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BP Gulf Fields Restart Production

Zacks Equity Research

British energy giant BP Plc (BP) announced that two of its U.S. Gulf of Mexico (GoM) fields − Atlantis and Mad Dog − have resumed oil and natural gas production. The company however refused to comment on the production levels of the fields.

With a daily production capacity of 200,000 barrels of oil and 180 million cubic feet of gas, Atlantis was undergoing maintenance activities during the entire second quarter of 2012 as the company was replacing facilities on the seabed. BP is the operator of the platform with a 56% right, while its partner BHP Billiton Ltd. (BHP) holds a 44% working interest.

Mad Dog field − with production capacity of 80,000 barrels of oil and 40 million cubic feet of natural gas a day − was offline for 15 months as the platform suffered damages from hurricane lke in 2008. The Mad Dog oil and gas field − located 190 miles (145 kilometers) offshore New Orleans in the Atwater Foldbelt − has a reserve potential of 200 million to 450 million barrels of oil equivalent (MMBoe).

Mad Dog is the largest find in the GoM region and covers quite a number of blocks in the southern Green Canyon, including Green Canyon Blocks 825, 826, 738, 739, 781, 782 and 783. BP owns the operatorship interest of 60.5% in the field, while its associates, BHP Petroleum holds 23.9% and Chevron Corporation (CVX) possesses a 15.6% stake.

During the second quarter, BP’s profit suffered from widespread planned maintenance activities (particularly in the high-margin area of the GoM), lower contribution from its Russian partner TNK-BP, as well as weaker oil and U.S. gas prices. The company stated that it had already lost approximately 86,000 Boe/d in net hydrocarbon production in the U.S. GoM mainly due to maintenance operations and Tropical Storm Debby.

The U.K. giant is now speeding up its deepwater operations and intends to spend $4 billion in the U.S. Gulf over this year with an intention to invest no less than the same amount annually over the next decade.

BP also projected a lower production level for the year compared to 2011. The GoM spill in 2010 and the failed Russian Arctic deal have undoubtedly weighed on BP shares. Moreover, its far-reaching turnaround and maintenance ventures will continue into the upcoming quarter, adding significant headwinds.

The company retains a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months.


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