Anadarko Petroleum Advances Lucius Development In Gulf Of Mexico

By Eric Fox | July 11, 2012 AAA

Anadarko Petroleum (NYSE:APC) is moving forward with the development of the Lucius field in the Gulf of Mexico, and recently signed a joint venture agreement to help finance this project. The company expects first oil and gas production from this field in the last half of 2014.

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Discovery Well
Anadarko Petroleum drilled its first exploration well at the Lucius field in late 2009 and targeted multiple Miocene and Pliocene sand formations. The company found 200 feet of net oil and gas pay at a depth of approximately 20,000 feet. This discovery capped a successful year for Anadarko and was its fifth discovery in the Gulf of Mexico in 2009. Other successful exploration wells in 2009 are listed in the table below:

Date Well Block
Feb 2009 Heidelberg Green Canyon 859
Feb 2009 Shenandoah Walker Ridge 52
Jun 2009 Samurai Green Canyon 432
Jul 2009 Vito Mississippi Canyon 984

SEE: Oil And Gas Industry Primer

Lucius Appraisal
In January 2010, Anadarko followed up its success at the Lucius field with a sidetrack appraisal well less than a mile from the original exploration well and found 600 feet of net oil and gas pay. The company drilled a second appraisal well in mid-2010 and confirmed the presence of additional oil and gas resources at the Lucius field.

Development Plans
In mid-2011, the company started to plan the development of this large field, which has an estimated 300 million barrels of oil equivalent of oil and gas resources. It signed an agreement with Exxon Mobil (NYSE:XOM) to unitize and jointly develop four separate blocks in the Keathley Canyon area of the Gulf of Mexico.

SEE: Investing In Oil And Gas UITs

Anadarko plans to construct a floating production facility in the area to handle the production from the Lucius field and the Hadrian South field operated by Exxon Mobil. The production facility is expected to have a capacity of 80,000 barrels of oil and 450 million cubic feet of natural gas per day.

Exxon Mobil Corporation holds a 15% working interest in the Lucius development. Other operators involved include Plains Exploration (NYSE:PXP) with a 23.3% working interest, Apache (NYSE:APA) with 11.7%, Petrobras (NYSE:PBR) with 9.6% and Eni (NYSE:E) with 5.4%.

Joint Venture
Anadarko recently announced a joint venture agreement with an unidentified party to help finance the Lucius development. The company will receive $556 million in the form of a drilling carry in exchange for a 7.2% working interest in the project, lowering the stake held by Anadarko to 27.8%. It expects the drilling carry to completely cover its share of the required capital expenditures at the Lucius project.

SEE: 5 Biggest Risks Faced By Oil And Gas Companies

The Bottom Line
Anadarko Petroleum is known for its skill in exploring and developing deepwater oil and gas resources, and this reputation should make investors confident that the Lucius development will be successful and add to the company's production and reserve base.

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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