8
The royalties on our lease blocks range from 12.5% to 18.75% with an average of 16.86%.
Most of our U.S. Gulf of Mexico blocks have a 10-year primary term, expiring between 2016 and 2025. Assuming we are able
to commence exploration and production activities or successfully exploit our properties during the primary lease term, our leases
would extend beyond the primary term, generally for the life of production. Our leasehold interest in the U.S. Gulf of Mexico
decreased by 113,760 gross (65,804 net) acres in 2015. This decrease was primarily due to our relinquishment of 29 leases that we
deemed to be non-prospective in order to forgo payment of future delay rentals.
The table below summarizes our undeveloped acreage scheduled to expire in the next five years in the U.S. Gulf of Mexico.
Undeveloped Lease Acres Expiry
2016(1)(2)
2017(1)
2018(2)(3)(4)
2019
2020 and
thereafter
Gross
Net
Gross
Net
Gross
Net
Gross Net Gross
Net
U.S. Gulf of Mexico ..................... 276,480 160,524 57,600 29,108 538,310 267,875 63,360 31,032 339,840 200,103
(1) The gross and net acreage numbers reflected in these columns include portions of the estimated 14,400 gross (2,880 net)
acres covering U.S. Gulf of Mexico blocks associated with our Shenandoah project, upon which exploration and appraisal
wells have both discovered hydrocarbons, but a development project has not yet been sanctioned. The leasehold acreage
in the Shenandoah project is part of the Shenandoah Unit, federally approved in 2014. We expect that the operator of the
Shenandoah Unit will conduct additional appraisal drilling operations in 2016 and eventually file for approval of a
Suspension of Production in order to perpetuate all of the acreage associated with the Shenandoah Unit.
(2) The gross and net acreage numbers reflected in these columns include portions of the estimated 34,560 gross (20,736 net) acres
covering U.S. Gulf of Mexico blocks associated with our North Platte project, upon which exploration and appraisal wells have
both discovered hydrocarbons, but a development project has not yet been sanctioned. We plan to perpetuate this acreage by an
eventual unitization and sanctioned development plan and by applying for approval of a Suspension of Production.
(3) The gross and net acreage numbers reflected in these columns include portions of the 20,160 gross (4,032 net) acres
covering U.S. Gulf of Mexico blocks associated with our Anchor project, upon which exploration and appraisal wells
have both discovered hydrocarbons, but a development project has not yet been sanctioned. The leasehold acreage in the
Anchor project is part of the Anchor Unit, federally approved in 2014. We expect that the operator of the Anchor Unit will
conduct additional appraisal drilling operations in 2016 and eventually file for approval of a Suspension of Production in
order to perpetuate all of the acreage associated with the Anchor Unit.
(4) The gross and net acreage number reflected in this column includes 11,520 gross (9,792 net) acres in two leases that are
contiguous to the south of the Anchor Discovery Unit. These leases may have the potential to be included within the
Anchor Discovery Unit if any future exploration drilling is successful.
The acreage numbers in the table above do not reflect (i) 5,760 gross (1,152 net) acres covering leases associated with our
Shenandoah project whose primary term expired in 2014 but are being held by continuous operations on the Shenandoah project, or
(ii) 11,520 gross (2,304 net) acres covering leases associated with our Anchor project whose primary term expired in 2014 but are
being held by continuous operations on the Anchor project. We expect that the operators of both Shenandoah and Anchor will
continue to conduct operations on these projects during 2016 and eventually file for approval of a Suspension of Production in order to
perpetuate this acreage. See “Risk Factors—Risks Relating to Our Business—Under the terms of our various license agreements, we
are required to drill wells, declare any discoveries and conduct certain development activities in order to retain exploration and
production rights and failure to do so may result in substantial license renewal costs or loss of our interests in these license areas.”
Drilling Rigs
On August 5, 2013, we executed a drilling contract with Rowan Reliance Limited, an affiliate of Rowan Companies plc, for the
Rowan Reliance, a new-build, ultra-deepwater dynamically positioned drillship that is currently conducting operations on the initial
North Platte appraisal well. The Rowan Reliance drillship is capable of operating in water depths of up to 12,000 feet and drilling to
measured depths of up to 40,000 feet. The drilling contract provides for a firm three-year commitment, which began in February 2015,
at a day rate of approximately $602,000 (inclusive of mobilization fees) and two one-year extension options at day rates to be
mutually agreed.
