Houston-based independent Cobalt International Energy LP and Total E&P USA Inc. last week agreed to combine their Gulf of Mexico (GOM) lease holdings in a long-term strategic alliance.
Under the terms of the agreements, subject to approval of the Mineral Management Service (MMS), the GOM exploration portfolios of both companies will be merged. Cobalt has 122 offshore leases and Total has 80 leases, which will be added to 12 exploration leases they already jointly own. Generally the agreements stipulate that Cobalt will be 60% owner; Total, based in Paris, will hold a 40% stake. The agreements are expected to provide both companies with access to large areas of contiguous acreage, mainly sub-salt, similar to major discoveries in the Lower Tertiary area of the deepwater GOM.
The companies also agreed to a joint participation area for any future opportunities between the parties in the GOM. Cobalt was designated as the partnership's operator. No financial details were released.
"We will execute our program utilizing state-of-the-art technology to realize the full potential and value of our combined Gulf of Mexico assets," said Cobalt CEO Joseph H. Bryant. "The combined portfolio contains numerous prospects with significant working interests positioned in key play fairways."
The alliance would combine Cobalt's "proven expertise in the Gulf of Mexico, along with Total's worldwide experience in deep offshore exploration and development," Total said. A multi-well program on the combined portfolio is expected to launch this summer using a Total-supplied drilling rig. Cobalt would operate the exploration phase in the joint program and Total would provide the rig and some personnel.
"Both companies have complementary competencies to successfully explore and develop their combined portfolio," said Total's Yves-Louis Darricarrere, president of exploration and production.
Cobalt has been in operation less than four years. It was formed in late 2005 by former Unocal Corp. and BP plc executives, and initially launched with $500 million in private equity from Carlyle/Riverstone and Goldman Sachs Capital Partners (see NGI, Dec. 5, 2005). Additional financial backers now include First Reserve Corp. and Calgary-based KERN Energy Partners.
In October 2007 Cobalt ranked third behind Shell Offshore Inc. and BP Exploration & Production Co. Inc. after capturing 83 high bids on offshore leases offered by MMS (see NGI, Oct. 15, 2007). In that lease sale, Cobalt obtained 53 deepwater leaseholds. In last month's MMS Central GOM Lease Sale 208, Cobalt, with Eni Petroleum US LLC and Samson Offshore Co., was high bidder at $22 million for Walker Ridge Block 133 in the deepwater Lower Tertiary Trend (see NGI, March 23).
Total's U.S. E&P program has been ongoing since 1957. In the deepwater GOM, Total now is participating in two major development projects. The producer holds a 17% equity stake in Chevron Corp.'s Tahiti project, which is scheduled to ramp up in the next few months (see NGI, March 16). In addition, Total owns a one-third stake in the Chinook deepwater project, which is scheduled for start-up in 2010 (see NGI, Sept. 11, 2006). Total also operates two producing deep shelf fields, Matterhorn and Virgo (see NGI, Feb. 5, 2007; Oct. 24, 2005).
Total, which is the fourth largest publicly traded oil and gas company in the world, also has operations onshore in the United States. It acquired a 30% working interest from Chevron in several onshore exploration blocks in the White Hills area of Alaska, and an exploration program is under way. Total also holds a portfolio of exploration blocks in the Beaufort Sea offshore Alaska. In addition, it acquired a half stake in IDT Corp.'s American Shale Oil LCC (AMSO) subsidiary, which is developing a research and demonstration program to produce and commercialize oil shales on AMSO's federal leasehold in western Colorado.
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