Tickers in this Article: RDS-A, NXY, MMR, HES
Nexen (NYSE:NXY) has not given up on the deepwater Gulf of Mexico and has an ambitious exploration and development program planned over the next few years. IN PICTURES: 6 Major Credit Card Mistakes

Gulf of Mexico
Nexen likes the Gulf of Mexico for several reasons. The deepwater has one of the largest amounts of undiscovered resources of any basin, with an estimated 15 billion to 85 billion barrels of oil equivalent (BOE) of reserves yet to be found, according to the company. The deepwater Gulf of Mexico is also an oily basin, and exploration here has a fairly high success rate historically. Nexen also likes the deepwater Gulf of Mexico because a find here has a chance to be a "world class discovery" that could make a company.

Nexen also favors the deepwater Gulf of Mexico due to the business climate that is present there. The region has access to a large market due to its proximity to the United States, and has an expanding infrastructure that extends more than 150 miles offshore, where new discoveries can be tied in.

The Gulf also has plenty of unexplored acreage and a steady flow of deals if the company wants to acquire more acreage or divest some properties.

Nexen Portfolio
Nexen has been operating in the Gulf of Mexico for more than 30 years, and like many in the industry is currently focused on the subsalt Miocene play and the Norphlet play. The company estimates that it has more than 100 prospects in its portfolio.

Subsalt Miocene
In the Subsalt Miocene, the company is working in the Knotty Head prospect. The company has signed a letter of intent with Hess Corporation (NYSE:HES), which is the operator on the block, to get the project moving forward. The company expects the project to be sanctioned in 2011 or 2012, with first production in 2014 to 2016.

Norphlet Play
In the Norphlet play, the company has a 20% interest in the Appomattox discovery, where Royal Dutch Shell (NYSE:RDS.A) is the operator and owns the other 80%. The discovery well at Appomattox found 425 feet of net oil pay and two sidetracks drilled also found oil pay. The company estimates its resource potential here at 250 million barrels of oil equivalent (BOE), which might support a 100,000 BOE per day hub facility.

Exploratory
Nexen expects to restart exploratory drilling early in 2011 in the subsalt Miocene play and has prospects at Angel Fire, Kakuna and Cypress to drill in 2011.

Another player in the Gulf of Mexico is McMoRan Exploration (NYSE:MMR), which has several prospects that the company is working on. One well the company is currently drilling is the Blackbeard East well, which is targeting various Miocene formations.

Bottom Line
Nexen still loves the Gulf of Mexico despite the increased government regulation that will apply to future drilling here. The company has an ample inventory of exploratory and development wells to work on here. (For related reading, see Oil And Gas Industry Primer)

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