Earlier this week, EPL moved a rig on location for the first test of the Denali prospect in the East Bay field and expects to commence drilling the well in the next several days. The first well, with a planned total depth of approximately 18,500 feet, is expected to test the shallower of two prospective horizons. EPL holds a 40% working interest in the well, with McMoRan Exploration Co.
The Company also announced an exploratory success at South Timbalier 42 #1. This discovery extends the productive intervals previously encountered on South Timbalier 41 eastward into South Timbalier 42 and encountered three apparent pay zones, including one zone deeper than any previously encountered in the area. This most recent discovery also marks the fifth success in five exploratory tests in the South Timbalier 41 and 42 area in the last two years. EPL, the operator, holds a 60% working interest in the well and Kerr-McGee Corp. holds the remaining 40%.
Three other recent exploratory wells, Eugene Island 4 #1, South Pass 29 #1, and South Pass 39 #1, were dry holes. EPL held a 50% working interest in Eugene Island 4 #1 and 100% working interests in South Pass 29 #1 and South Pass 39 #1, which tested the prospects known as Durango and Katmai, respectively. EPL expects to recognize approximately $16.1 million in exploration expense in the fourth quarter in connection with these wells. For the year to date, EPL has 15 discoveries in 27 wells offshore and 12 discoveries in 16 wells onshore. The Company currently has one additional exploratory test underway, the South Timbalier 23 #CC-6 sidetrack in Bay Marchand.
In other operational news, the Company said that production is now averaging approximately 23,500 Boe per day, nearly 80% of pre-Hurricane Katrina levels. Additionally, EPL was recently awarded the final two leases on which it was the high bidder in the August 2005 Western Gulf of Mexico lease sale, bringing the total awarded leases from the sale to four out of four high bids at a total cost of $4.6 million.
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