HOUSTON—When getting better economics is the mission at hand, Gulf of Mexico (GoM) operators like Talos Energy are eyeing potential prospects around existing assets.

The Houston-based company’s reverse merger with Stone Energy, completed more than a year ago, boosted the independent’s U.S. GoM acreage to nearly 625,000 net acres, more than about 342,600 were developed by year-end 2018.

Having already had success around the deepwater Phoenix and Tornado fields in the Green Canyon area, Talos Energy CEO Tim Duncan turned to assets bought in the Stone merger in the Mississippi Canyon area such as Pompano and Ram Powell and Green Canyon 18 acreage picked up with its acquisition of Whistler Energy II.

“I think you’re going to see us develop more prospects around those assets for the reasons we’ve talked about—trying to get better economics,” Duncan said on the sidelines of a recent energy conference. “We’ve also entered into some interesting JVs,” including a 20,000-acre joint venture with Murphy Oil Corp. focused on Middle Miocene prospects.

Source: Talos Energy
Source: Talos Energy

As Talos continues to grow, Duncan said the company will consider pursuing other emerging areas. But he cautioned the company, which is also behind the massive Zama development offshore Mexico, is “never going to get away from our core knitting.” Talos’ strategy relies on its large seismic database and reprocessing techniques with deep expertise in the Miocene and Pliocene geologic trends.

The company is also known for sniffing out redevelopment and tieback candidates.

“The Bulleit prospect is an example of that,” Duncan said.

Located in the Green Canyon’s Phoenix complex, home to both the Phoenix and Tornado fields, the Bulleit prospect was spud in late April. Talos’ partners are EnVen Energy Ventures LLC (33.33%) and Otto Energy (16.67%).

With a water depth of about 1,200 ft, Bulleit is an amplitude-supported Pliocene prospect, Otto said in a May news release. The main objective test is in the deeper MP Sands. The shallower target—the DTR-10 oil sand—was discovered in 1984 with all three wells drilled during the ‘80s logging oil pay. Otto said LWD data indicate the DTR-10 sand is well developed.

The shallower objective is about 9,000 ft, while the deeper one is about 13,000-14,000 ft, Duncan said.

“What makes that interesting is the geophysics look like the physical asset we bought 10 miles away at Green Canyon 18,” Duncan said. “So it’s the same aged reservoirs, same geophysical characteristics.”

That field has produced nearly 40 million barrels of oil equivalent to date, according to Otto.

Providing a bit of history, Duncan explained how the company saw the similarities and reached out to the operator of the asset where the lease was expiring at the time. Talos pitched becoming operator and tie back the new discovery, if there is one, to its newly acquired facility.

“That’s an example of how we buy something that looks small and it almost looks nonstrategic and uninteresting, then immediately we start doing business development and exploration in and around that,” area with existing facilities nearby and “the fixed cost is paid for by the production of the transaction,” Duncan said.

Considering the Bulleit prospect is near existing infrastructure, “we can hook it up within 12 months if we find something. I think we’ll report on that probably by midyear.”

UPDATE: Otto Energy Confirms Bulleit As Commercial Discovery

As Talos continues to strengthen its position in a basin that includes some of the industry’s biggest oil and gas players, including BP Plc and Royal Dutch Shell, the company has its eyes on Anadarko’s assets. Anadarko, also among the big oil producers and has a profitable tieback strategy, is being acquired by Occidental Petroleum Corp.

The industry awaits news on which assets will be on the chopping block.

“We’re interested in anything and everything Anadarko operates,” Duncan said. “They’re a great company. I think they’ve [Occidental] got a lot to digest and figure out. Obviously, there are limits to capital we can raise and things we can do.”

Like other companies looking to acquire assets, Duncan said the company would have to evaluate what fits its core areas and where the company already has production.

Anadarko’s GoM assets include 10 operated deepwater facilities, and the company has discovered more than 30 deepwater fields in the GoM.

But “Maybe [Occidental] stays in for a while,” Duncan said. That, he added, would speak for the basin’s viability. “They were a great operator here in the past. We suspect, with the Anadarko team, they could be a great operator here again. But to the extent that some of those assets aren’t as material or not strategic and we can transact around those, we would love to try to. Who wouldn’t?”

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