Energy XXI (Bermuda) Limited provided an operations update, including announcement of an agreement allowing the company to earn working interests in the South Timbalier Block 168 No. 1 exploration well, formerly known as the Blackbeard West No. 1, in the relatively shallow waters of the Gulf of Mexico shelf.
Energy XXI entered into an agreement with McMoRan Exploration Company to earn a 20 percent working interest in five blocks encompassing the Blackbeard West prospect. Subject to certain preferential rights held by third parties, McMoRan will also assign a proportional share of its interest in 81 additional blocks covering approximately 425,000 gross acres associated with the ultra-deep trend to Energy XXI. In total, Energy XXI will pay up to $5.5 million for the right to participate in the re-entry of South Timbalier Block 168 and for a share of the additional acreage.
The original Blackbeard West #1 exploration test, located at South Timbalier 168 in 70 feet of water offshore Louisiana, was drilled to 30,067 feet by a separate producer group but was temporarily abandoned. McMoRan resumed operations on March 18 with the expectation of deepening the well to a proposed total depth of 31,267 feet to evaluate deeper Miocene targets.
Current Blackbeard West participants include McMoRan, the operator, with a 32.3 percent working interest, Energy XXI with 20 percent and Plains Exploration Company (NYSE: PXP) with 35 percent.
"Blackbeard is an exciting, opportunistic addition to our drilling program, offering multiple trillions of cubic feet of natural gas potential," Energy XXI Chairman and Chief Executive Officer John Schiller said. "We reserve a portion of our drilling budget for swing-for-the-fences projects such as this, and are pleased to team up with McMoRan again, following our joint success last year with the Laphroaig discovery. Prior to this agreement, Energy XXI had begun drilling or had scheduled within the next few months to spud six prospects with net unrisked reserves potential totaling nearly 50 million barrels of oil equivalent (MMBOE). As a reference point, our fiscal year-end proved reserves totaled 55.6 MMBOE. Adding Blackbeard to the portfolio significantly increases the potential to grow the company through near-term exploration."
Energy XXI today also provided updates on other operational matters:
Volumes for the fiscal third quarter ended March 31 are estimated to have averaged more than 26,000 barrels of oil equivalent per day (BOE/d), with March volumes exceeding 27,000 BOE/d.
A new daily high production record of 29,312 BOE/d was set on March 18, assisted by the first well recompletion performed on the Main Pass fields acquired in June 2007, as the MP 61 #B-1 (50 percent working interest) well was placed back on line at 560 BOE/d (net).
The Cote de Mer prospect (35 percent working interest) resumed drilling operations in late March, preparing to side-track at about 13,000 feet with the anticipation of reaching total vertical depth of 21,932 feet in late June.
The deep J Prospect (38.6 percent working interest) at the company's Rabbit Island field found more than 600 feet of wet sand within the target interval and was abandoned.
The second well in the Lake Salvador exploratory area onshore Louisiana was an apparent success, and a third well is currently drilling.
The Greene & Broussard Plantations Inc. #1 well targeting the Kaplan prospect (87.5 percent working interest) in Vermillion Parish spud on March 28.
"We are pleased with the operational results delivered in the just-completed fiscal third quarter and look forward to the results from the drilling program we have in place," Schiller said.
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