The hunt to secure a joint venture (JV) partner to help develop some projects in the deepwater Gulf of Mexico is nearly done, Devon Energy Corp. officials said Wednesday.

The Oklahoma City-based explorer began to scout for a JV partner a few months ago because the company was spending more money offshore for planning activities than it wanted, and it was taking time and funding away from its onshore prospects (see Daily GPI, Oct. 2; May 7). Devon remains on track to have a partner in place by the end of the year.

“This process has attracted a very broad interest, and we’ve had a strong showing in the data room,” which opened in July, said Vince White, who heads Devon’s investor relations unit. He told financial analysts during a conference call that Devon still had not asked for specific bids and wouldn’t until delineation well results are in on the deepwater Kaskida prospect.

“We are confident that we will complete those operations on Kaskida this month,” said White. “That schedule would put us with bids due by the end of December.”

CEO Larry Nichols told analysts that selling a stake in the Lower Tertiary prospects by the end of the year would help the company prepare for increased onshore spending in 2010. The sale, he said, will “bring balanced spending back in line…so that we’re not spending as large a percentage in the Gulf and we’re spending more of it on our core onshore properties.”

Dave Hager, executive vice president of exploration and production for the company, said “appraisal and development work” is continuing on several of the deepwater discoveries in the Lower Tertiary. The Cascade development project, in which Devon has a half-stake, “is progressing well. We are preparing to move the West Sirius rig to Cascade this month to begin completion operations of the first of two producing wells. This well was drilled earlier in the year and encountered 500 feet of net pay.”

The Cascade prospect in the Lower Tertiary was discovered in 2002 by Devon, BHP Billiton and Petrobras (see Daily GPI, June 4, 2002). In 2006 Devon, Chevron Corp. and a predecessor company of StatoilHydro completed the deepest extended drill stem test in history on the Jack No. 2 well at Walker Ridge Block 758 (see Daily GPI, Sept. 6, 2006).

Petrobras last year received approval from the Minerals Management Service (MMS) to develop the first floating production storage offloading (FPSO) facility in the Gulf of Mexico, which will be placed in the Cascade-Chinook area (see Daily GPI, April 30, 2008).

“Construction of the FPSO is approximately 95% complete, and it should arrive in the Gulf of Mexico in January,” said Hager. “The project remains on schedule for first production in mid 2010.

At Kaskida, another Lower Tertiary prospect, Devon is drilling an appraisal well five miles west of the original discovery, said Hager. “This appraisal well would test a second structural feature on the Kaskida prospect and has the potential to increase the size of the resource that we believe is already the largest of Devon’s four Lower Tertiary discoveries.”

Devon had expected to be finished with the appraisal well two months ago. However, “while drilling in the Wilcox section, we encountered an encouraging oil column and are now evaluating options to sidetrack the wellbore for further delineation information,” said Hager. “Devon has a 30% working interest in Kaskida and BP owns 70%.”

Because BP is the operator, Hager said no information on the well results are expected until the “operations are through,” said Hager. “But when you consider that this well is something like five miles away from the discovery well at Kaskida…just the fact that it’s oil-charged is a very positive indicator to us…”

FBR Capital Markets analysts Rehan Rashid and Michael Jones said in a note to clients after Devon’s conference call that they remained “fans of the company’s Lower Tertiary position and believe that the Street has very low expectations from this sale, as the Lower Tertiary is generally considered almost uneconomical.

“Our analysis, however, leads us to a different and positive conclusion. We note that on Oct. 29 BP filed with the MMS permits to drill two additional exploratory wells on Kaskida project. We view this as having positive implications for the well that is currently drilling…”

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