Anadarko Begins Production From Two Gulf of Mexico Fields; Plans Increased Drilling Program for 2001

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Jan. 29 2001

Anadarko Petroleum Corporation (NYSE: APC) announced that it recently began production from the Tanzanite and Hickory fields, two sub-salt discoveries made in 1998 off the coast of Louisiana in the Gulf of Mexico.

The two fields began producing from one well each in the final week of December. Currently Tanzanite is producing more than 10,000 barrels of oil and 23 million cubic feet (MMcf) of gas per day from the first completed well, the EI 346 A-1. Hickory is producing 62 MMcf of gas and 4,100 barrels of condensate per day from the GI 116 #1, or Hickory A-1 well.

"Clearly, Anadarko's ongoing commitment in the offshore sub-salt trend is continuing to deliver excellent results," said Robert J. Allison, Jr., Chairman and Chief Executive Officer. "The production from Hickory and Tanzanite will add an estimated 10 million energy equivalent barrels to our net production in 2001."

A second well is currently being completed at Tanzanite and is expected to go on production in February 2001. Anadarko owns a 100 percent working interest in this field, which is located in Eugene Island Block 346 in 314 feet of water.

When both wells are on-line, oil production from the Tanzanite field is expected to reach 15,000 barrels per day, the platform's capacity for oil, and about 50 MMcf per day of natural gas. Initially this field is expected to produce crude oil at high rates from the main reservoir, but oil production will decline over time and be replaced by rising natural gas production from the gas cap. The Tanzanite platform has the capacity to produce as much as 200 MMcf a day of gas.

At Hickory, three additional wells will be completed and tied in over the next few months. When all four wells are completed, production is expected to exceed 200 MMcf a day. Hickory is located in 320 feet of water in Grand Isle Blocks 110, 111 and 116. Anadarko operates the field and owns a 50 percent working interest in partnership with Shell Exploration & Production Company (NYSE: RD) and (NYSE: SC), which holds a 37.5 percent working interest, and Ocean Energy, Inc. (NYSE: OEI), with a 12.5 percent working interest.

The Company recently completed drilling a fifth successful well in the Hickory field area. The GI 110 #2 well was drilled to a total depth of 21,269 feet and encountered 87 feet of pay. The partners are evaluating a plan to drill a directional well from the platform and put this well on production, once all four existing Hickory wells are producing.

Throughout the Gulf of Mexico, Anadarko is allocating $414 million to drill 46 wells this year, versus 27 in 2000.

"We have a well-balanced, growing portfolio of high-potential deep water prospects and sub-salt prospects that we'll be actively exploring this year, combined with a lot of low-risk, shallow water projects," Allison said.

Shallow Water

Anadarko expects to drill 20 development and 10 exploratory wells in and around older, existing fields in 2001.

"We have a large inventory of prospects in the shallow water, and we see a lot of opportunity here, based on 3-D seismic and amplitude studies," Allison said. "We can drill and complete these projects in a short period of time, and while the finding cost is relatively high, their quick payout gives us a good rate of return."

Sub-salt

Seven exploratory wells and one development well are planned in the sub- salt for 2001.

"We have enjoyed a lot of success in this play," Allison said. "So far, seven of Anadarko's 13 sub-salt projects have resulted in discoveries. Four of these are commercial and already on production.

"We continue to refine and improve our seismic techniques and have developed an extensive inventory of sub-salt prospects. We plan to jump start our exploration drilling this year," Allison added.

The first sub-salt prospects Anadarko plans to drill this year are:

  • Tarantula To be drilled in the first quarter in 680 feet of water on South Timbalier Block 308 as a continuation of the company's sub-salt, flex-trend play on the Outer Continental Shelf. Anadarko holds a 100 percent working interest.
  • Taurus A sub-salt well in 580 feet of water planned for the first or second quarter at Green Canyon Block 134. Anadarko holds a 100 percent working interest.
  • Mahogany Already drilling is a deeper test of the existing Mahogany field (18,100 feet), located in 360 feet of water at Ship Shoal 349/359. Anadarko is the operator, with a 37.5 percent working interest. Phillips Petroleum Co. (NYSE: P) holds a 37.5 percent working interest, and W & T Offshore, Inc., holds a 25 percent working interest.

Anadarko holds a total of 115 lease blocks in its sub-salt program, with 23 potential prospects identified.

Deep Water

The company plans eight deep water wells — all exploratory — for 2001.

"Our Marco Polo discovery this past spring was our first step into the deep water, but we plan to get a lot more active there," Allison said.

Among the deep water prospects Anadarko will drill this year are:

  • LaSalle Spudded this week in 3,300 feet of water as the first of a multi-block prospect in East Breaks. Anadarko is the operator and holds a 33.3 percent working interest. Mariner Energy, Inc., holds a 33.3 percent working interest, and Burlington Resources (NYSE: BR) holds a 33.3 percent working interest.
  • Eiger Sanction Located in 3,000 feet of water, a high-potential exploration well planned for the second quarter in Mississippi Canyon Block 667, offsetting Anadarko's previous Gomez discovery. Anadarko holds a 100 percent working interest.
  • Marco Polo A total of four wells have been drilled in the Marco Polo field at Green Canyon Block 608. Three wells found significant pay sands, with between 90 and 360 feet of net pay, and one well was a dry hole. Detailed engineering and cost estimates are under way to help determine commerciality, and further drilling is being evaluated.
  • Gomez The company recently completed drilling a fifth appraisal well at the Gomez discovery, located at Mississippi Canyon Blocks 667, 711 and 755. A total of five wells have been drilled to date, with net pay sands ranging from 100 to 200 feet thick. Additional drilling in the area is planned for later this year to help determine commerciality.

Anadarko holds a total of 58 lease blocks in its deep water program and has identified 32 prospects.


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