[Editor’s Note: This article was updated June 28.]
LLOG Exploration Co. LLC is gearing up for more work in the Lower Tertiary and other areas in the U.S. Gulf of Mexico (GoM), having recently turned on the tap for a field believed to contain nearly 5 billion barrels of oil in place.
The company announced June 25 the startup of Phase One of the Buckskin development, a two-well, six-mile subsea tieback to the Lucius platform operated by Anadarko Petroleum Corp.
“The two wells have achieved an output rate of more than 30,000 barrels of oil per day, a higher level than planned,” LLOG COO Rick Fowler told Hart Energy in an emailed statement June 28. “LLOG intends to drill a number of Buckskin wells in the future.”
With the Buckskin development onstream in the GoM’s Keathley Canyon area, the Covington, La.-based company’s first deepwater development in the Lower Tertiary’s Wilcox Trend, LLOG increases the number of deepwater wells it has brought online this year to six. By year-end 2019, that number is expected to grow to eight when two wells at the Stonefly development begin production in the Viosca Knoll area.
“The successful execution of this project [Buckskin] perfectly illustrates one of LLOG’s key strengths which is the ability to create significant value by reducing cycle times and introducing development efficiencies to world class assets,” Philip LeJeune, president and CEO of LLOG, said in a statement. “LLOG is looking forward to developing future phases of the project and embarking on additional opportunities in the Lower Tertiary.”
The activity comes as the offshore sector continues to see improved economics and a pickup in investment. Subsea tiebacks and standardization are among the elements driving improvements offshore for LLOG and other players.
Buckskin was originally set to reach first oil in late 2019, but LLOG—working with partners Repsol, Navitas Petroleum, Beacon Offshore Energy Buckskin LLC and Ridgewood Energy—brought it onstream early and on budget. The discovery was made by Repsol in 2009.
“The original Buckskin development project was paused for further analysis after the initial economics did not guarantee its viability,” Repsol said June 25, noting LLOG took over operatorship and worked with Repsol to streamline the plan.
Fowler told Hart Energy that the previous operator had a more than $2.2 billion budget for what was a four-well project at the time. “LLOG reduced the scope to two wells and was able to successfully execute the first phase of the project for less than $0.6 billion,” he said.
Navitas Petroleum said production from Buckskin could last about 18 years and bring in about $11.3 billion in total revenue for project partners, according to a Reuters report. Navitas, which reported Buckskin startup June 16, has a 7.5% interest in the project.
Repsol added the phased development approach and use of standardized processes “boosted economic viability, reducing the break-even price for produced oil from Buckskin by almost 30% from the original plan.”
LLOG and Repsol are also partners in the Leon discovery on Keathley Canyon Block 642, where Fowler said a delineation well will be drilled this summer. Repsol said the two recently signed an agreement in which Repsol will acquire a 30% interest in Moccasin with LLOG, in turn, becoming operator of the Leon project. The discovery well, drilled by Repsol in 2014, hit oil in multiple sands in the Lower Tertiary Formation.
“LLOG has been getting more involved in the Lower Tertiary play because we feel we can add value with our focus on low cost and reduced cycle times,” Fowler said.
In the Mississippi Canyon area, LLOG is also progressing the Praline discovery with partners Ridgewood Energy, Red Willow Offshore LLC, Houston Energy Deepwater Ventures XII, CL&F Offshore LLC and Beacon Offshore Energy. The company said it signed a production-handling agreement to develop the Pliocene-aged subsalt discovery as a tieback to the Pompano platform.
“The well is scheduled to be completed in the fourth quarter of 2019 with first production expected in 2020,” LLOG said in an operations update.
The company will also see a fresh infusion of cash after entering a deal with Murphy Oil Corp. earlier this year.
In April, Murphy Oil said it had agreed to acquire some of LLOG assets for about $1.4 billion in cash plus up to $250 million in contingency payments between 2019 and 2022.
“The transaction includes roughly 60% of LLOG’s current production but 0% of LLOG’s exploration prospects,” Fowler said. “LLOG has amassed a solid inventory of over 40 exploration prospects, primarily through lease sales, over the past several years. As a result, LLOG will have opportunities for many years to come. The Murphy transaction positions LLOG for growth.”
On the exploration front, LLOG said it will drill an exploration well at its Spruance subsalt prospect in Ewing Banks 877. Partners are Red Willow Offshore, Houston Energy Inc. and EnVen Energy Corp.
In 2018, LLOG—one of the largest privately-owned operators in the U.S.— brought eight new wells online from five new fields.
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