In what could be a multibillion dollar find, Anadarko Petroleum Corp. has discovered 305 m (1,000 ft) net of oil pay in the Gulf of Mexico (GoM) in multiple high-quality sands southwest of Shenandoah-1, the company and analysts said.

The find could be among the largest for Anadarko and one of the largest overall in the GoM.

Anadarko’s Shenandoah-2 well in the deepwater GoM encountered the oil in high-quality Lower Tertiary-aged reservoirs. The Shenandoah-2 well, located in Walker Ridge Block 51, was drilled to a total depth of 9,572 m (31,405 ft) – nearly 6 miles – in approximately 1,768 m (5,800 ft) of water, more than 1.6 km (1 mile) southwest and approximately 518 m (1,700 ft) structurally down-dip from the Shenandoah-1 discovery.

“The successful Shenandoah-2 well marks one of Anadarko’s largest oil discoveries in the Gulf of Mexico, with more than 1,000 net feet of oil pay and reservoir rock and fluid properties of much higher quality than previously encountered by industry in Lower Tertiary discoveries,” said Bob Daniels, Anadarko senior vice president of deepwater and international exploration.

Anadarko controls the successful Shenandoah wells, the adjacent Yucatan prospect, and the nearby, promising Coronado well, positioning the company to be in one of the most prolific new areas in the deepwater Gulf of Mexico, Daniels said.

Bill Herbert, managing director and co-head of securities for Simmons & Co. International, said the appraisal well was drilled to test the down dip extent of the accumulation and found sands that were full to base with no oil-water contact.

“We would not be surprised if this ultimately doubled the Shenandoah resource potential from APC’s 300-plus million barrels of oil estimate to 600 million barrels of oil,” he said.

David Tameron, Wells Fargo Securities senior analyst, said the discovery has the potential to be one of the largest overall in the Gulf of Mexico.

“To give some idea of scale, the original (Anadarko) Lucius discovery encountered 200 ft of net pay, and the first two appraisal wells encountered 600 and 650 net ft of pay. For (Anadarko’s) Heidelberg the original discovery well encountered 200 ft of net pay and the subsequent two appraisal wells encountered 250 ft,” Tameron said. “We realize there are a lot of variables, and this is a simple and shallow analysis, but gives some indication of size and potential.

“We value the net present value of each of these projects at approximately $7 billion,” he said. “Granted the PV on both of these projects is closer and have already invested more capital, but a similar valuation or something higher could mean another $2.0-plus billion project net to APC,” or $4 per share.

On March 5, Anadarko announced it had signed a definitive agreement with an undisclosed party to enter a carried-interest arrangement for a portion of Anadarko’s ownership in the Heidelberg development project. Anadarko will be carried for $860 million, which represents nearly all its expected capital requirements through the anticipated date of first oil at Heidelberg in mid-2016. In exchange, Anadarko will convey a 12.75% working interest in the Heidelberg development. Anadarko will continue as operator with a 31.5% working interest.

Anadarko is the operator of the Shenandoah-2 well and the previously announced Shenandoah-1 discovery well, located in Walker Ridge Block 52, with a 30% working interest. Other co-owners in Shenandoah are ConocoPhillips with a 30% working interest, Cobalt International Energy LP with a 20% working interest, Venari Resources LLC with a 10% working interest, and Marathon Oil Co. with a 10% working interest.

Similar to the initial Shenandoah discovery well, log and pressure data from the Shenandoah-2 well indicate excellent-quality reservoir and fluid properties. The well was drilled to test the down-dip extent of the accumulation, and the targeted sands were full to base with no oil-water contact.

In the Shenandoah basin, Anadarko also has a 15% working interest in both the Coronado well, located in Walker Ridge Block 98, and the Yucatan prospect, located in Walker Ridge Block 95.

As of year-end 2012, the company had approximately 2.56 Bbbl equivalent of proved reserves, making it one of the world’s largest independent exploration and production companies.

Contact the author, Darren Barbee, at dbarbee@hartenergy.com.