PXP Reviews Third Quarter Exploration, Production Developments
Plains Exploration & Production Co. has provided an operational update for the third quarter ended September 30, 2008.
Oil and gas sales volumes averaged 92.4 thousand barrels of oil equivalent per day (BOEPD) in the third quarter 2008 compared to 57.1 thousand BOEPD in the third quarter 2007.
Hurricane downtime reduced third quarter 2008 volumes by approximately 170 thousand BOE. All production impacted by the hurricanes has been restored.
Flatrock development continues delivering positive results with five successful wells to date and three of these wells currently producing approximately 37 million cubic feet equivalent per day (MMCFED) net to
Flatrock No. 4 well production test, through perforations in the primary Rob-L section, indicated a gross flow rate of approximately 109 MMCFD, 2,500 barrels per day of condensate and zero barrels of water, approximately 124 MMCFED (27 MMCFED net to PXP). This is in the same Rob-L sand which continues to produce at approximately 100 MMCFED at the Flatrock No. 2 well.
Flatrock No. 5 has encountered 90 net feet of pay as indicated by wireline logs and is currently drilling below 15,000 feet to a proposed total depth of 18,400 feet.
Flatrock No. 6 commenced drilling in late October 2008.
Additional multi-hundred BCFE Flatrock step-out prospects either currently drilling or preparing to spud are outlined below:
Tom Sauk exploratory well, operated by McMoRan and located on Louisiana State Lease 340, commenced drilling in August 2008 and is drilling below 12,500 feet towards a proposed total depth of 19,000 feet to evaluate potential Operc and Gyro sands in the Middle and Lower Miocene. PXP holds a 24.4% working interest.
Gladstone East exploration prospect, operated by McMoRan and located on Louisiana State Lease 340, is expected to commence drilling in November 2008 and carry over into 2009. This prospect, located in the Flatrock area, has multiple targets in the Rob-L and Operc sands in the Middle Miocene. PXP holds a 30% working interest.
Ammazzo exploration prospect, operated by McMoRan and located on South Marsh Island Block 251, is expected to commence drilling in November 2008 and carry over into 2009. The prospect, also located in the Flatrock area, has multiple targets in the Rob-L, Operc and Gyro sands in the Middle and Lower Miocene. PXP holds a 28% working interest.
Plans are underway to complete and test the South Timbalier Block 168 ultra-deep exploratory well operated by McMoRan. The well will be temporarily abandoned waiting completion. As previously reported, the well was drilled to a total depth of 32,997 feet and logs indicated four potential hydrocarbon bearing zones. PXP holds a 35% working interest.
Friesian #2 well, operated by PXP and located on Green Canyon Block 643, is currently drilling below 24,000 feet to a proposed total depth of 28,000 feet. Drilling results are expected before year end.
Drilling operations in the Haynesville Shale now include 14 rigs, up from six in August, with an average of approximately 26 rigs expected in 2009. For 2009, PXP allocated 40% of its 2009 capital budget, or approximately $460 million, to Haynesville activity pursuant to Chesapeake's, our operator's, 2009 operating plan. Drilling operations for our Haynesville Shale Joint Venture began in July 2008 and inaugural production commenced during the third quarter. Currently four wells are producing 36 MMCFED gross, 5 MMCFED net to PXP. With over 7,000 potential well locations, this asset area is expected to be a significant driver of future production and reserve growth. PXP holds a 20% interest in Chesapeake's over 550,000 net acre leasehold position.
Drilling operations in the South Texas and the Texas Panhandle areas continue to yield positive results. Production combined from these areas increased approximately 40% from January to September 2008. In South Texas, drilling has focused on the Los Mogotes, Lopez Ranch and Mills Bennett Fields and the area was producing 11,700 net BOEPD at the end of the third quarter. In the Texas Panhandle, production was approximately 8,100 net BOEPD at the end of the quarter with ongoing drilling successes in the Courson Ranch, Wheeler and Marvin Lake Fields. These asset areas provide multi-year drilling inventories supporting further reserve and production growth.
Los Angeles County Board of Supervisors recently passed enhanced environmental and safety standards supporting continued development of the Inglewood Field in the Baldwin Hills area of Los Angeles, California. This approval gives PXP the ability to drill up to 600 new wells at the Inglewood Field.
The County of San Luis Obispo California recently approved a permit to construct a water reclamation and treatment facility to improve operating efficiencies for oil recovery activities in PXP's Arroyo Grande Field. The new facility will accelerate field development and production growth at the Arroyo Grande Field, which represents a significant development for our onshore California production operations. Construction is expected to begin by year-end 2008 followed by drilling and steaming operations to enhance the present production rate of 1,300 BOEPD with a 17% compound average growth rate over the next 10 years.
T-Ridge received final approval from the County of Santa Barbara California Board of Supervisors on October 7, 2008. This approval is an important milestone for this significant project. PXP is working to obtain approvals from the California State Lands Commission, the California Coastal Commission, and the federal Minerals Management Service, which would allow drilling to begin as early as the first quarter 2009.
PXP agreed on September 24, 2008 to divest its oil and gas properties located in the Permian and the Piceance Basins for $1.25 billion to Occidental Petroleum Corporation. This transaction is expected to close
on December 1, 2008.
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