Royal Dutch Shell (NYSE:RDS-A, RDS-B) and Nexen (NYSE:NXY) have reported additional oil and gas resources at the Appomattox discovery in the Deepwater Gulf of Mexico. The companies plan additional drilling over the next two years to further delineate and appraise this prolific discovery.

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Royal Dutch Shell is the operator of the Appomattox discovery and owns an 80% working interest. Nexen is also involved on a non-operated basis and owns a 20% working interest.

Appomattox History
Royal Dutch Shell and Nexen reported initial success at Appomattox in March 2010 on Mississippi Canyon blocks 391 and 392. The discovery well here found 530 feet of gross oil pay at a depth of approximately 25,000 feet. Two sidetrack appraisal wells also drilled by the operator confirmed the presence of oil at the prospect. The three wells announced in 2010 were evaluating the south fault block, one of three located at the property.

In September 2010, the two companies announced that Appomattox contained recoverable contingent resources in excess of 250 million barrels of oil equivalent (BOE). Nexen had booked 65 million BOE of probable reserves from Appomattox prior to the most recent evaluation.

SEE: Oil And Gas Industry Primer

Northeast Fault Block
The latest revised estimate of resources at Appomattox involved the Northeast fault block. The operator estimates that this area of Appomattox contains 215 million BOE of gross recoverable resources, with a range of 120 million to 370 million BOE.

The Appomattox discovery is expected to be developed in phases and support production in excess of 100,000 barrels per day. First oil is expected around 2017 or 2018.

Gulf of Mexico
McMoRan Exploration Co. (NYSE:MMR) is involved with a number of prospects in the Gulf of Mexico and recently reported an update on the Davy Jones No. 1 well in the shallow water area of the coast of Louisiana. The company reported a malfunction with equipment used to flow test this well.

Exxon Mobil (NYSE:XOM) is the operator of the Hadrian South prospect located on Keathley Canyon Block 919 in the deepwater Gulf of Mexico. The company reported several successful exploration wells on this block in 2011 and is moving forward with the development of Hadrian South and other discoveries in the area. Eni (NYSE:E) and Petrobras (NYSE:PBR) also have an ownership interest at Hadrian South.

SEE: A Guide To Investing In Oil Markets

The Bottom Line
The Appomattox discovery is even better than expected and once again proves the prolific nature of the deepwater Gulf of Mexico. The Federal government should speed up the permitting process here so that these resources can be brought to market.

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

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