Oil and gas supermajor Exxon Mobil Corp. (NYSE: XOM) announced Thursday that it has made another discovery offshore of Guyana, adding to an estimated 4 billion barrels of total resource the company already has uncovered in the area. The discovery announced today was drilled at the Hammerhead-1 well to a depth of nearly 14,000 feet under 3,373 feet of water. Drilling began on July 27.
The Hammerhead-1 well is located about 13 miles southwest of Exxon’s Liza-1 well, the company’s first successful well in the Stabroek offshore block. The new well is the ninth discovery offshore and the fifth in the Stabroek block. Other previous discoveries include Liza Deep, Payara, Snoek, Turbot, Ranger, Pacora and Longtail.
The Hammerhead-1 exploration project found 197 feet (60 meters) of high-quality, oil-bearing sandstone. The Longtail-1 well, announced in June, showed 256 feet (78 meters) of high-quality, oil-bearing sandstone, which combined with the Turbot well is estimated to provide a total recoverable resource of more than 500 million barrels. Exxon did not provide an estimate of the Hammerhead-1 recoverable resource.
Exxon plans to move a second exploration vessel into the waters off Guyana in October with plans to drill the Pluma prospect located about 17 miles from the Turbot discovery.
The Liza phase 1 well is expected to begin producing in early 2020 using a floating production, storage and operations (FPSO) vessel. Exxon estimates production could reach 120,000 barrels of oil a day. Phase 2 of the project is targeted for approvals by the end of this year, and a second FPSO will be used to produce up to 220,000 barrels a day from the new well by 2022. A third project, Payara, is expected to be approved next year and begin producing about 180,000 barrels of oil a day in 2023 from a third FPSO.
According to an Exxon investor presentation dated July 2018, the company expects a return of more than 10% at a realized price of $40 a barrel from the entire Guyana deepwater discovery. With prices now around $70 a barrel, that is good news for investors.
Exxon owns a 45% interest in the Stabroek block through its Guyana-based subsidiary. The company is also the block’s operator. A Guyana-based subsidiary of Hess holds a 30% interest in Stabroek and China’s Cnooc subsidiary in the country owns 25%.
Exxon stock traded down about 0.3% early Thursday morning, at $80.63 in a 52-week range of $72.16 to $89.30.