Australia’s largest independent oil and natural gas operator, Woodside Petroleum Ltd., last week announced an alliance with privately held Explore Enterprises of Louisiana LLC to acquire, develop and produce properties in the Gulf of Mexico (GOM) Outer Continental Shelf and in the deepwater.

Under the five-year exploration alliance, subsidiary Woodside Energy (USA) Inc. and Explore Enterprises will jointly invest in the GOM. Woodside will hold 95% of the combined interests; Explore will hold the remaining 5% stake. Explore Enterprise’s stake in the new alliance would increase to 12.5% after Woodside had recovered the present value from its invested capital in the projects, and the alliance includes a two-year extension option. The alliance will maintain offices in Houston, TX and in Covington, LA, where Explore is headquartered.

Woodside CEO Don Voelte called the venture an important step to develop the Australian producer’s GOM business and a strategy to improve competitive positioning in the region.

“It builds on our strategic objectives for the Gulf of Mexico by bringing an established and experienced management team to Woodside’s Gulf business,” Voelte said.

The agreement gives Explore Enterprise 5% interest in Woodside’s existing leases in the GOM, including its Neptune and Midway discoveries, and allows the two to invest in additional acquisitions and development. The Neptune natural gas well is located in deepwater, and is included in one of Kerr-McGee Corp.’s spar hub developments.

Woodside splits its 50% interest in the Midway gas well, located in shallow water, with Pioneer Natural Resources. Under the two-year agreement, Woodside has taken a 50% interest in 47 offshore exploration blocks operated by Pioneer. The agreement covers eight prospects and 19 leads and includes five wells in 2003 and three in 2004. Most of the wells will target gas plays below 15,000 feet (4,500 meters).

Woodside, a mid-cap independent about the size of Apache Corp., was unsuccessfully targeted by Royal Dutch/Shell Group in a takeover attempt in 2001. Among other things, Woodside has about 15 years of experience working with liquefied natural gas (LNG) projects, and it has been upping its interest in LNG projects in the United States. In November, Houston-based Crystal Energy LLC announced an in-principle agreement with Woodside to develop a proposed LNG receiving terminal off the coast of Oxnard, CA (see NGI, Nov. 8, 2004). It has delivered more than 1,600 cargoes of LNG to markets in Asia, the United States and Europe.

Woodside also has expertise in developing floating production, storage and off-loading facilities (FPSOs) offshore Australia.

Agu Kanstler, who directs Woodside’s exploration program, said “the combination of this team with Woodside’s technical expertise and substantial lease position will provide both companies with significant benefits.” Kanstler said Woodside uses “rigorous opportunity screening” to drive its portfolio quality, using subsurface technology in its project development. Woodside also likes to build strategic alliances to enlarge its substantial portfolio.

Bill Bethea, who founded Explore Enterprises with David McCubbin in 2003, noted that Woodside had built an “outstanding set of exploration assets” in the GOM. Explore focuses on the GOM, he said, and its experience “will allow the alliance to unlock the full value of its existing asset base and build a substantial business during the term of the agreement.”

Bethea and McCubbin cofounded W&T Offshore in 1988 to explore the GOM, and between 2001 and the end of 2003, W&T drilled 55 exploration wells, 49 of which were successful. W&T currently has an enterprise value of more than $1 billion.

Bethea, who has also worked for Taylor Energy and Texaco Corp., sold his stake in W&T in 2002, and with McCubbin, established Explore Enterprises. McCubbin had worked for Exxon Corp. before joining Bethea.

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