Kerr-McGee and BP Exchange Deepwater, Arkoma Basin Assets
Kerr-McGee Oil & Gas Corp. and BP plc executed a property swap last week, with BP giving up its 37.5% working interest in the deepwater Gulf of Mexico Blind Faith discovery. In exchange, BP will receive an undisclosed amount of cash and interests in several oil and natural gas assets in the Arkoma Basin of southeast Oklahoma.
The Blind Faith prospect is located in 7,000 feet of water about 175 miles southeast of New Orleans on Mississippi Canyon Blocks 695 and 696. The discovery well was drilled in June 2001 and encountered more than 200 feet of net pay in Miocene sands from 20,900 to 24,300 feet. A successful appraisal well was drilled earlier this year.
Blind Faith has an estimated gross resource potential exceeding 100 MMboe. ChevronTexaco Corp. operates Blind Faith with a 62.5% working interest. Development options currently are being evaluated and sanction is expected in 2005, with first production in 2007. The prospect is located about 20 miles from BP's Thunder Horse prospect, which is considered one of the largest discoveries ever in the Gulf (see NGI, Sept. 8, 2003).
"We view this property exchange as a win-win for both Kerr-McGee and BP," said Dave Hager, Kerr-McGee's senior vice president responsible for oil and gas exploration and production. "Upon closing, this will add another significant development to our deepwater Gulf of Mexico portfolio, while BP will acquire additional working interests in their operated and non-operated Arkoma basin production."
Hager said the transaction was consistent with Kerr-McGee's plan to concentrate assets in core operating areas where it has "critical mass and operating expertise." The exchange was to be effective Nov. 1, 2004, with closing anticipated in early 2005.
As a result of the exchange, Kerr-McGee adjusted its production guidance for 2005 to reflect the disposition of the Arkoma assets. The Oklahoma City-based independent now expects to produce 361,800-390,000 boe/d in 1Q2005. In the quarter, Kerr-McGee expects to produce 1,052-1,127 MMcf/d of gas in the United States onshore and offshore, which is slightly below earlier forecasts. The only quarterly decline is in onshore U.S. gas production, where the company now expects to produce 612-652 MMcf/d.
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