It’s not at all unusual for a smaller player to pick at the leftovers the majors abandon. Companies with strong field development strategies can often revitalize these older fields.

EPL Oil & Gas Inc. hopes to do a little more than just squeeze a few extra drops of oil from its fields. The company has focused on acquiring and developing assets in the central US Gulf of Mexico (GoM) and currently has eight core field areas. But it hopes to add a little secret sauce to its activities.

T.J. Thom, CFO of EPL, said the company was founded in 1998 to go into older fields left behind by the majors to redevelop the fields. “The unfortunate part is that they focused on gas,” she said. After the company was restructured, it was left with only two assets from which to grow.

“This was no short feat,” she said. “But in three years we’ve managed to be acquisitive and get the right fields.” All eight core areas are focused on value growth, she added. And while oily acquisition opportunities aren’t abundant, there have been enough that have fit the company’s criteria that it has seen steady growth. “We’ve been quite successful,” she said.

The company’s 2014 capital budget news release certainly sounds cautious. EPL plans to spend about US $360 million, mostly on drilling and sidetrack operations as well as rig workovers and waterflood opportunities.

“This initial budget has been conservatively designed to measure results in the first half of 2014, commodity prices, and free cash flow generation,” the release reads. “Based on these factors, this initial budget could be modified up or down during 2014.”

What might lead to an increase? Seismic data.

The secret sauce

Thom said new technology could unlock a new era of development in the central GoM. Several multiclient surveys are under way, bringing technology such as nodal acquisition and full-azimuth surveying to the region. This technology will image features that, to date, have not been easy to detect.

“These deeper geologic formations simply were not touched by the majors due to a variety of reasons, one of which is they typically hit pressure so they stopped drilling,” Thom said. “They had plenty of pay sands that they encountered that have made up a lot of production in the Gulf to date. But more importantly, as for the deeper section, they couldn’t image it.”

These features are typically below salt or on the flanks of the salt, conditions that wreaked havoc with older technology, she added.

“Deep,” in EPL’s case, is not Davy Jones deep. “We’re not talking 35,000-ft [10,670-m] wells,” she said. “It’s 12,000 ft to 20,000 ft [3,658 m to 6,100 m].” She added that most of the region has been drilled to about 3,658 m, and of course some wells have been drilled deeper than 9,145 m (30,000 ft), but the depth of interest to EPL is underexplored.

EPL also is interested in oil, not gas. While there is a gas component at these depths, Thom said oil has been recorded as well. “We have high hopes that we’ll see rich gas if not some oil reservoirs as we go explore,” she said. “That’s really where we’re concentrating.”

She maintained that the company definitely is not seeking the ultra-deep gas reserves that some of the majors chased a few years ago. “The good news is that they found the basement still had gas,” she said. “The bad news was that the commerciality of going so deep was not as fruitful as they had expected.

“I think we have missed a step and overlooked a complete section that is very prospective.”

New data

To get a better understanding of this prospective section, EPL has made a $45 million seismic commitment including brand new 3-D surveys to be conducted by FairfieldNodal covering 1 million acres and 200 blocks. The total survey is expected to take about three years, with one section already nearing completion covering the Eugene Island area of the shelf.

“We’ll see the Eugene Island survey come in house first, and then we’ll start shooting our other core areas,” Thom said. “I think we’ll see a steady stream of opportunities come from the data that will allow us to use our technical expertise to really go after these untapped reservoirs.”

While nodal technology was first tested in deep water, it has equal value on the shelf. According to FairfieldNodal, advantages to nodal systems include longer offsets, full-azimuth data, unlimited record lengths, continuous recording, design flexibility, superior coupling and vector fidelity, and highly repeatable acquisition. These advantages will provide a much clearer image of the target of interest than previous datasets were able to provide, without the hassle of steering a ship towing multikilometer-long streamers around fixed platforms.

“This data will lead to unmatched clarity within these horizons,” Thom said. “It will also create an uplift in the shallow section. From top to bottom, it’s going to be a great add to our inventory of good-quality seismic.”

Experts are standing by. Thom said EPL has yet to use a recruiter, choosing to hand-pick its staff based on their experience in the central GoM. “They have spent their whole careers in this region,” she said. “That regional understanding is critical to bringing prospects to bear.”

The company will not be idle while it waits for the new data to become available. Thom said the team is concentrating on aggregating both its current producing leaseholds as well as lease sale pursuits to shore up its assets.

“We’re a ‘walk before we run’ type of company, so we will pace our activity to align with receipt of the new data,” she said. “We are concentrated in the central Gulf for a reason. That’s where you find the opportunities in and around most of the major salt-dome features that have created the big old oil fields.

“Big fields get bigger – we believe that wholeheartedly – and we have a focus that keeps us squarely in that window of the most prolific areas of the Gulf.”

It will be interesting to watch the story unfold as new data become available. Thom said the company made the commitment to FairfieldNodal to help shape the survey to meet its strategic objectives. Once the data become available, the shallow GoM might yet again become a happening play.

“The Gulf has truly been a terrific basin to play in,” Thom said. “We’re on the brink of a new restart for the shelf. It’s going to be an unparalleled time. I think there’s a lot of life left in this basin.”

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