Wednesday, June 8, 2011

Exxon Announces Major Oil Finds In US Gulf

By Angel Gonzalez


HOUSTON (Dow Jones)--Exxon Mobil Corp. (XOM) on Wednesday unveiled two major oil discoveries and a natural-gas find in the deep-water Gulf of Mexico that combined could contain more than 700 million barrels of recoverable oil and gas resources--a sign that the region's energy potential is starting to reawaken from its Deepwater Horizon slumber.

Two of the finds, at the Hadrian South and Hadrian North prospects, had been made in 2009 and 2010 respectively. A third discovery was made in the same block of the Keathley Canyon area of the U.S. Gulf after the company drilled its first exploration well in the region since the lifting of the nine-month U.S. moratorium following the Deepwater Horizon disaster.

The find boosts Exxon's relative weight in the Gulf, where the world's largest publicly traded oil company has lagged behind peers such as Chevron Corp. (CVX) and BP PLC (BP). The amount of recoverable oil and gas near Hadrian exceeds that of Chevron's Tahiti field, which accounts for about 40% of that company's oil and gas output in the U.S. Gulf.

"This is one of the largest discoveries in the Gulf of Mexico in the last decade," said Steve Greenlee, president of Exxon Mobil's exploration business. "More than 85% of the resource is oil with additional upside potential."

The discovery is Exxon's most significant since the Julia find in 2007. Shares rose 1.4% to $81.10 in recent trading. The stock is up 32% in the past year as the industry rebounds driven by high oil prices.

The find is "quite big," said Mohammad Rahman, an analyst with energy consultancy Wood Mackenzie. Wood Mackenzie counts only three fields in the U.S. Gulf of Mexico that contain more than 700 million barrels of oil equivalent in recoverable oil and gas, he said.

Exxon had been ready to start drilling the well when the Deepwater Horizon, a Transocean Ltd. (RIG) drilling rig working for BP in the Gulf, exploded in April 2010, killing 11 and unleashing the worst accidental marine oil spill in U.S. history. But the ensuing moratorium delayed Exxon's plans by nearly a year; after reapplying for permission to drill under new regulations, the process started on March 26.

"We had a drilling rig standing by for months," said Exxon spokesman Patrick McGinn. "We were chomping at the bit to go drill this well."

Exxon is continuing to drill in pursuit of a deeper reservoir that it estimates could contain more resources, McGinn said. Results won't be known for a few weeks, he added.

Exxon's announcement follows Noble Energy Inc.'s (NBL) disclosure at the end of May that it had struck oil at its Santiago prospect.

The Exxon well, which encountered more than 475 feet of net oil pay, is located in the Keathley Canyon region, about 250 miles southwest of New Orleans, in about 7,000 feet of water.

Exxon in April reported its first-quarter earnings surged 69% as the company benefited from high oil prices, stronger refining margins and a jump in natural gas production.

-By Angel Gonzalez, Dow Jones Newswires; 713-547-9214

Tess Stynes contributed to this article.

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