Kerr-McGee's Drilling Program on Track
Kerr-McGee's active fourth-quarter drilling program is continuing on schedule. The company currently has 13 exploratory and appraisal wells drilling, including seven deepwater wells. Five additional exploratory wells are anticipated to be spud by year-end, including two deepwater wells.
Deepwater Gulf of Mexico
In the Atwater Valley area, Kerr-McGee has finished drilling its second successful appraisal of the Merganser natural gas discovery. This well was drilled as a sidetrack to the initial appraisal well to test the reservoir's down-dip extent. Located in 8,000 feet of water, the well was drilled to a total depth of 21,110 feet and encountered the same primary pay zone as the discovery well. Reserve estimates range from 200 billion to 400 billion cubic feet of natural gas equivalent (Bcfe). Kerr-McGee operates Merganser with 50% working interest, and Ocean Energy, Inc. (NYSE: OEI) holds the remaining 50%.
Also in Atwater Valley, a successful appraisal confirmed a natural gas discovery on the Vortex prospect on block 261. The appraisal was drilled to a total depth of 19,330 feet. This sidetrack appraisal was drilled 2,900 feet to the west of the discovery well. The appraisal well currently is being evaluated and will be temporarily abandoned. Kerr-McGee currently operates the appraisal well with one-third interest. Ocean and BHP Billiton also hold one-third each.
The Yorktown well, located in 2,100 feet of water on Mississippi Canyon 886, was spud in late October toward a total depth of 25,000 feet. Pre-drill reserve estimates exceed 175 million barrels of oil equivalent (BOE). Kerr-McGee and Ocean each hold 50% working interest in the Ocean-operated prospect.
The Santiago well in Garden Banks 487 has drilled to 19,043 feet and evaluation with wireline logs is in progress. Kerr-McGee operates Santiago with 87.5% working interest and has recently farmed out the remaining 12.5% of this prospect to LLOG Exploration Company.
Kerr-McGee has farmed into the Bohr prospect in Mississippi Canyon 637. This is a 28,500-foot vertical well in 4,100 feet of water, located in southern Mississippi Canyon. Kerr-McGee holds 27.5% working interest in the prospect operated by Unocal with 27.5%. Shell holds 40%, and ChevronTexaco 5% working interest.
Kerr-McGee is rigging up to spud an additional exploratory well on Garden Banks 877. This planned 18,300-foot well will test the potential up-dip extension of the reservoirs encountered at the Red Hawk field. The Red Hawk field, with current estimated proven reserves greater than 250 Bcfe, is being developed with the world's first cell spar. Production from Red Hawk is expected to begin in the second quarter of 2004. Kerr-McGee operates the Red Hawk area with 50% working interest, and Ocean holds the remaining 50%.
Kerr-McGee has spud its first deepwater well on block 4 offshore Benin. The drillship Transocean Deepwater Discovery is drilling the Fifa #1 well in 7,125 feet of water. This well will test the shallower Kaba and deeper Atacora prospects. Pre-drill reserve estimates range from 150 million to 400 million BOE. Kerr-McGee operates this well with 70% working interest with partner Petronas, which recently farmed into the block for 30% working interest.
Upon completion of this well, the company expects to drill a second exploratory well on the block, the Hihon #1. The Hihon well will be drilled 35 miles to the west of the Fifa #1 and will test the Alibori prospect, located in 7,200 feet of water.
The company has spud a deepwater well off the northwest shelf of Australia, the Wigmore #1, on the WA-295-P block. The well is drilling in 4,060 feet of water toward a total depth of 16,000 feet. Pre-drill reserve estimates range from 200 million to 600 million BOE. Kerr-McGee operates this block with 50% working interest, and Agip Australia Limited holds the remaining 50%.
Onshore in the United States, Kerr-McGee is drilling six exploratory wells. The wells are primarily located in the Gulf Coast region of Texas and Louisiana. Kerr-McGee operates five of these and holds an average working interest of approximately 50% in these prospects.
Kerr-McGee still expects total exploration expense for the fourth quarter to be approximately $120 million.