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MMS Confirms Continued Slow Gulf Restoration; Newfield Projects Long Recovery

The Minerals Management Service (MMS) said last Monday that because of the lack of progress in restoring Gulf infrastructure damaged by the hurricanes it would begin reporting offshore production shut-ins only twice a week instead of daily going forward. Over the last three weeks, an average of about 40 MMcf/d has been added to the market, compared to more than double that during the month of November.

"In the last few days there has been minimal improvement in the production numbers, and this appears to be a trend that will continue with incremental movement over the next several months," MMS said. As of Thursday, there was about 2,227.74 MMcf/d of gas production still shut in offshore in the Gulf of Mexico, the MMS said.

That compares to 5.43 Bcf/d of gas shut in at the end of October and a post-Rita peak of 8.6 Bcf/d on Sept. 26. EIA said earlier this month that it still expects 660 MMcf/d to be shut in next March. Cumulative shut-ins currently total 532.932 Bcf of gas (14.6% of annual offshore gas production) and 102.97 million bbl of oil (18.8% of annual offshore Gulf crude production).

Newfield Exploration reported last week that it will take another six months for its production to approach the levels it was seeing prior to the hurricanes this summer. "We were producing 320 MMcf/d prior to the storms, and if you factor a natural decline in there, we probably would be producing about 300 MMcf/d [had the hurricanes not occurred]," said Newfield spokesman Steve Cambell. Instead, the company is producing about 200 MMcf/d currently.

"Recovery from Hurricane Rita has been much slower than we originally projected with most of the delays relating to pipeline and onshore processing plant damage," said Newfield CEO David A. Trice. "In addition, the storm substantially delayed our drilling program which would have resulted in additional production during this period from new wells and recompletions.

"We are currently producing 200 MMcfe/d from the Gulf of Mexico. We estimate that Gulf production will reach 250-270 MMcfe/d by the end of the first quarter of 2006 and 270-300 MMcfe/d by mid-year 2006," Trice said. "These estimates depend upon timely repairs to third party facilities."

Newfield said that damaged third-party the hurricanes have resulted in the deferral of about 22 Bcfe of its anticipated 2005 production, which represents about 4.2% of the cumulative total deferred production in the Gulf of Mexico as of Monday, according to the latest statistics from MMS.

"Only 14 MMcf/d [out of the remaining 100 MMcf/d of Newfield production still shut in] is due to damage to Newfield platforms. We lost three structures in the storm. Everything else is due to pipelines, connecting facilities and onshore processing," said Cambell. He said the damage to the Venice gas processing plant, the High Island Offshore System, ANR Pipeline and Sea Robin represent the bulk of the impediment to Newfield's production.

The Louisiana Department of Natural Resources (LDNR) reports 30 pipelines are still shut-in, and 17 others are partially shut-in. Seven gas processing plants are still out of service.

In addition, the LDNR said Tuesday that 3,085 wells have reportedly been restored to production, representing 51.9% of the 5,949 wells that were producing in a thirty-eight (38) parish region prior to the hurricanes. In addition, 2,202 wells, or 37%, remain shut-in. The status of 662 wells has not been reported. Estimated restored oil production is 119,451 bbl/d, or 58.8% of total daily production. Estimated restored onshore gas production is 1,485.8 MMcf/d, or 66.5% of the total estimated to be 2,235 MMcf/d.

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