A combination of an independent's prospects and a service company's expertise has led to a mutually beneficial business relationship.

Most would have to agree that an outsourcing relationship between an oil company and a service technology provider that found more than 200 Bcfe would be considered a success story. As in any "win-win" business relationship, both parties have to be willing, cooperative, incentivized and very good at what they do. Here is one such story whereby all these ingredients fit together nicely for mutual gain.

Two heads are better than one

Most small- to moderate-sized independent oil companies have good geological and operational expertise but lack the geophysical technology needed for risk-assessing potential prospects.
In 1996, Denver-based Westport Resources decided it was time to expand its business model into the Gulf of Mexico. The transition to offshore, where the competition is fierce and the cost of doing business is considerably higher than onshore, required that Westport find a way to differentiate itself from others.
"We recognized the competitive advantage that the Emerald technology gave Westport. It made good business sense to partner with the company and combine our prospect generation ability with its unique prospect evaluation products," said Kevin Small, exploration manager, Gulf of Mexico division, for Westport Resources.

A new business model

At the same time, the owners of Emerald Research decided to start a new independent company to leverage their technology into the oil and gas arena. In 1996, RiverBend Energy Partners was created. It was designed to help reduce some of the exploration risk by giving oil companies access to seismic data and technology at a reduced cost.

"Working with our investors, we offered Westport access into our large seismic database and access to the Emerald prospect evaluation technology at a reduced cost, for an overriding royalty," said Davis Ratcliff, president of both Emerald Research and RiverBend Energy Partners. "In this way, Westport could help cover Emerald's fixed overhead costs and would pay royalties only when we were both successful."
The Emerald density cube concept is based on extracting density information from the seismic data. "A seismic trace can be decomposed into its three fundamental components," said David Weber, Emerald Research's chief executive officer. "We extract Vp, which is the compressional wave, Vs, which is the shear wave, and density. When you extract the density information and look at 'density-contrast' maps, you have the ability to discriminate between a sand with a little gas and a sand with economic quantities of hydrocarbons."

Emerald extracts this information into a "3-D density cube," used in conjunction with other rock property tools to provide a further constraint on the data.

Joint cooperation in action

Starting in 1997, Westport began ramping up its offshore operations. It licensed a large seismic database from Diamond Geophysical, participated in the Gulf of Mexico lease sales and acquired prospects, used the Emerald technology to better understand risks associated with the prospects, and went on to make several significant discoveries. In addition to the 150 Bcf that has already been found, the team has found 25 additional prospects to be drilled, with an estimated reserve potential of 788 Bcf.

"Our joint venture has proven to be very lucrative for Westport, Emerald and RiverBend Energy Partners. It is certainly a blueprint that we can use for other outsourcing projects," said Small.

Recent discoveries

In March 2000, Westport bid on and acquired East Cameron Block 369 at the Central Gulf of Mexico lease sale. Previously, different oil companies had drilled two wells on this block using conventional amplitude extractions (Figure 1A). The wells tested two of six seismic amplitude anomalies trapped by faults. Both wells found sands containing non-economic amounts of residual gas.

Using the seismic data purchased from RiverBend at a discounted rate and the 3-D density cube data generated by Emerald (Figure 1B), Westport was able to determine which remaining amplitudes on East Cameron 369 were related to residual gas and which were related to economic quantities of hydrocarbons. In 2001, Westport drilled two exploration wells within the density cube data (Figure 1B), which resulted in finding more than 350 ft (107 m) of gas-filled sands. The two wells are currently producing at a rate of 18 MMcf/d.

In March 2001 Westport acquired South Timbalier Block 316 at another Gulf of Mexico lease sale. Using Emerald's integrated geophysical prospect evaluation technology along with Westport's understanding of the local geology within the South Timbalier area, Westport drilled three wells on this block. The discovery well found more than 60 ft (18 m) of oil-filled sands. The number two confirmation well found 58 ft (17.5 m) of net oil pay, and the number three development well found more than 135 ft (41 m) of net oil pay. The South Timbalier 316 oil discovery by Westport should be on production by the third quarter of 2003 and should provide excellent revenue generation for the company in years to come.

Additional discoveries where Westport has used this successful outsourcing relationship with Emerald and RiverBend include Ewing Bank Block 966 (more than 70 ft, 21 m of oil pay), West Cameron Blocks 613/614 (140 ft, 42.7 m of gas pay) and Grand Isle Block 103 (40 ft, 12 m of gas pay).

Conclusion

This outsourcing exploration/exploitation relationship continues to flourish. Without a large capital outlay commitment, Westport continues to have access to ongoing geophysical research. The prospect evaluation technology and 3-D derivative seismic products continue to give the company a distinct competitive advantage, and all without the financial burden of an in-house research effort.
Emerald Research continues to stay very busy. By only offering a handful of select companies the opportunity to take advantage of its technology, it keeps the technology contained and provides a distinct competitive advantage to clients.

"It has certainly evolved into one of the more unique and very successful relationships that I have been involved in," said Small. "Our constant interaction with Emerald's team has resulted in a better understanding of the risks associated with our wells. The story of our success in the South Timbalier 316 area certainly attests to the great teamwork that was involved."

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