Too Soon to Value Nexen / Shell Oil Strike in Eastern Gulf of Mexico

Includes: CEO, RDS.A, RDS.B
by: Proactive Investor

The Gulf of Mexico is widely regarded as a mature oil and gas basin, having received the attention of energy companies for decades, yet discoveries are still being made on a weekly basis. Nexen (NXY) and its partner Royal Dutch Shell (NYSE:RDS.A) have added to the tally of significant oil discoveries at Appomattox, off-shore Mississippi Canyon blocks 391 and 392

At Appomattox, the partners drilled an exploratory well and two appraisal sidetracks, and the well results have exceeded pre-drill expectations. Shell is the operator of the project and it holds 80% interest, while Nexen owns the remaining 20%.

"The Appomattox discovery confirms our confidence in the play and provides a strong basis to evaluate the remainder of our significant acreage position in the Eastern Gulf of Mexico", Nexen President and CEO Marvin Romanow said. "We are looking forward to additional drilling at Appomattox to confirm the estimate of total resource and move the discoveries towards development".

The discovery well, located in 7,217 feet of water, was drilled to 25,077 feet true vertical depth and encountered approximately 530 feet gross of oil pay. The first appraisal sidetrack was drilled to approximately 25,950 feet (true vertical depth) and encountered approximately 380 feet oil pay, the second sidetrack was undertaken to further delineate the discovery.

Appomattox is the third discovery in the area, following discoveries at Shiloh and Vicksburg, in which Nexen owns 20% and 25% respectively. Through its subsidiary, Shell Offshore, Royal Dutch Shell operates all three projects.

The partners said that additional appraisal activities are planned for later in the year, and they are investigating development options for Appomattox and Vicksburg.

It seems the Gulf of Mexico still have plenty of scope for reserves and will continue to play a vital role in the United States energy security for some years to come.

Disclosure: No position