Vastar's Davidson Credits Early Deep Water Entry
Vastar Resources has placed much of its hopes for the future in
the deep-water Gulf of Mexico as evidenced by its recent deal to
acquire interests in 23 producing fields through a three-way deal
with Atlantic Richfield and Mobil (See Daily GPI Aug. 5, 1998).
However, the company realizes it is not alone in pinning its hopes
on the Gulf and was wise to begin its Gulf of Mexico program when
"The competition is clearly increasing," Vastar CEO Chuck
Davidson said earlier this week in Houston. "We've seen that in
every lease sale as we've continued on. Vastar has built up its
leasehold position in deep-water since really the beginning of
1996. We now have approximately 125 blocks in the deep-water, and
clearly we can see that as we continue on there are more and more
players entering into the deep-water."
Davidson said he doesn't expect any dramatic changes to Vastar's
capital expenditure budget for 1999 as long as the cash flow is
there. This year the company is slated to spend about $700 million.
Next year's amount will likely be about the same unless "commodity
prices go completely wacko." Since Vastar's production is 75%
natural gas, it's largely gas market prices that count. Questioned
as to whether the E&P program would continue at the current pace
if gas prices averaged $1.50, Davidson commented that was
Vastar began building its deep-water portfolio in late 1995. "We
saw that (deep-water) had evolved to the point where we as an
independent company could certainly benefit by participating in it.
It was important for us to build a position early before the rest
of the independent sector moved in. And, of course as we all know
in the last few years, there's been a broad movement into the deep
water by both majors as well as independents."
Davidson said it would be impossible for the company to build
the deep-water position it has now if it were just starting today.
"I say that for a couple of reasons. One is that it would be much
more expensive to try to start over today, but two, as we all know,
the industry has leased a large amount of acreage in the Gulf of
Mexico, and clearly a lot of the key prospects have been and
acquired and are now in various stages of exploration or further
Through its deal with ARCO and Mobil, Vastar is set to acquire
interest in, among other fields, Eugene Island 330, which is
predicted by the Department of the Interior's Minerals Management
Service (MMS) to offer the greatest prospect for gas/oil recovery
at about 750 MMBoe. Vastar already holds an interest in Grand Isle
43, ranked No. 3 by the MMS. In all, five Vastar fields rank among
the MMS' top 50; Six Mobil Fields rank among the top 50. And Vastar
will hold interests in 11 of the top 50 fields once it acquires the
Davidson also touted Vastar's first operated deep-water
discovery, King, which is in the same vicinity as Gulf discoveries
Mars and Ursa. First production is expected from King some time in
2000. King offers potential recovery of 50 to 150 MMBoe. Vastar
holds a 50% interest in the prospect. Also on the company's list is
a much larger prospect, Mirage, in which it holds a 75% working
interest. Mirage could see recovery ranging from 200 to 600 MMBoe,
"We do feel that today it would be almost impossible to
duplicate the position that we've built up over the last couple of
Joe Fisher, Houston
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