Stone Energy has outlined its strategic commitment to the deepwater Gulf of Mexico, and is continuing to put its money where its mouth is.
Despite recently reporting a net loss for 2014 of US $189.5 million after impairment charges, the US independent is preparing to drill a number of exploration probes in the GoM, while also continuing to invest the lion’s share (88%) of its planned 2015 capital expenditure of $450 million on its deepwater assets. A total of 60% of its capex is on development activity.
The 2015 Capex figure is still significantly less than last year’s total of $884 million, but Stone revealed in its latest analyst presentation that it remains in a strong position, thanks to its GoM assets.
Outside of OPEC’s long-dominant lowest cost of supply basin leadership, the deepwater US GoM leads the rest of the pack, with an oil supply cost range of between $20-$48/bbl. The deepwater GoM also has the lowest non-OPEC breakeven price at just under $50/bbl (see graphs).
Operationally, Stone’s first two wells on the deepwater Cardona field in Mississippi Canyon Block 29 began producing late in the fourth quarter of 2014 to its 100%-owned Pompano (Viosca Knoll 989) deepwater platform. They are currently producing at a combined gross rate of 10,000 boe/d.
The operator is also planning to spud a third development well, Cardona-6, in the second quarter using the Ensco 8503 rig. Drilling and completion operations are expected to take four months, with the well expected onstream in the fourth quarter at a predicted gross rate of 6,000 boe/d. Stone holds a 65% working interest in Cardona, where it also plans to eventually drill the Cardona-7 well, with a forecast gross rate of 4,000 boe/d.
In MC 26 the deepwater Amethyst gas field development is well underway, with the long lead items ordered for a single well tieback to the Pompano platform, less than five miles away. The Ensco 8503 rig will be outfitted with mooring capabilities before being mobilised to finish completion operations at the well in the second half of this year. Production is expected to flow early in 2016. Amethyst is 100% owned by Stone, with the well originally encountering approximately 27 m (90 ft) of net hydrocarbon pay early last year (see DI, 24 February 2014, page 9).
2015 gross capital spend on Amethyst is put at $120 million, which is expected to produce up to 75 MMcf/d via flexible flowline back to Pompano. A nearby prospect likely to be drilled in the near future is the company’s Derbio target in MC72.
Stone entered into an agreement for the Ensco 8503 last October, with the primary contract term for 24 or 30 months (Stone must elect by 1 April, 2015). The rig will work at a dayrate of approximately $350,000, with the contract also permitting Stone to farm out drilling slots and exercise options to extend the term up to an additional 12 months.
On the exploration front, Stone is a 37% partner in a ConocoPhillips-operated wildcat spudded on the Harrier prospect in MC 118, targeting the Miocene interval and expected to take three or four months to drill. If successful it is likely to end up a tieback to Pompano.
In MC 34 and 35 it is a 32% partner in the deepwater Vernaccia prospect, another Pompano tieback candidate also targeting the Miocene interval and projected to spud late in the second quarter. The well is estimated to take three months to drill.
Back on Pompano itself, Stone says it expects to secure a platform drilling rig for its drilling program late this year, with the program to consist of 3-4 development wells. Net investment on this project is put at $116 million by the company.
Overall in the GoM Stone holds 107 deepwater leases and currently has 20 ‘high potential’ prospects in its plans, including 17 tieback exploration projects. It also has 12 platform development wells planned, five tieback development prospects, four ‘larger sized’ shelf prospects and six liquids-rich gas prospects.
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Drillers cut nine oil rigs in the week to March 22, bringing the total count down to 824, the lowest since April 2018, Baker Hughes, a GE company (NYSE: BHGE), said in its weekly report.
The independent U.S. energy producer aims to take a final investment decision on the $20 billion project in the coming months, having signed up long-term buyers for its LNG.