Enterprise Oil, the largest independent exploration andproduction company in Europe, apparently couldn’t resist the marketopportunity in the U.S. any longer. The company paid $127.3 millionyesterday for all of drilling company R&B Falcon Corp’s E&Pinterests in the Gulf of Mexico, which includes a 50% stake in theBoomvang field about 100 miles south of Galveston, TX, and a majorstake in the Gyrafalcon prospect, which is about 100 miles offshoreLousisiana in Green Canyon block 20.

For R&B, it’s an opportunity to unload E&P assets at atime when the market is at a high point. R&B’s explorationefforts have been “very successful over the past year and one-half,and the…sale partially unlocks the considerable, unrecognizedvalue we have built there,” said R&B Falcon CEO Paul B. Loyd.”We have been working for some time to monetize all or part ofDEVCO [Reading and Bates Development Co.], and we believe ourpatience in waiting for the right time and the right buyer hasclearly paid off for R&B Falcon shareholders. Proceeds from thesales will be utilized to strengthen our balance sheet. We wishEnterprise success in their strategy of developing the Gulf ofMexico into a core business area.”

Enterprise’s activities have been focused in three core areas inEurope, including the United Kingdom and Ireland; Norway andDenmark; and Italy. Now the company is turning its sites on theU.S. Gulf, according to Peter Jackson, president and generalmanager of the company’s U.S. operations. The former British Gassubsidiary plans on elevating the Gulf of Mexico to core businessstatus.

“If you have a billion barrels of reserves, you want to gosomewhere and find probably more than 100 million [to establish anew core area],” said Jackson. “We’re getting between 28 and 33million barrels of reserves (about 200-350 Bcf of gas reserves)[with this purchase]. It’s a significant building block. It’s notgoing to turn the company upside down clearly, but in terms of ourGulf of Mexico position, it’s an extremely significant buildingblock. Boomvang we regard as being a very valuable nugget for us tobuy.”

Under the terms of the purchase, Enterprise has a 50% interestin the Boomvang field development, and subject to final closingconsents, it will acquire a 100% interest in, and operatorship of,the Gyrfalcon field and interests in 19 other deepwater Gulf ofMexico exploration blocks. The Boomvang field is operated byKerr-McGee and has estimate reserves between 70-100 million barrelsof oil equivalent, 50% of which are natural gas. The field isexpected to begin producing in the first half of 2002, using a Sparplatform designed for daily production of 30,000 barrels of oil and200 MMcf/d of gas. Gyrfalcon is a gas field with reserves of threemillion barrels of oil equivalent. The field is producing about 10MMcf/d of gas through a single well tied back to Shell’s nearbyBoxer platform.

Jackson said Enterprise searched carefully during the past yearfor the right prospects to buy. He also noted the climate haschanged so significantly in the last year that the large number ofprospects and farm-ins previously available have vanished to agreat degree with the improved pricing environment.

“There have been a great number of opportunities in the Gulf inthe last 18 months but that market seems to be drying up a littlebit because of favorable pricing. I think people 18 months ago weresaying ‘let’s farm this out and get some help doing it,’ and Ithink that has changed quite a bit.”

He said Enterprise intends to maintain its access to four orfive “top-notch exploration prospects” to drill each year or toparticipate in each year. In addition to Boomvang and Gyrafalcon,the company also acquired R&B’s 25% interest in 12 explorationblocks operated by Texaco, located in the Green Canyon and WalkerRidge areas of the Gulf of Mexico. It also receives explorationacreage in the nine new leases in the Atwater Valley andMississippi Canyon obtained during the OCS Gulf of Mexico LeaseSale 175 in March 2000.

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