Stone Energy Corporation Secures Deep Water Drilling Rig and Provides Operational Update

abarrelfullabarrelfull wrote on 09 Apr 2013 19:20
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Stone Energy Corporation (NYSE: SGY) announced today that it has contracted an ENSCO 8500 series dynamically positioned deep water drilling rig for Stone's Cardona oil development program at Mississippi Canyon 29. Drilling on the first Cardona well is expected to commence during the second half of 2013 followed by the drilling of the Cardona South well. Stone plans to tie back both wells to the 100% owned Pompano platform with production projected for late 2014. Stone holds a 65% working interest in the Cardona wells and will be the operator.

Chairman, President and CEO David Welch stated, "The signing of the Ensco contract allows us to move forward to more fully develop the reserves around the Pompano platform. These Stone-operated deep water wells allow us to be in control of the planning and timing of the Cardona project. After years of preparation, we look forward to progressing our deep water development and exploration efforts."

Separately, the ENSCO 81 jack-up rig is expected to begin drilling on a three to four well conventional shelf/deep gas drilling program in May 2013. Stone expects to drill the Hammerlock oil prospect located on South Timbalier 100, followed by the Taildancer oil prospect located on Ship Shoal 113. The remaining one or two wells will follow Taildancer. Also in May 2013, the Parker 50B inland barge rig is expected to spud an infield oil well prospect in the Stone-operated Clovelly field. Stone holds a 94% working interest in Hammerlock and a 100% working interest in Taildancer and Clovelly.

At the La Cantera liquids-rich deep gas field, the third well was successfully drilled to 18,000 ft and is currently in completion operations with first production expected in June 2013. Combined with the first two wells, gross production from this field is projected at over 100 MMcfe per day (over 25 MMcfe per day net) when the third well commences production. Stone holds a 34.6% non-operated working interest in the field.

Drilling operations at the deep water Malachite prospect located on Mississippi Canyon 258 are complete. The well has been logged and marginal hydrocarbons were found in several sands. The partners have decided not to proceed with the project and the well is currently being plugged and abandoned. Stone holds a 40% non-operated working interest in the prospect and the net well cost is estimated at approximately $22 million.

In Appalachia, production has been impacted by three third party pipeline failures since late December 2012 and an unscheduled gas processing plant outage. During the first quarter of 2013, net volumes were impacted by approximately 20 MMcfe per day. The most recent pipeline failure occurred in late March 2013 on a 24-inch Williams pipeline in Marshall County West Virginia and continues to curtail production in the Mary field. The two previous pipeline interruptions on the Williams 12-inch line have been repaired. Stone is currently producing approximately 45 MMcfe per day (net) from Appalachia. Stone estimates approximately 20 MMcfe per day (net) will remain curtailed until the 24-inch line is repaired. Stone is scheduled to bring 10 new wells on production in its unaffected Heather field (50% working interest) by late April 2013, which Stone projects will increase net daily production by approximately 15 MMcfe per day. Stone continues to execute its operational plans of drilling and completing 26 to 30 horizontal wells in Appalachia in 2013.

Despite the curtailments in Appalachia, production guidance for the first quarter of 2013 remains within the 38-40 thousand barrels of oil equivalent (MBoe) per day (230-240 MMcfe per day) guidance range. Because a majority of the curtailment was natural gas, Stone expects liquids to represent approximately 50% of overall volumes in the first quarter of 2013.

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