Gulf of Mexico lease-holders received preliminary news of the much-anticipated, $180-million, deep-shelf wildcat that ExxonMobil and Newfield Exploration Co. have had under way for more than a year offshore Louisiana in 70 feet of water.

Blackbeard West #1 in South Timbalier 168 was to be drilled more than six miles below the seabed to some 32,000 feet. Drilling was stopped at 30,067 feet. A thin gas-bearing sand was encountered below 30,000 feet, Newfield reports.

But, drilling stopped short of the primary target because of excessive pressure. ExxonMobil, the operator, has temporarily abandoned the well.

Newfield shares fell from $43.52 to $41.81 during trading the next day.

The company's share of the bill to date is $25 million. It had had a carried interest as the developer of the prospect.

John Herrlin, an E&P analyst with Merrill Lynch, says, "This well was truly a frontier play and that means low chance of success.

"These days, some companies say they're wildcatting when they go a mile from a known onshore field in a stratigraphic play. Because many of the sedimentary shelf intervals encountered had never been drilled, there will be much more important lithologic, (i.e.) rock type, and environmental data, (i.e.) temperature and pressure, that will help future exploration endeavors for the ultradeep-shelf play and in deep-shelf plays."

He concludes that the play isn't dead, "but a longer-term work appears in progress.

"Some might say (it is) an expensive learning experience, but in an era where resource issues are a concern, successful frontier plays can ultimately be economic. It wasn't that long ago that the (deepwater Gulf) was viewed as risky, and the Gulf does have an extensive production infrastructure today."

Partners in the well are ExxonMobil, 25%; Newfield, 23%; BP, 20%; Petrobras, 20%; Dominion, 7%; BHP Billiton, 5%.

Carin Dehne Kiley, an E&P analyst with Calyon Securities (USA) Inc., estimates total well costs are $200 million and expected a weaker stock price after the news, "although after 18 months of drilling and the company's radio silence, we do not believe many investors were expecting great news on this prospect."

She had not included success from the prospect in her production forecasts for Newfield. She held her Add rating on the stock and a target price of $50.

David Trice, Newfield chairman, president and chief executive, says, "Although disappointed that we were unable to test our primary objectives, we have learned a great deal about drilling ultradeep wells. This has been a challenging well to test a true frontier play, but Newfield is sufficiently encouraged to continue investing in this play."

The prospect involves lease blocks that were past the primary term. The "temporarily abandoned" well designation can help hold the blocks, meanwhile. Newfield expects new drilling could not begin sooner than within two years.



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