Results from the latest appraisal well in the Zama Field offshore Mexico have given Talos Energy and partners confidence that estimated resources will land on the high side of guidance.

The Houston-based company said the Zama-3 appraisal well logged 228 m (748 ft) of pay, proving the reservoir’s extension to the south. The well, drilled downdip from the Zama-1 well in the Sureste Basin, is the last of the Zama appraisal wells drilled by the consortium of Talos, Premier Oil and Sierra Oil & Gas, a Wintershall DEA company.

Talos reported Zone 3 results “significantly exceeded expectations with a net to gross ratio of about 85% to 90%.” Most of the field’s resources are believed to be in zones 3 and 4.

Source: Talos Energy
Source: Talos Energy

“Based on the preliminary results of our appraisal program, we have confirmed the combination of outstanding subsurface properties, significant recoverable volumes and attractive economic potential that have already made Zama a globally-recognized asset,” Talos Energy CEO Tim Duncan said in a statement. “The match of the preliminary well data to our geophysical model suggests that we have a gross recoverable resource in the upper half of our pre-appraisal guidance range of 400-800 MMboe.”

Oil was first discovered at Zama, the first offshore exploration well drilled by a private operator since the country’s historic energy reform, in 2017. Since then, Talos and partners have amassed a trove of data to gain more insight on resource potential.

Data include fluid samples, pressure points, logging runs, extended flow tests and whole core, including 219 m (717 ft) captured during Zama-3 appraisal work, the company said. The appraisal campaign included two appraisal wells and a vertical sidetrack.

Analysts viewed the news as positive.

“Given the favorable Zama resource expectation, we’re increasing our NAV [net asset value] for this focus list company by $3 to $41 based on a gross resource estimate for Zama of 650 MMboe vs. our previous 525 MMboe,” CapitalOne Securities analysts said in a note. “In our view, the next key milestone for [Talos] to achieve is the finalization of the ongoing Zama unitization process with the Pemex lease located to the east of Zama that, with Mexican government approval, we expect would likely lead to FID [final investment decision] next year for the Zama project.”

Last month Duncan told media gathered on the sidelines of an energy conference that “there’s no doubt we have a shared reservoir.”

Unitization talks with Pemex continue along with FEED work, the company said.

“Our focus now turns to selecting the optimal development for the field, ahead of taking a final investment decision next year,” Premier Oil CEO Tony Durrant said in a statement.

The consortium plans to update its report on contingent recoverable resources by the end of the year.

Progress comes as Mexican President Andres Manuel Lopez Obrador demands to see results from oil companies awarded contracts after his predecessor, Enrique Peña Nieto, opened the sector to private investors. The current administration has suspended all future auctions.

Velda Addison can be reached at vaddison@hartenergy.com.

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