The Gulf of Mexico is the only focus for Houston-based
Spinnaker Exploration, which was founded in 1996 with the mission
to explore the Gulf using vast, regional 3-D seismic data sets.
In fact, Roger Jarvis, chief executive officer, struck a deal with
PGS whereby the seismic contractor earned five million shares of
the new company in exchange for all of its non-exclusive seismic
data shot in the Gulf through March 31, 2002.
Spinnaker has parlayed that deal — along with $75 million
in private equity from EM Warburg Pincus — into a vital independent
operator that's proving there's plenty more life left in the Gulf.
"We would argue that the Gulf of Mexico has never been more prolific
than it is today," said Robert Snell, vice president and chief financial
officer of Spinnaker.
"Five of the 15 largest fields ever found in the history of the
Gulf have been discovered in the last three years," he continued.
"Those are in deep water, but deep gas targets are also becoming
an important new play."
Spinnaker's PGS deal, which was the first of its kind in the oil
industry, is an important part of Spinnaker's corporate culture.
"We believe we have an information advantage with the over 11,000
blocks of recent vintage, mostly contiguous seismic data we control,"
Snell said. "That data allows us to take a regional approach to
the Gulf as opposed to a postage stamp view.
"Well control and knowledge we achieve through our drilling operations
continually enhances the value of that seismic data," he said.
Spinnaker, unlike many independents in the Gulf, is not building
its business on acquisitions and exploitation. The firm is firmly
committed to exploration, both on the shelf for deep gas targets
and in deep water.
"While the Gulf is highly productive, it also exhibits high depletion
rates, particularly in the conventional plays on the shelf where
average field size has declined," Snell said. "We are focused on
deeper, less obvious exploration prospects on the shelf as well
as the deep water, where advances in 3-D seismic are critical to
success."
Successful Strategy
That strategy seems to be working. Through 2000 the company had
drilled 37 successful exploration wells in 59 attempts, and according
to Snell that success has been a function of the massive 3-D data
volumes the company controls.
Spinnaker's plan this year includes 41 wells with 31 on the shelf
and 10 in deep water. The 2001 capital expenditures were set at
$260 million, with about 40 percent earmarked for the deep water,
where Spinnaker currently holds interests in about 76 leases.
The company's lease position will expand if the Minerals Management
Service approves all its apparent high bids in the recent Western
Gulf lease sale. Spinnaker was the sale's second most active high
bidder, participating in 38 bid submissions. Of the 32 apparent
high bids the firm participated in, 26 were on the shelf and six
were in deep water.
Spinnaker will act as operator on 31 of those apparent high bids.
Currently the deep water accounts for about 3 percent of the company's
total equivalent production, but that figure could skyrocket to
30 percent by early 2004 when recent deep-water discoveries come
on line. The company has participated in 13 deep water wells, and
seven of those were successful.
Spinnaker is a partner with Murphy Oil (operator) and Dominion
Resources on the Front Runner and Front Runner South discoveries
announced earlier this year. Based on drilling results, Spinnaker
estimates reserves for the deep-water discoveries at 200 to 250
million barrels of oil equivalent.
The fields are in the Gulf's Green Canyon area in about 3,500 feet
of water. The partnership controls 13 contiguous blocks surrounding
the discoveries, and at least eight separate satellite prospects
have been mapped. Two or three of those prospects will be tested
in 2002 and Spinnaker will likely operate one of those wells, Snell
said.
The partners are focusing on establishing production from Front
Runner as quickly as possible, with first production expected in
late 2003 or early 2004 at a potential 50 to 70 million barrels
of oil equivalent.
The production net to Spinnaker from the Front Runner fields will
amount to 50 to 70 percent of the firm's total current equivalent
production.
Spinnaker also is a partner with:
- Ocean Energy (operator) in the Zia discovery on Mississippi
Canyon blocks 496 and 497 in 1,200 feet of water.
- Mariner Energy in the Dulcimer discovery at Garden Banks 367
in 1,100 feet of water.
- Murphy in the Seventeen Hands natural gas discovery on Mississippi
Canyon block 299 in about 5,400 feet of water.
- TotalFinaElf in the Calisto prospect in 7,800 feet of water
on Mississippi Canyon blocks 732, 875 and 876, which was drilled
as a tight hole earlier this year.
The company also operates and holds a 100 percent interest in
the Sangria natural gas discovery at Green Canyon 177. The field
is expected to be a one-well field, with initial production expected
in the first half of 2002 at 15 million cubic feet of gas equivalent
daily — about 10 percent of Spinnaker's current equivalent
production.
The Bread and Butter
While the deep water will play an increasingly important role in
the company's future, today deep gas targets are Spinnaker's bread
and butter.
"Deep gas is a growing exploration trend in the Gulf and we expect
to drill 17 deep gas plays over the next 15 months," Snell said.
"These are high risk compared to traditional shelf drilling, but
the potential reward is also much higher.
"We plan to be very active in this renewed exploration on the shelf."
Spinnaker already has banked some successes in deeper gas plays.
In the Miocene Rob Trend offshore Texas — discovered in 1998
— the firm owns 45 blocks, or about 250,000 gross acres, under
lease and has drilled 15 successful wells with only two dry holes.
The project established first production in the area from several
formations, and gross production is in excess of 200 mmcfgd.
An additional 70 million cubic feet of gas equivalent is shut-in
waiting on completion, connection or recompletion.
Plus, the company has mapped at least a two-year backlog of exploration
locations and continues to reprocess and upgrade leads in the area.
"The downdip Rob Trend has a chance to become a tcft trend or more
over its life," Snell said.
Two additional important deeper gas plays for Spinnaker are:
♦ Mustang
Island 861, where the company recently announced a significant
discovery at its Stirrup prospect. The well was drilled to over
17,000 feet and tested the Middle Frio sands, establishing the
geologically oldest production on the shelf west of the Mississippi
River.
The Stirrup discovery is situated on a large faulted anticline
with plenty of room to expand the play. The discovery well tested
21.1 million cubic feet of gas equivalent per day, and Spinnaker
expects initial production from the well by the first half of
2002 at about 20 million cubic feet of gas equivalent daily.
♦ Brazos
A-19 , where the company recently spudded a replacement well
at its Alex Deep Field. The initial well was drilled to a total
depth of 18,800 feet and encountered 150 feet of net pay in May
1998 and was producing over 90 million cubic feet of gas equivalent
a day before major mechanical problems forced the firm to abandon
the well.
"The Gulf of Mexico was our focus from the inception of the company,
for so many reasons," Snell said. "The availability of good quality
data in broad data sets and good access to acreage were the driving
factors.
"We knew that with an innovative approach and good science based
on our extensive 3-D seismic library there was still plenty of
opportunities in the Gulf."