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Mixed results for Energy XXI at US Gulf wells

Houston-based player hits pay at one well but ‘thief zone’ halts progress at another, capex slashed

Energy XXI Gulf Coast has hit pay at one sidetrack in the shallow-water US Gulf of Mexico but has come unstuck at another where a “problematic zone” has temporarily put paid to further drilling.

The Houston-based player has also decided against spudding any more wells this year as it cut back expected capital expenditure amid market and oil price uncertainty.

The company spudded the West Delta 30 L-14 ST2 High Tide well on 7 June with White Fleet Drilling’s jack-up 350. The well was drilled to a total vertical depth of 8500 feet and encountered 102 feet of net pay across three prospective horizons, Energy XXI said.

“This well will be completed and placed on production before the end of the third quarter,” it added.

The 100%-owned well, situated in just 53 metres of water, was permitted as a sidetrack, kicking off at 2550 feet.

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The company followed the probe up by spudding the West Delta 31 L-19 ST1 Kingstream well last month. However, it encountered an unanticipated fluid loss zone and was not able to be drilled beyond this so-called “thief zone”.

“The temporary abandonment of the well is being finalised and a plan is being evaluated to potentially re-drill the well from a different location to avoid the thief zone and reach the targeted reserves,” the company said.

Energy XXI had planned to drill between two and four wells in the West Delta area this year but has now said it has no plans to drill any more wells in 2017. It will, however, continue its planned workover and recompletion programme.

Oil price uncertainty has also led it to slash expected full year capex from between $140 million and $170 million to now between $125 million and $155 million. This will include between $50 million and $70 million for abandonment costs.

For the second quarter the company posted a net loss of $23.64 million, better than a loss of $195.9 million a year earlier when it incurred impairments of $142.64 million. It emerged from bankruptcy late last year. For the first quarter this year it posted a loss of $65.32 million as it racked up impairments of $44.05 million.

Revenues in the latest quarter were $143.72 million, down from $147.8 million a year earlier and $157.91 million in the first quarter. The company posted lower production volumes and lower oil prices in the second quarter.