The recent US $1.5 billion deal by Energy XXI Ltd. to buy and merge with its closest rival EPL Oil & Gas created the largest public producer focused on the Gulf of Mexico (GoM) Shelf and illustrates nicely the competition taking place in what was – until just a few years ago – dubbed the “dead sea.”

If you ignore the deepwater sector of the GoM, which has itself (post-Macondo) seen a strong and well-documented resurgence in activity by operators to a peak beyond that achieved before the tragedy occurred, the shallows have become very desirable property.

Energy XXI’s aim in buying EPL is to better compete with private equity-backed players such as Fieldwood Energy (the largest private player on the Shelf) in squeezing out more oil and gas from both mature fields and new deeper plays. Although not huge figures compared to the majors – the acquisition would boost Energy XXI’s production to roughly 65,000 boe/d – the returns are good. “EPL’s assets and operations closely resemble our own ... with some of the highest margins in the industry,” said CEO John Schiller in the company’s release on the deal.

Interestingly, EPL’s CFO, T.J. Thom, spoke with E&P’s Rhonda Duey in last month’s issue (before the above merger was unveiled) about its strategy of bringing new life to a mature basin. It involves the use of improved technologies, in terms of seismic data in particular, with technology such as nodal acquisition and full-azimuth surveying employed to help image features that have been tough to find until now.

She stressed that the new data allowed EPL to use its technical expertise and regional understanding to “really go after these untapped reservoirs.”

Another CEO who sees only growth in the GoM is Fieldwood’s founder, Matt McCarroll. In a recent interview with Hart Energy’s Steve Toon, he admitted that little more than a year ago the company was “three guys and an idea – and not even with a GoM focus.” After the opportunist acquisition of Apache’s shelf assets (more than 500 fields), it became the largest shelf player, followed by the further acquisition of SandRidge’s assets.

Again, like Thom, McCarroll stressed that technology, including new seismic acquisition techniques, is key to unlocking new offshore reserves.

The image of so-called “smaller players” picking through the leftovers in a mature basin written off by the oil majors is a big misconception. The above deals clearly demonstrate that operators with strong field development strategies and a flexible approach can revitalize older fields – and whole regions. And that’s an approach that can be applied in many other producing basins around the world.

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