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MMS Highlights Solid Deepwater Gulf Activity, But Some Producers Want Out

While many Gulf of Mexico producers are still reeling from the hurricane damage this year, the Minerals Management Service (MMS) said the deepwater Gulf remains a growth area for the industry. There have been nine deepwater discoveries (greater than 1,000 feet) so far in 2005 and there currently is more ultra deepwater drilling activity than one year ago.

"The deepwater discoveries to date represent a strong continuing success story in the Gulf of Mexico," said Chris Oynes, MMS regional director for the Gulf of Mexico. "Discoveries like BP's Stones represent a continuing favorable development in the new Paleocene play in the Walker Ridge area."

The following discoveries were made in 2005:

MMS said there were nine rigs drilling in 5,000 feet of water or greater -- the ultra deepwater zone -- during the first week of December, compared to seven in the same period one year ago.

Chevron/Unocal reached a new drilling record in 2005 -- 32,968 feet of drilling depth at its Knotty Head prospect. This broke the old record set by Shell of 32,727 feet.

MMS said the announced deepwater discoveries thus far this year "demonstrate that active exploration in the deepwater Gulf of Mexico will continue to help America meet her energy needs."

However, producers are still reeling from the hurricane damage and some have decided to reduce their offshore risk by scaling back future Gulf operations. Pioneer Natural Resources said this fall that it will completely exit the deepwater Gulf (see Daily GPI, Oct. 14).

"The current commodity pricing environment offers a unique opportunity to deliver near-term value to our shareholders by repurchasing shares at attractive prices and increasing the dividend," said Pioneer CEO Scott Sheffield. "We also reduce our risk profile with an increased focus on onshore North America and the planned divestiture of short-lived and non-strategic assets."

Dallas-based Pioneer made its Clipper discovery after that announcement. The Green Canyon 299 discovery is now included in its divestment program, which also includes existing production from Canyon Express, Devils Tower and the Falcon Corridor, with discoveries under development at Ozona Deep and Thunder Hawk, and 90 exploration blocks.

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