EPL Oil & Gas Inc. continues its buying spree in the Gulf of Mexico (GOM), agreeing Thursday to acquire five natural gas and oil leases off the coast of Louisiana, a purchase timed to an ongoing push to expand its portfolio of shallow water prospects.

The $70.4 million purchase from Nexen Petroleum USA Inc. includes leases primarily in the Central GOM's Eugene Island blocks, about 170 miles southwest of New Orleans. The leases being acquired sit on about 2.6 million boe of reserves, according to EPL estimates. Existing wells now produce about 900 boe/d net, 91% weighted to oil. EPL would own all of the interests.

The Houston-based operator, which moved its headquarters from New Orleans last year, plans to use new technology to drill other shallow water fields in the Central GOM, said CEO Gary Hanna.

"This purchase adds another layer of long-lived oil production to our current asset base and additional upside," he said.

The purchase, set to close by the end of the month, is the independent's fifth major acquisition in the shallow GOM since 2011. In September, EPL paid $21.8 million to W&T Offshore Inc. for an asset package in the West Delta 29 field with estimated reserves of 0.6 million boe, 94% proved developed. That purchase was funded by the $21.8 million sale of a nonoperated asset package in the GOM's Bay Marchand field.

EPL in 2012 made its biggest shallow water purchase by spending $550 million to buy natural gas-weighted Central GOM leases from Hilcorp Energy GOM Holdings (see Daily GPI, Sept. 18, 2012). The Hilcorp purchase doubled EPL's total output with production of 10,000 boe/d, equally weighted to natural gas and oil. Estimated proved reserves in the Hilcorp transaction at the time totaled 36.3 million boe.

Last March EPL was awarded five leases in Central GOM Lease Sale 227 covering a total of 13,892 shallow water acres on a net basis (see Daily GPI, March 21, 2013). And in September and October management negotiated agreements totaling about $45 million to acquire 3-D seismic licenses over its core areas through 2016 covering at least 200 blocks, or about one million acres of its shallow water holdings.

EPL estimated that it would absorb about $27 million in Nexen's future costs related to the new leases. Calgary-based Nexen Inc. in 2013 was purchased by a unit of China National Offshore Oil Co. (see Daily GPI, Feb, 13, 2013; July 24, 2012).

In its 3Q2013 operations report, EPL said it completed five development drilling operations, four of which were successful, and six recompletion operations, all of which were successful. Additionally, it drilled one exploration well in the Hilcorp-acquired lease in the Main Pass area that was waiting on production facilities to begin production.

Operating results in the quarter compared with a year ago reflected a 96% increase in oil production and a 192% jump in natural gas production, EPL noted in its report. The production mix at the end of September was 76% weighted to oil, including natural gas liquids, compared with 82% in the year-ago period.