Byron Energy bounds to top oil producing spot on Gulf of Mexico shelf, advances well spud plans

Byron Energy ASX BYE Gulf of Mexico well spud SM71 SM74 Otto Energy Metgasco OEL MEL
South Marsh Island 71 is currently the number one oil producing lease on the shelf in the Gulf of Mexico.

Oil and gas junior Byron Energy (ASX: BYE) is making great strides in the US Gulf of Mexico, with one project now bumping up to the top spot for oil production on the Gulf’s shelf and rolling plans to spud a maiden well in a neighbouring block.

The company today released several announcements regarding its Gulf leases, South Marshall Island Block 71 (SM71), which it operates in joint venture with Otto Energy (ASX: OEL) and South Marshall Island Block 74 (SM74), which it owns on a 70/30 working interest basis with Metgasco (ASX: MEL).

SM71

SM71 is operated by Byron’s wholly-owned subsidiary Byron Energy Inc in a 50/50 joint venture with Otto.

The partners announced the first oil production from the shallow-water block in March this year and it is now already the number one oil-producing lease on the shelf in the Gulf of Mexico.

The project is currently producing around 3600 barrels of oil per day plus 6 million cubic feet per day of gas (gross).

According to Byron, this achievement has also ranked the company as the 12th top oil producer out of 119 in the Gulf shelf area over the past two months, based solely on its 50% working interest share of production from the SM71 F platform.

“This is an outstanding result given that one year ago, the company went to the equity market to raise the necessary funds to finish the construction of the platform and subsequently initiate production from all three wells on the platform,” Byron stated.

“The company’s goal is to build on this ranking over the next couple of years”.

The partners also updated the market on their plans to undertake recompletion operations at the SM71 F2 well.

In July, Byron reported the well, which was completed in the secondary B65 sand, experiencing depleting reservoir pressure. Therefore, it was decided to drill down into the B55 sand until production ceases, then recomplete the J1 sand before proposing to redrill back to the main B65 area.

Byron today said a lift boat was scheduled to arrive to the SM71 production facility next week, subject to final permit approval and weather conditions. The recompletion work is expected to take three weeks and cost about US$1.1 million.

SM74

Byron Energy Inc also operates SM74, located to the east of SM71. This block has been estimated to hold gross prospective resources of 5.2 million barrels of oil and 13 billion cubic feet of gas.

In mid-July, Byron farmed out a 30% stake in the block to Metgasco. Under the terms of the agreement, the latter will fund 40% of the cost of the initial test well (estimated to cost a total of $11 million).

Once the well is drilled to total depth, both companies will bear their respective working interest costs (70% Byron/30% Metgasco).

At the time of the farm-in, this initial well was tagged for drilling in October. However, in today’s announcement Byron said the well, SM74 D-14, is expected to spud sometime during February to April of next year.

The company said it has inked final documents with the operator of the adjacent South Marshall Island Block 73 (SM73) to use its D platform to drill the well.

The SM73 operator is currently using the rig and deciding on an optional well, so the precise timing of the rig’s availability will depend on this. According to Byron, the SM73 operator will make its decision by mid-December, at which time the spud timing of Byron’s maiden well will be confirmed.

Byron chief executive Maynard Smith said the company was pleased to have concluded the platform use and production handling agreements and to now be in a position to move forward with the SM74 project.

“These were very detailed and complicated negotiations which took considerable time and effort to conclude, but the benefits of this effort are significant and have created a very exciting opportunity for our company,” Smith said.

In a separate announcement, Metgasco executive director Ken Aitken congratulated Byron at securing this access agreement “which will help underwrite robust project economics, via a rapid tie-in and early production, in the event of a successful exploration well”.

Aitken said the few months delay in spudding of the well “in no way” diminished the company’s excitement at addressing the significant prospect.

Byron shares were sitting 19.64% higher at $0.335 on the news by midday trade, although Metgasco’s stock had fallen 1.56% down to $0.063. Otto’s share price rose slightly by 1.47% to $0.069.

Danica has extensive experience writing and editing business news in the Oceanic and Southeast Asian regions. She has written across a range of industries including oil and gas, mining, energy, science and research, retail and travel. Danica has covered small and large cap companies listed on the Australian, Singapore, Hong Kong, Indian, London and Toronto exchanges.