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BP to Expand Operations and Production in Gulf of Mexico

Zacks Equity Research
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BP plc BP intends to boost operations at the Atlantis field in the U.S. Gulf of Mexico and has agreed to a major expansion of the field. The company has also discovered considerable additional oil resources that will facilitate further development opportunities around the production hubs in the region.

Recently, BP made a breakthrough by using advanced seismic imaging and reservoir characterization that revealed additional 400 million barrels of oil in place at the Atlantis field. The company also identified a further 1 billion barrels of oil in place at the Thunder Horse field. The similar technology is being applied to the eastern area of the field where additional oil in place has been identified.

Consequently, BP approved the Atlantis Phase 3 development, which has an estimated cost of $1.3 billion. This is in sync with its strategy of growing advantaged oil production through existing production facilities in the Gulf.

Atlantis Phase 3, estimated to be commissioned in 2020, will comprise the construction of a new subsea production system from eight new wells that will be tied into the current platform, 150 miles south of New Orleans. At its peak, the project is anticipated to enhance production at the platform by 38,000 barrels of oil equivalent a day (boe/d) gross.

BP also announced two oil discoveries at the Manuel and Nearly Headless Nick prospects in the Gulf of Mexico.

Located in Mississippi Canyon block 520, the Manuel discovery lies east of the BP-operated Na Kika platform. The well hit oil in high-quality Miocene sandstone reservoirs. The company intends to develop these reservoirs via subsea tieback to the Na Kika platform. The other partner in the Manuel discovery is Royal Dutch Shell plc RDS.A, holding a working interest of 50%.

Located on Mississippi Canyon block 387, the Nearly Headless Nick discovery is operated by LLOG. The well hit oil in high-quality Miocene sandstone reservoirs and is anticipated to be tied back to the nearby LLOG-operated Delta House facility. The other partners in the discovery are BP, Kosmos Energy Ltd KOS and Ridgewood Energy. BP holds a working interest of 20.25%.

Currently, BP is the leading oil producer in the Gulf of Mexico and has been boosting net production in the region over the last five years. The company’s production has increased from less than 200,000 barrels of oil equivalent per day (boe/d) in 2013 to over 300,000 boe/d, up more than 60%. BP expects production to grow to about 400,000 boe/d by the middle of the next decade.

The upside will be backed by recent project startups that include Thunder Horse Northwest and Thunder Horse South expansions as well as the Thunder Horse Water Injection project. Also,it will comprise the addition of a second platform (Argos) at the Mad Dog field, scheduled to begin operations in late 2021.

In the past decade, BP has been the largest investor in the Deepwater Gulf of Mexico and operates four large production platforms in the region— Thunder Horse, Atlantis, Mad Dog and Na Kika. The company holds interests in four non-operated hubs — Mars, Olympus, Ursa and Great White.

The potential developments in future at BP’s offshore fields in the Gulf include Atlantis Phase 4 and 5, further developments at Thunder Horse, Na Kika subsea tiebacks and Mad Dog field extensions.

Zacks Rank & Key Picks

Currently, BP carries a Zacks Rank #3 (Hold).

Another better-ranked player in the energy space is SunCoke Energy, Inc SXC, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SunCoke acquires, owns and operates coke making as well as coal mining operations. The company delivered average positive earnings surprise of 302.6% in the last four quarters.

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