Kerr-McGee was the high bidder on seven blocks in the Agencia Nacional do Petroleo (ANP) Bid Round 6 in Brazil. The blocks are located offshore in the prolific Campos and Espirito Santo basins in water depths up to 6,600 feet. Kerr-McGee will own interests ranging from 25% to 100% in the blocks, which will increase its interests in Brazil to nine blocks totaling more than 1.6 million acres. Kerr-McGee will operate two of the new blocks. Total net exposure for the high bids is approximately $13.5 million. The new concessions are subject to ANP's approval.
"These blocks strengthen our position in the heart of the proven Campos and Espirito Santo basins offshore Brazil," said Dave Hager, Kerr-McGee senior vice president responsible for oil and gas exploration and production. "These blocks add multiple prospects along trend with major discoveries, and will leverage our deepwater expertise as we explore these high-potential prospects."
In addition, Kerr-McGee was the high bidder on 21 deepwater and three shelf leases in today's western Gulf of Mexico lease sale 192. The company's net total exposure for all high bids is approximately $14 million. The bids are subject to approval by the U.S. Interior Department's Minerals Management Service. Kerr-McGee anticipates operating 80% of the high-bid blocks, with an average working interest of approximately 85%.
"These blocks provide satellite prospects near our existing operated hub facilities at Gunnison, Nansen and Boomvang, and also position the company in some exciting new-field wildcat opportunities in the Gulf of Mexico," added Hager. "These exploration opportunities are part of our balanced growth strategy of high-impact exploration in proven world-class hydrocarbon basins, underpinned by a strong inventory of low-risk exploitation opportunities and tactical acquisitions in our core areas."
In addition to the new blocks, Kerr-McGee holds a 33% interest in the BM-C-7 block and a 50% interest in the BM-ES-9 block offshore Brazil. Earlier this year, the company participated in an exploratory well at the Dragon prospect on BM-C-7 in the Campos basin. The well encountered hydrocarbons, and oil samples were taken. Kerr-McGee is working with the operator to determine the future appraisal program. The company also is participating in a well at the Tartaruga Verde prospect on BM-ES-9, located in approximately 8,700 feet of water of the Espirito Santo basin. The well was spud in June and is expected to drill to approximately 19,000 feet to test a cretaceous objective.
Gulf of Mexico
Kerr-McGee is one of the most successful independent explorers and producers in the deepwater gulf, with five operated deepwater hub facilities and a sixth facility under development. Last month, the company achieved first production from its deepest development to date in 5,300 feet of water at the Red Hawk field. Kerr-McGee expects to begin production at its 100%- owned Constitution field in mid-2006, which will include development of the recently discovered Ticonderoga field as a subsea tieback.
Award of the 24 high-bid leases will increase the company's total lease holdings in the gulf by about 140,000 gross acres to approximately 4.6 million. Kerr-McGee will hold interests in 870 leases in the gulf and will operate more than 70% of these, with an average working interest of 56%.
The new Brazil and gulf leases will increase the company's total worldwide holdings of leases, concessions, reconnaissance permits and other interests to approximately 63 million gross undeveloped acres, with nearly 56 million acres in deepwater trends.
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