Woodside hoping to follow BHPP's Gulf success

With its share price trading below the $11 mark, accounting changes and write-offs resulting in a $90 million full year loss for 2002, Woodside will be hoping to emulate the BHP Petroleum high-margin oil strategy in the Gulf of Mexico.

Two weeks ago, BHPP confirmed their Atlantis discovery as one of the biggest in the Gulf of Mexico. BHPB Petroleum chief executive Phil Aiken, said the Atlantis-6 appraisal well, drilled in an unexplored area of the Atlantis structure, was "probably the best well we've drilled in the Gulf of Mexico, and maybe the best ever in the region."

Coinciding with the new upside in the Atlantis field, the company also announced a revision of earlier reserves calculations from 575 million barrel to 635 million barrels of oil. This makes it the third largest field in the Gulf after BP's Thunder Horse and Shell's Mars field.

BHPP has committed about $US1 billion to commercialise the field, which would see production commence in the third quarter of 2006.

For BHPB, the results are confirmation its high-margin oil strategy, designed to find replacements for production from Bass Strait and the North West Shelf, is working.

Bass Strait, the most profitable asset BHP has ever owned, is in terminal decline. Bass Strait once held proven oil and gas reserves of 6.5 billion barrels of oil equivalent, of which BHP owns a 50% share, but most of this has been produced.

From a peak daily production rate of about 520,000 barrels of oil a day in 1989, Bass Strait now produces less than 200,000 bpod, as production costs inch ever higher.

BHP's share of oil production in the Gulf is about 30,000 barrels of oil equivalent a day at present, but with the development of some Typhoon satellites such as Boris and Tiger and new production form Mad Dog and Atlantis, that could climb to 150,000 barrels a day or more.

As for Woodside, it is facing a fall in crude oil production due to the depleting Laminaria field in the Timor Sea and has planned to spend $365 million on new exploration this year on at least 18 wildcat wells, of which six will be drilled in the deep water regions of the Gulf of Mexico.

Woodside's GoM drilling this year has gotten off to a shaky start with the Voss Prospect exploratory well being plugged and abandoned on Keathly Canyon Block 511. However, the well did earn Woodside a 15% interest in the Voss Prospect with partners ConocoPhillips and Norsk Hydro.

Last month, Woodside Petroleum teamed up with US independent Pioneer Natural Resources Company to undertake a two-year, US$55 million joint exploration program for the shallow-water Texas Shelf region of the Gulf of Mexico.

Woodside will be hoping for some success from the JV's first wildcat, Roatan-1 exploratory well (OCSG-22193-1), located on the Brazos Area Block 490, which spudded last week targeting the Roatan prospect and will be drilled to a depth of 16,000 feet.