It seems that Davy Jones Locker might be full of oil according to this.
Shares of oil companies McMoran Exploration, Energy XXI and Plains Exploration & Production are jumping this morning amid news that the trio has made a nice oil discovery at its Davy Jones prospect in the Gulf of Mexico. Drilling logs on the 28,000-foot-deep well (that's 5 miles down!) show a likely prize of as much as 165 million barrels of oil and natural gas.
The well seems to be in a relativity shallow area in 20 feet of water. Which means you can get at it with jack-up rigs and don't need those expensive deep water rigs. Jack-up rigs have been in a kind of slump recently so this should be good news for companies like Rowan (RDC) that own them.
I looked at the financials for McMoRan (MMR) seem okay for the most part with a large nonrecurring entry due to derivative accounting. Their annual revenue is about $1 billion so this find could easily ramp up that number by several billion. The only problem is that they have all sorts of dilutive ways to get capital on their books so any slip up might be costly.
The next few weeks will be crucial according to this Forbes piece.
McMoRan is holding its quarterly conference call on January 19. I am sure the company would love to have more news for shareholders by then. It is more likely that it will take two to four more weeks to complete this work. What is really the key here is that the 150 feet of pay dirt already announced was found in sands not expected to bear hydrocarbons because in other wells they held nothing. It seems that the targeted sands which have resulted in very rich discoveries offshore in several very big wells drilled by others are just below the drill bit.
They already have 150 feet of oil but this number could go way higher depending on their findings. They might also drill a deeper well in their other finding called Blackbeard West. If that guy has oil in the same amount as Davy Jones this company might suddenly become a big player overnight.
No comments:
Post a Comment