BHP hits oil at Caicos in deepwater Gulf of Mexico

Offshore staff

LONDON BHP Billiton has reported positive drilling results at the Caicos exploration well in the deepwater Gulf of Mexico.

Located in Green Canyon block 564, the well is about 100 mi (161 km) south of Louisiana. Caicos was drilled to a total depth of 30,803 ft (9,389 m) and encountered oil in multiple horizons.

Speaking at an investor briefing in London, Steve Pastor, BHP Billiton President Operations Petroleum, said: “We are encouraged by the Caicos results and are moving to further appraise the area. The next step will be drilling the Wildling well in November.

“With success at Caicos and Shenzi North, we continue to be optimistic around the opportunity for a commercial development in the area.”

He also updated on the natural resources conglomerate’s financial picture.

In conventional, BHP Billiton is expecting unit operating costs to remain at around $10/boe over the 2017 and 2018 financial years as it pursues a number of options to extend high margin production from its existing facilities. 

“We have a rich portfolio of brownfield project options, with total capex of $2.5 billion and an average internal rate of return of 45% that will help offset field decline.

“With significant improvements in capital efficiency, major capital projects like Mad Dog 2 are now economically attractive, even below $50/bbl,” Pastor said. BHP Billiton has a non-operator stake in the BP project.

He also noted that having both minerals and petroleum in the company’s portfolio allows it to maximize the value of its petroleum assets at the right point in the cycle.

“While currently well supplied, underlying fundamentals suggest both oil and gas markets are improving more quickly than our minerals commodities,” he said. “Over the next decade, demand growth, natural field decline and the effects of industry wide investment deferrals are expected to create a significant opportunity to invest and maximize value in oil.

“Our focus on productivity has significantly reduced both operating and capital costs, supporting a range of shale and conventional investment opportunities that would generate compelling returns at today’s prices. As a result, petroleum is well placed to maintain its position as BHP Billiton’s highest margin business and to grow its free cash flow contribution.” 

BHP recently named the GoM as an area of focus, where it currently operates the Shenzi project and participates in Atlantis and Mad Dog. It also plans to increase its offshore exploration spend.


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