HOUSTON—When faced with the decision of whether to spend about $30 million to shoot new seismic across Block 7 offshore Mexico or a couple of million dollars to reprocess data provided by the government, Talos Energy CEO Tim Duncan chose the latter.

Comparing two seismic images—one of old data shot by state-owned Pemex and Talos’ reprocessed data—Duncan pointed out an interesting flat spot typically indicative, he said, of a difference between oil and water on the older image.

“We also knew there was a well 40 miles away that was filled with wet sand. Our view was that if those sands were resident in those locations and it had hydrocarbons this should light up,” he told attendees of the AIPN International Petroleum Summit. After reprocessing what the government provided and seeing a clearer image, a well was drilled. The result, as the industry knows it today, is Zama—a discovery believed to hold between 400 and 800 million barrels of oil equivalent (boe) in resources. If the appraisal program, expected to end by mid-year with a 2020 target for a financial investment decision, confirms the resource range, production could be between 150,000 and 175,000 boe/d.

“That’s the type of business we want to engage in. What’s the smartest dollar we can spend?” Duncan said.

Source: Talos Energy
Source: Talos Energy

Having plenty of seismic data, including reprocessed data, has proven beneficial for companies like Talos Energy. But independent E&Ps and majors alike are relying heavily on seismic, whether it’s reprocessed or the latest advanced technology, to uncover hydrocarbon resources. Such technologies are also playing a crucial role in infrastructure-led exploration underway in the Gulf of Mexico (GoM).

“We can’t go on an elephant hunt and expect that to be sustainable through the cycles of … a commodities-based business,” Duncan said. “Our model is to have a lot of seismic, use that seismic and go do M&A,” eyeing infrastructure and exploration opportunities around it.

Having that infrastructure helps uplift exploration economics, he added. Using reimaged seismic data, the company has been to uncover opportunities others have passed.

Although U.S. shale is still holding the world’s attention, Duncan said opportunities offshore may be more interesting now than the industry has ever seen it. He called the GoM “a whole minion of M&A opportunities,” including stranded discoveries, mature assets and assets of private equity-backed companies looking to exit.

When Talos, which completed a reverse merger with Stone Energy last year, bought the Phoenix Field (formerly Typhoon) in 2013 it was flowing about 10,000 bbl/d. But production has since risen to about 40,000 bbl/d, thanks to reprocessing data, which led to new discoveries, redeveloping the asset and exploring to the south with new leases.

“If we can do this one out of three times in our transaction efforts, it’s a homerun for us,” Duncan said.

Talos, which is a Miocene and Pliocene geologic trend player in the GoM with some interest in the Norphlet play, is using the same reprocessing seismic strategy offshore Mexico.

But the independent is not alone in uncovering new barrels in the GoM.

Technology, specifically breakthroughs in advanced seismic imaging, is having a big impact for BP.

“We can now see below geologic salt layers better than ever before,” said Starlee Sykes, BP’s regional president of GoM and Canada.

In January, BP said seismic imaging uncovered 1 billion more barrels of oil in place near the Thunder Horse Field and an additional 400 million barrels at the Atlantis Field in the U.S. GoM. The technology, called full waveform inversion (FWI), combined with supercomputing power and a proprietary algorithm led to the discovery of the additional resources.

At the Mad Dog Field, Sykes said BP deployed its proprietary low-frequency seismic Wolfspar to help the company see additional potential.

Deepwater GoM remains competitive for investment dollars, she added.

“When we drilled the first exploration well at Thunder Horse, oil price was in the range of $8-$10 per barrel,” Sykes said. “If we could make it work then, imagine what we can do now.”

Using technology, planning ways to get the most out of existing assets and discoveries, and infrastructure-led exploration are part of BP’s exploration strategy, Sykes told media after her presentation.

When oil price dropped, it was all about returns, she recalled.

“For us we had a lot of opportunity around our hubs that was really good. To go out and find new stuff wasn’t necessary,” Sykes said. “Quite frankly the best thing for us to spend money on was filling our hubs. We now have a strategy in place around all four of our hubs to fill them.”

BP’s four hubs in the U.S. GoM are Thunder Horse, Atlantis, Mad Dog and Na Kika.

But the company still has core exploration opportunities on its radar as it remains active in lease sales, adding to a portfolio of drilling options.

Infrastructure-led exploration is also part of Talos’ strategy.

Duncan used an asset acquired from Exxon Mobil Corp. in the 1980s as an example.

“After we closed that transaction 10 miles to the east we picked up a stranded prospect that didn’t look like it would get drilled by its operator,” he said. “We picked up a stranded discovery about 25 miles away and we picked about three or four leases in a lease sale averaging about $100 an acres and suddenly I have a whole portfolio of ideas to fill up that 30,000 bbl/d facility where all that fixed cost is paid for by that transaction.”

It’s a formula the company hopes to replicate when feasible. “If we just go hunting for these prospects without access to this infrastructure it changes the dynamics,” he said.

It’s something to which frontier explorer Kosmos Energy can relate. The company entered the GoM in August 2018 with its $1.225 billion acquisition of Deep Gulf Energy.

“We’re now going in and looking for the smaller opportunities that either were too small initially to drill for, too risky or folks didn’t even see them,” said John Shinol, vice president of geoscience for Kosmos Energy. Nearby infrastructure makes for attractive returns and short timelines from discovery to first oil. “In the Gulf of Mexico, our business has been doing this on average in less than 18 months.”

Enhanced seismic data is among the main drivers. Shinol described the GoM as a testing ground for the offshore industry. Technologies such as wide azimuth surveys, nodal surveys, FWIs and depth imaging was carried out in the basin over the last decade or so, he said. “Not only has it helped to find the big deep fields, but it is also something that can help us find smaller fields near infrastructure. We’re leveraging that data and utilizing that to help us find new discoveries.”

Velda Addison can be reached at vaddison@hartenergy.com.