"This discovery and pooling of property are part of our long-term strategic plan to develop core areas in high-potential trends," said Luke R. Corbett, Kerr-McGee chairman and chief executive officer. "With the transaction, we have amassed interests in more than 60 blocks and doubled our identified prospects, to about 15, in this deepwater play. This large inventory allows us to high grade and drill prospects in an area with proven hydrocarbons, as evidenced by our Merganser discovery. Consistent with our business plan, we will continue exploring this new core area, with the goal of creating an Atwater Valley operating hub similar to our Nansen and Boomvang complex in East Breaks."
The 21,268-foot Merganser discovery well encountered more than 150 feet of natural gas pay in three zones. Reserves are estimated in the range of 200 billion to 400 billion cubic feet of gas equivalent. Kerr-McGee operates Merganser with 50% interest, and Ocean holds the remaining 50% interest.
The Merganser well set a water-depth record for Kerr-McGee discoveries at 7,900 feet. Merganser is the second discovery drilled at no cost to Kerr-McGee under the deepwater exploratory joint venture between the company and Ocean, which covers more than one million undeveloped acres in the Gulf of Mexico. The companies expect to drill an appraisal well later this year to further evaluate the size of the Merganser field.
In the property swap, Kerr-McGee and Ocean have exchanged 33% of their interests in 20 Atwater Valley leases and 50% in two leases in adjacent Lloyd Ridge, for 50% of BHP Billiton's interest in 32 leases and 25% of BHP Billiton's interest in two leases, all in Atwater Valley. The companies will continue to operate the leases they operated prior to the transaction. Exploratory drilling on this combined acreage is expected to begin later this year.
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