Deepwater tech driving shelf activity
Oil and gas production in the continental shelf of the Gulf of Mexico is alive and growing, and technology developed for deepwater use is now driving the growth in shelf production, T.J. Thom, senior vice president and chief financial officer of EPL Oil & Gas, said Tuesday.
Thom was the guest speaker at the Atchafalaya Chapter of the American Petroleum Institute’s monthly meeting at the Petroleum Club of Morgan City.
Much of the technology invented for deepwater drilling used in the Gulf is now making its way to the shelf, Thom said. “We can use different techniques that allow us to make capital commitments that are very, very cheap.”
If the industry can stay focused on driving innovation in the shallow section of the Gulf of Mexico, more companies will be attracted into the Gulf, Thom said.
“I think that we’re in a cycle that will return to prospering,” Thom said. The industry is just on the cusp of new technology that will bring about that prosperity, she said.
In 2009, natural gas business comprised 80 percent of the company. EPL restructured, and now, oil business makes up 80 percent of the company.
EPL is headquartered in Houston and has an office in New Orleans. The headquarters moved to Houston from Louisiana because many of the geologists needed for technical expertise were in Houston, Thom said.
In the previous years, the technology being used in the shelf would have taken deepwater returns in order to justify those expenditures, Thom said.
“We can now make large, seismic commitments over many acres and cover our entire acreage position,” Thom said. Over the next three to five years, the Gulf of Mexico will be “shot at least over the central Gulf,” she said.
EPL’s market capitalization is almost $1 billion, and just four years ago was less than $300 million, Thom said. Market capitalization is the total value of a company’s shares in a stock market. “We decided we had the best asset base right here in your backyard, right there in the Gulf sitting in the shallow waters,” she said.
Thom said $85 to $90 per barrel oil in the long term could be a reality. EPL has grown from having two fields to seven fields, and has tripled its oil reserves and production, she said. EPL has 92 million barrels of oil reserves, which gives EPL a diversified inventory, Thom said.
The company has focused on drilling where oil and gas has been found in the past while focused on acquiring properties and putting those properties to use. The company also focuses on safety because “the more efficient rigs are actually the safest rigs.” Thom said.
EPL has tapped into well depths in the 10,000-foot range over the past couple years, she said.
EPL’s last big acquisition from Chevron doubled the size of EPL overnight, Thom said. “We haven’t even started drilling that asset base. This is a set of properties from Chevron that basically hasn’t been looked at for the last couple decades.”
The deeper pay potential for oil and gas production sits around 12,000 to 20,000 feet, she said. “That is really where we’re targeting the next phase.”
Technology and imaging has also gotten a lot better in the last two years. EPL has been 90 percent successful with drilling wells. “That’s what technology brings. The key is really doing a regional understanding and holding the prime real estate,” Thom said.
With the amount of oil reserves in the shelf, companies such as Exxon and Shell may start coming back to the shelf though it will take some time for that to happen, Thom said. When deepwater economics are played out in shallow water, for example, wells that used to cost $100 million can be drilled for $20 million, she said.
Thom sees a lot of rejuvenation on the shelf. “We probably would have ventured out (of the shelf) a couple years ago had we not taken and embraced technology.”