis has a fourth largest producer in the Gulf. and lasting efficiency gains to improve good staff and does a great job.” Statoil has ownership in five other profitability and robustness. Averty says He says Red Willow Offshore had the fields–Julia, Stampede, Vito, Heidelberg Statoil’s “heritage as an innovative problem high bid on eight blocks in the March and Big Foot–that either have been sanc - solver makes it well placed to do just that.” Central Gulf lease sale totaling $59 tioned or expect to be soon, Schwartz million. LLOG Bluewater Holdings, Red adds. Stampede Willow and Ridgewood Energy also had The Chevron-operated Big Foot Field Jeff Wirth, asset director for the Gulf the combined high bid of $17 million for (Statoil has a 27.5 percent share) is ex - of Mexico at Hess Corporation, has 20 Mississippi Canyon Block 769, he adds. pected to begin producing later this year, years of experience both on- and offshore. “Our group bids on leases and then Schwartz continues. Statoil also has work - “Before rejoining the Gulf with Hess in we work a deal with an operator,” Zahrad - ing interests in the Royal Dutch Shell- 2013, I spent four years in North Dakota nik explains. “Noble Energy operated the operated Vito Field, the Hess Corpora - (in the Bakken Shale),” he reveals. “That first two wells we drilled. We have drilled tion-operated Stampede Field, the Exxon - was a great opportunity, but the Gulf is a number of wells with LLOG Exploration Mobil-operated Julia Field, and the Hei - just as exciting. Hess is producing 80,000 Co., and we have an 18 percent working delberg Field, all of which are expecting barrels of oil equivalent a day net from interest in the Delta House reserves. We startup over the next several years. 11 fields. It is an exciting portfolio and a have interests in six deepwater wells that On the exploration side, Statoil made key area for us. We have been active in are on production, five more that will some news with a discovery in Yeti in the Gulf for 25 years.” begin producing this year, and 30 explo - the Gulf of Mexico, comments Jez Averty, A big difference between onshore and ration projects. Six of those will be drilled senior vice president of exploration for offshore is cycle time. As an example, this year. North America. He says assessments are Wirth says Hess’ deepwater Stampede oil “We typically have a 20-30 percent under way to determine its commercial and gas field was discovered in 2005, 115 working interest,” he adds. potential. Yeti is a subsalt Miocene play miles south of Fourchon, La., in Green He says Red Willow’s nonoperating that Averty says could become the com - Canyon Blocks 468, 511 and 512, but it partnerships have been a huge success pany’s first operated GOM field. wasn’t sanctioned until fourth quarter 2014. for the Southern Ute Growth Fund, and “The Yeti discovery expands the proven “We expect to have a rig on location he credits Houston Energy, LLOG, Noble, subsalt Miocene play farther south and in 2016 and first production in 2018,” he Deep Gulf Energy and Ridgewood Energy west of Big Foot,” he points out. “We are calculates. “We have contracted 85 percent as just several of the “wonderful partners” analyzing data to determine the size of of the services: drilling rig, engineering Red Willow has worked with in Mississippi the discovery and to agree on appraisal and fabrication. We have been able to Canyon and Green Canyon projects. options.” take advantage of lower prices.” Zahradnik says Red Willow has inter - The Yeti discovery was made in Walker The field is located in 3,500 feet of ests in more than 1,800 wells in many of Ridge Block 160, which is located nine water and has a reservoir depth of 28,000- the major basins across the United States, miles south of the Big Foot Field and 31,000 feet. Wirth says production facilities including the Gulf of Mexico. Investing seven miles from the Cascade Field.