OKC-Based Kerr-McGee Posts Strong Results from North Slope Appraisal Well

Article excerpt

Kerr-McGee Oil & Gas Corp. on Tuesday said an appraisal well on Alaska's North Slope tested at rates of up to 1,200 barrels of oil per day.

Kerr-McGee Oil and Gas, a subsidiary of Kerr-McGee Corp. of Oklahoma City, has a 70 percent interest in the Nikaitchuq #4, a horizontal appraisal well.

Armstrong Alaska Inc. holds the remaining 30 percent.

The Nikaitchuq well and Kerr-McGee's Tuvaaq exploration well about three miles to the west both encountered the same interval in the Schrader Bluff reservoir.

Kerr-McGee said it is drilling a sidetrack, the Kigun well, to earn additional acreage. Kerr-McGee will operate Kigun with a 55 percent working interest.

The company also increased its stake in Tuvaaq by acquiring an additional 40 percent working interest from Pioneer Natural Resources. Kerr-McGee now holds an 82 percent working interest in Tuvaaq and is the operator.

We are encouraged with the results we've seen thus far in Alaska, said Dave Hager, Kerr-McGee senior vice president responsible for oil and gas exploration and production. Although we still need to complete the appraisal program, based on initial evaluations, it appears the Schrader Bluff interval might be developed throughout much of our 36,000 acres in the Nikaitchuq and Tuvaaq area.

Kerr-McGee's announcement of its success in Alaska came while the energy company is in a legal battle with billionaire investor Carl Icahn and his associates. Icahn has been critical of Kerr-McGee's drilling program and said the company should end its exploratory deepwater drilling program.

We believe KMG can spend its money much more judiciously than to continue spending money on high-risk exploration, Icahn said in a letter to Kerr-McGee Chairman and Chief Executive Luke Corbett.

The Oklahoma City-based energy company has defended its drilling program, saying its strategy has been historically successful.

Kerr-McGee's crude oil production in the fourth quarter totaled 184,700 barrels per day, up 32 percent from a year earlier. Domestic offshore production for the fourth quarter totaled 63,100 barrels per day, up 16 percent from a year earlier.

Red Hawk, Kerr-McGee's deepest development, is in 5,300 feet of water in the Gulf of Mexico and uses the world's first cell spar facility, technology that Kerr-McGee developed. The cell spar, a floating production facility, is the third generation of the spar systems, all of which Kerr-McGee pioneered. The technology reduces the reserve threshold for economical development of deepwater fields.

Kerr-McGee's Alaska program this year includes two appraisal wells at Nikaitchuq and the exploration well at the Tuvaaq prospect. The Nikaitchuq #4 horizontal appraisal well tested the Schrader Bluff interval, while the Nikaitchuq #3 horizontal appraisal well currently is being drilled to test the Sag River formation.

In 2004, Kerr-McGee announced successful exploration and appraisal wells on the Nikaitchuq prospect.

The Nikaitchuq #1 vertical well tested at rates more than 960 barrels of oil per day from the Sag River Formation. …