The independent E&P company is turning to technology to boost reserves by upping incremental recovery from mature assets.

SAN FRANCISCO—The pieces are set on the chessboard that is the Gulf of Mexico (GoM) shelf as operators turn to execution to boost reserves in a consolidated mature environment.

“Some small fields are out there, but the big ones we own, Apache owns, or Chevron owns – and none of us are selling,” said Ben Marchive, executive vice president of E&P for Energy XXI, presenting at the IPAA OGIS West Conference in San Francisco.

“We wish Chevron would sell a big package like ExxonMobil, but [it is] getting busy in [its] own fields. [The company] put out a couple [of] small packages in the last couple [of] years. There are no big packages out there.”

Marchive confirmed Energy XXI had looked at Hilcorp Energy GOM Holdings LLC’s shelf exit package that EPL Oil & Gas Ltd. acquired for US $550 million in mid-September. In general, deal volume has been trending down on the shelf, despite the headline transaction this year involving SandRidge Energy Inc.’s $1.275-billion acquisition of Dynamic Offshore Resources LLC, as well as Energy XXI’s $1.012-billion acquisition of ExxonMobil properties in November 2010.

“We look at seven or eight packages a year,” Marchive said. “A lot of them we don’t even act on because [these] are not very promising. It is very hard to find what we are looking for: old oil fields, because the newer fields, they’re not big. You’re not finding the half-billion-barrel fields, or the 300 MMbbl fields, or the 200 MMbbl fields. [Those] were all found years ago.”

Rather, Energy XXI is focusing on technology to add reserves by increasing incremental recovery from mature assets.

“We’re finding through reservoir simulation studies that with horizontal drilling we can do 700,000 or 800,000 barrels and we can add reserves,” Marchive said. “That original well might have been 400,000 barrels if we drilled it vertically. So we’re adding reserves with our development program.”

As an example, Marchive outlined results from the Big Sky #2 horizontal test on its West Delta 73 block, which the company acquired in the November 2010 ExxonMobil divestiture. Vertical wells in the structure generated initial production (IP) rates of 1,000 boe/d and estimated ultimate recoveries (EURs) of 350,000 bbl. The Big Sky #2 horizontal test employed a 305-m (1,000-ft) lateral targeting 2,500 boe/d. Despite interruption in the drilling process from Hurricane Isaac, Energy XXI completed the well in September for $8.7 million with a 24-hour IP of 3,000 boe/d and an 800,000-bbl EUR.

Energy XXI plans four other horizontal wells in West Delta 73 in 2013, which is 45 km (28 miles) south of Grand Isle, La., in 53 m (175 ft) of water.

Marchive, in his OGIS presentation, noted that Energy XXI’s top five fields featured a 45% recovery factor. Historically, those fields produced 992 MMbbl of oil with an estimated 38 MMbbl remaining. A 5% improvement in recovery factor via horizontal drilling and advanced completion techniques would generate an additional 114 MMbbl out of the five fields.

“Reservoir simulation shows we can double or triple the recovery factor with a horizontal [well], and we can add millions of barrels of oil,” Marchive said. “ExxonMobil drilled nine horizontal wells in West Delta. Three [were] gravel packed; six [were] not. The three [that were] gravel packed made over a million barrels. The six it didn’t made 250,000 to 300,000 barrels.”

Energy XXI is currently running four operated rigs in shallow shelf waters off the southern Louisiana coast and is participating in four nonoperated drilling programs, including the ultradeep shelf tests at Blackbeard West #2 and Davy Jones #1. Two of the nonoperated ultra-deep tests are onshore at Lineham Creek and the Highlander area in southern Louisiana.

The Houston-based shelf player claims it is the third-largest oil producer on the shelf and operates five of the 11 largest shelf oil fields.

Energy XXI is targeting $600 million in E&P capital expenditures for fiscal year 2013, with $322 million allocated to the former ExxonMobil properties.

“Trying to do $600 million is tough because of the rig situation,” Marchive said. “You bump up against rig availability. When you get a rig, you have to hold onto it. Sometimes we wait six months to get a rig, so it’s tough to increase our spending because you physically can’t do it.”

The company will install a new 20-slot platform at South Timbalier 54 Field, 58 km (36 miles) offshore Lafourche Parish, La., in 20 m (65 ft) of water.

“We’re running into problems as far as not having slots to drill from,” Marchive said. “When we do put a 20-slot platform out there, the wells will be cheaper and we won’t have to go through the expense of reclaiming an old wellbore. We’ll put the platform in an area where the paths of the wells will be less complicated than some of these we’ve been drilling.”

Contact the author, Richard Mason, at rmason@hartenergy.com.