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Anadarko Gets Lucius Funding in Exchange for Stake

Anadarko Petroleum Corp. last week agreed to give up some of its ownership in the prospective Lucius development in the deepwater Gulf of Mexico (GOM) in exchange for $556 million to help fund the project to first production in late 2014.

Lucius, which is 230 miles southeast of Houston in waters about 7,000 feet deep, includes portions of Keathley Canyon (KC) Blocks 874, 875, 918 and 919. The KC blocks that make up Lucius are said to hold an estimated 300-540 million boe. Initial production, set in late 2014, would come from six wells.

Under the joint venture capital carry arrangement with the undisclosed party, Anadarko would receive $556 million, which is estimated to represent all of its expected capital obligations through the anticipated date of first production. In exchange, Anadarko would convey a 7.2% working stake in the development; its 35% stake would be reduced to 27.8%. Anadarko would continue as operator. The agreement is expected to close by the end of September with an effective date of Jan. 1, 2012.

Anadarko CEO Al Walker said the agreement "further enhances the capital efficiency of our investment in the estimated 300 million boe-plus Lucius development. We look forward to closing this agreement and working with our prospective partner and the other Lucius co-venturers to advance this project on time and on budget toward first production in the second half of 2014."

Lucius partners now include Plains Exploration & Production Co. (23.3%), ExxonMobil Corp. (15%), Apache Corp. subsidiary Apache Deepwater LLC (11.7%), Brazil's Petroleo Brasilerio, or Petrobras (9.6%), and Italy's Eni SpA (5.4%). Last month ExxonMobil was rumored to be attempting to secure more interest in the Lucius unit. The parties had no comment.

The KC blocks in the Central GOM have been high on the prospect list for deepwater explorers in recent years, including the Central GOM lease sale conducted last month by the Bureau of Ocean Energy Management (see NGI, June 25). Anadarko and its partners sanctioned Lucius for full development last December, almost two years after the producer announced the results of a successful sidetrack well (see NGI, Dec. 19, 2011; Feb. 1, 2010).

ExxonMobil and its partners last year also reported two "major" oil discoveries and a natural gas discovery in nearby KC blocks (see NGI, June 13, 2011). An executive said at the time that the estimated recoverable resource from the KC blocks was more than 700 million boe combined and was considered one of the largest discoveries in the GOM in the past 10 years. The 2011 discoveries followed one by by ExxonMobil and its partners in 2010 at the Hadrian North prospect in KC 919, which extends into KC 918. They also have interests in KC 963 and 964.

Once the Lucius unit is up and running, the stakeholders already have an agreement in place with ExxonMobil and its partners to produce natural gas from the Hadrian South field through the Lucius facility in return for a production-handling fee and reimbursement for any required facility upgrades.

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