U.S. oil firm W&T Offshore will drill up to eight wells in the Gulf of Mexico this year, including three wells at the Mahogany field and two wells at the Ewing Bank 910 field.
W&T said on Tuesday that its capital budget estimate for 2017 is $125 million with plans to drill six to eight wells in the Gulf of Mexico in a program that is expected to be balanced between exploration and development projects on the Shelf and in deepwater areas.
The plan includes completing the Ship Shoal 349 Mahogany A-18 well, which was drilled to its total depth in late 2016, and put in production in mid-January. The well logged 149 feet of net oil pay in five zones and extended the size and depth of the Mahogany field.
Drilling and completion of three additional Mahogany field wells are expected to achieve a return rate of more than 100 percent, with a relatively quick payback while the two wells to be drilled on the Ewing Bank 910 are expected to have the same return rate with an average projected payout in approximately one year.
The plan also includes performing between 20 and 25 recompletions valued at $26 million. Approximately two-thirds of the approved $125 million capital budget for the year is directed at projects that will come online and start producing in 2017.
The company said that all projects in 2017 have a very high probability of success, expected high rates of return and short-term payout, and will boost production levels in 2017 or early 2018.
Tracy Krohn, W&T Offshore’s Chairman and CEO, said: “We are substantially increasing our capital spending in 2017 over 2016 levels. Our 2017 capital program is focused on projects with an excellent probability of success and rates of return of between 80 percent to well over 100 percent. The projects are also located near existing infrastructure and can be brought on production quickly, offering immediate cash generation.
“Our Mahogany field is expected to be an important part of our capital program in 2017, with a substantial inventory of projects to choose from, including low-risk development drilling, and exploration that could continue to extend the field’s size.
“We have multiple ‘P’ Sand, ‘T’ Sand and ‘U’ Sand targets in our Mahogany field, which will provide drilling opportunities into 2018 and beyond. We feel confident that our capital will achieve above-average rates of return.”
The company’s production guidance for 2017 is expected to be approximately four percent higher than the mid-point of the company’s expected production in 2016.
Total production for the full year 2016 was between 14.6 and 16 MMBoe while the production guidance for 2017 is expected to be between 15.2 and 16.8 MMBoe.