Houston (Platts)--13Jun2012/533 pm EDT/2133 GMT

A renaissance is underway on the Gulf of Mexico's shallow-water Continental Shelf as exploration and production companies look to updated technologies and sharper seismic to eke more oil from a traditionally natural gas province, two small independent operators said Wednesday.

Even though crude oil prices have dropped about 20% in recent weeks, Shelf drilling is still economic as technology costs have come down, John Schiller, CEO of Energy XXI, said in webcast remarks at Enercom's annual London Oil & Gas Conference.

"At $75/barrel oil and $3/Mcf gas, we make $1.50 for every $1 we spend," Schiller said. Also, the company scrupulously hedges "to make sure we're able to keep drilling through the ups and downs in our business," he said.

Schiller and Gary Hanna, CEO of New Orleans-based Energy Partners Ltd, insisted reprocessing of older seismic data is helping them better zoom in on oil traps.

"Technology allows us to find a lot of untested fault blocks and find a lot of features you couldn't see before," Hanna said. Reprocessing seismic has "accelerated in the last five years."

Energy XXI, which Schiller said is the third-largest producer on the US Gulf Shelf, plans to begin horizontal drilling on some fields in an attempt to tease out higher recoveries, he said. That, coupled with the field's low decline rates, could move the needle for the company, he said.

For example, in the South Timbalier Block 21 and Main Pass Blocks 73-61 fields, which Energy XXI has owned for five or six years, "we've increased the ... oil coming out of the ground by 7% from infill drilling, production optimization and reservoir studies," said Schiller. "We'll do some horizontal drilling and water injection [in] these fields as we move forward."

The ability to recover an extra 10 million barrels of oil equals nearly $1 billion of cash, he said.

Echoing Hanna's comments, Schiller said reprocessing seismic to obtain better imaging has become cheaper and more efficient. At the Main Pass fields, which Mobil (now ExxonMobil) discovered in the 1970s, "we've reprocessed seismic several times," he said. "Ten years ago that was a $10 million decision, but today it costs $150,000 because of the speed of the [processing] machines."

The result: company officials changed their ideas of what the structure looked like and drilled accordingly. Originally the amount estimated to be recovered was thought to hold 100,000 barrels of reserves per well, but earlier this year that was revised upwards to 400,000 barrels, said Schiller.

"We'll go out and get all the large oilfields we can acquire and do work like this around them," he said.

On other fields, large structures appear to offer enough space to launch horizontal drilling, a technology widely used for onshore shale wells that accesses larger hydrocarbon volumes than vertical wells. Some of the structures on Energy XXI's acreage are 4,000 acres, which presents a "tremendous opportunity" to drill horizontally, he said.

One such candidate is Rosebank, a prospect on US Gulf Shelf acreage that Energy XXI acquired from ExxonMobil in late 2010 for $1 billion and will be drilled later this year, Schiller said. ExxonMobil drilled some horizontal wells in the area in the mid-1990s, with per-well estimated ultimate recoveries, EURs, averaging 800,000 barrels of oil compared to 350,000 barrels for vertical wells, he said.

"You'll start seeing us stepping that up and increasing EURs this year," Schiller said. "There's a lot of oil sitting here identified; all we have to do is get it out of the ground."

Upside also exists for Gulf Shelf oil exploitation in the so-called "stacked" pays of formations one atop another that are potentially productive in some areas, Hanna said. EPL's main operations arena, clustered offshore the tip of southeast Louisiana, contains just such a feature, he said.

One of EPL's larger fields, East Bay, has more than 100 separate identified pay zones, he added.

--Starr Spencer, starr_spencer@platts.com --Edited by Richard Rubin, richard_rubin@platts.com

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