Current production into the pipelines from two Ticonderoga wells and one Constitution well is approximately 32,000 barrels of oil per day and 30 million cubic feet of natural gas per day, with five additional wells expected to begin flow from Constitution in 2006. Construction of the wholly owned pipelines was completed in late 2005 below budget, and Enterprise received initial production from the two fields in the first quarter of 2006.
The Constitution oil and natural gas pipelines are located in approximately 5,000 feet of water in the central Gulf of Mexico. They are designed to provide gathering services for the Constitution and Ticonderoga fields, as well as other undeveloped blocks in the south Green Canyon area.
The 32-mile, 16-inch natural gas pipeline has the capacity to transport up to 200 million cubic feet per day by connecting the fields to Enterprise's existing Anaconda Gathering System, which gathers gas production from the Marco Polo area. The crude oil export pipeline is a 70-mile, 16-inch line with a capacity of approximately 100,000 barrels per day that connects the fields with the Cameron Highway Oil Pipeline and Poseidon Oil Pipeline systems at Cameron Highway's Ship Shoal 332B junction platform. Enterprise owns a 50 percent and 36 percent ownership interest in the Cameron Highway and Poseidon oil pipelines, respectively.
Enterprise said that, at the current volumes, the Constitution oil and gas pipelines will generate approximately $22 million in annualized gross operating margin, ramping up to approximately $48 million in annualized gross operating margin by the end of 2006 based on volumetric expectations. These amounts include the impact of both Constitution pipelines as well as additional equity earnings from the company's investments in Poseidon Oil Pipeline Co. and Cameron Highway Oil Pipeline Co. resulting from the expected increase in downstream volumes.
"Completion of the Constitution Oil and Gas Pipeline project extends the reach of our integrated value chain and provides flexible export solutions for producers developing the prolific south Green Canyon area," said Robert G. Phillips, Enterprise's president and CEO. "Producers in this area have access to crude oil markets in both Texas and Louisiana through our jointly owned Cameron Highway Oil Pipeline and Poseidon Oil Pipeline systems, and natural gas can reach markets on the Gulf Coast through our Anaconda Gathering System's interconnect to the ANR pipeline system. The integration of this project with our Cameron Highway and Poseidon oil pipelines provides additional cash flow to those assets, which enhances the cash return on our incremental investment in the Constitution pipelines."
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