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prospect to drill-ready status, we also perform substantial drilling-related engineering work, such as generating a proposed well
design, including the well evaluation and completion design, and the preparation of pore pressure prediction analysis and reports, site
survey reports, and shallow hazard reports. The purpose of this work is to minimize the drilling and operational risk associated with
drilling a well on a particular prospect. There are also numerous regulatory filings we must prepare and submit in order to obtain the
required permits, authorizations and approvals needed to drill an exploration well on a prospect.
We may decide during any of the foregoing steps of prospect maturation that drilling an exploration well on a particular
prospect may not be warranted given the geologic, drilling and economic risk profile that was developed during the prospect
maturation process. Once the foregoing items, as applicable, are complete and we have determined that a prospect is ready and
desirable for exploration drilling, and the geologic, economic and drilling risks associated with such prospect have been optimally
mitigated, such prospect would be considered “mature.”
Plans for Appraisal and Development
In general, the life-cycle of our major project developments begins with a thorough evaluation and analysis of well logs (including
offset analog wells), reservoir core samples, fluid samples and, in some cases, the results of production tests from the initial exploration
well that encountered what we believe may be commercial hydrocarbons. This information, along with relevant seismic data, is used to
generate locations and plans for appraisal and development wells. Depending upon the project, we may choose to drill one or more
appraisal wells prior to project sanction and development, each of which will undergo thorough analysis and evaluation. The information
we obtain from exploration and appraisal wells is then used to create a development plan, which will include economic assumptions on
the costs of drilling and completing development wells, the front-end engineering and design of offshore production and processing
facilities, including subsea, umbilical, riser and flowline systems and other related transportation infrastructure. The project will become
formally sanctioned when the relevant working interest partners have approved the development plan. Typically, following formal project
sanction, we will commence the construction of offshore production facilities, and proceed with development drilling and the installation
of subsea architecture in order to advance the project towards initial production.
A discovery made by the initial exploration well on a prospect does not ensure that we will ultimately develop or produce
hydrocarbons from such prospect or that a project development will be economically viable or successful. Following a discovery by an
initial exploration well, substantial additional evaluation and analysis, such as the steps described above, will need to be performed prior
to official project sanction and development. In addition, substantial amounts of capital are required to progress a project through the
project development life-cycle. At any time during the project development life-cycle, we may determine that the project would be
uneconomic and abandon the project, despite the fact that the initial exploration well, or subsequent appraisal wells, discovered
hydrocarbons. See “Risk Factors—Risks Relating to Our Business—Our discoveries and appraisal and development projects remain
subject to varying degrees of additional evaluation, analysis and partner and regulatory approvals prior to official project sanction and
production.”
Leasehold Acreage
As of December 31, 2015, we owned interests in 233 blocks within the deepwater U.S. Gulf of Mexico, representing
approximately 1.3 million gross (0.7 million net) acres. We are the designated operator of 213 of these blocks, or approximately 91%
of our U.S. Gulf of Mexico leasehold acreage. The following schedule shows the developed and undeveloped acres in which we held
interests as of December 31, 2015 in the U.S. Gulf of Mexico.
Developed
Lease Acres(1)
Undeveloped
Lease Acres(2)
Gross
Net
Gross
Net
U.S. Gulf of Mexico .....................................................
17,280
1,620 1,275,590 690,478
(1) Our developed lease positions of 17,280 gross (1,620 net) acres are entirely related to our Heidelberg project. The
Heidelberg project was sanctioned for development in mid-2013 and started oil and gas production in January 2016.
(2) Our Shenandoah, Anchor and North Platte projects are not yet sanctioned for development and therefore the
acreage associated with these projects remains classified as undeveloped. We estimate that (i) the North Platte
project covers U.S. Gulf of Mexico blocks, either wholly or partially, representing 34,560 gross (20,736 net) acres;
(ii) the Shenandoah project covers U.S. Gulf of Mexico blocks, either wholly or partially, representing 14,400
gross (2,880 net) acres; and (iii) the Anchor project covers U.S. Gulf of Mexico blocks, either wholly or partially,
representing 20,160 gross (4,032 net) acres. If development projects related to North Platte, Anchor and
Shenandoah are sanctioned, we will evaluate which acreage associated with these projects could then be classified
as developed acreage.
