American Oil and Gas Reporter - June 2015 - 98

SpecialReport: Offshore & Subsea Technology

Independents Find Gulf Opportunities
By Al Pickett
Special Correspondent

Deeper drilling and new reservoir discoveries are but two of the reasons why
the Gulf of Mexico remains an exciting
area for development and exploration.
While the nation's unconventional shale
plays seemingly have garnered much of
the attention these days, the Gulf of Mexico still is enormously important to the
nation's energy production.
Consider a couple GOM facts from
the U.S. Energy Information Administration:
* Gulf of Mexico federal offshore
oil production (1.8 million barrels a day)
accounts for 23 percent of total U.S.
crude oil production, and federal natural
gas production in the Gulf accounts for 7
percent of total U.S. dry gas production.
* There are more than 3,000 platforms
operating in waters up to 650 feet deep,
and an increasing number of rigs are
drilling in ultradeep waters up to 9,000
feet deep. Additionally, there are more
than 25,000 miles of oil and gas pipeline
on the Gulf of Mexico seafloor.
"We have been in a lot of unconventional plays, such as the Bakken and the
Anadarko Basin, as well as coalbed
methane," remarks Bob Zahradnik, operating director for the Southern Ute

Growth Fund, which owns Red Willow
Offshore/Red Willow Production. "The
'find and develop' economics are better
in the Gulf."
He says the key is good exploration,
and he credits Houston Energy for developing many of the prospects that Red
Willow participates in. In fact, Zahradnik
says, Red Willow Offshore and Houston
Energy partnered to submit the largest
single bid of $52 million for Walker
Ridge Block 107 in more than 5,000 feet
of water in Central Gulf Lease Sale 235
in March.
"It looks like a good prospect," he
says matter-of-factly. "We believe it is
the last Miocene turtle structure left to
drill in the Gulf. It is similar to Thunder
Horse, only smaller."
The Bureau of Ocean Energy Management reports that 42 oil and gas companies submitted 195 bids on 169 tracts
in Sale 235. Twice as many deepwater
blocks received bids as shallow-water
blocks, according to the BOEM, indicating
the deepwater focus companies are taking
in the Gulf.
Nonoperating Partner
Red Willow may be one of the more
unique players in the Gulf of Mexico,
suggests Zahradnik, who says he was the
company's first employee when the South-

Red Willow's first Gulf of Mexico
partnership was a Mississippi
Canyon project with Houston Energy in 2003. The company's
GOM holdings have since grown
to interests in six producing
deepwater wells, five more that
will begin producing this year,
and 30 exploration projects.
Here, Technip's Deep Blue lays
pipe to Red Willow's first well in
Mississippi Canyon 519, operated by Noble Energy, while the
Ensco 8501 drills a second well.

98 THE AMERICAN OIL & GAS REPORTER

ern Ute Indian Tribe founded Red Willow
Production Company to operate the tribe's
energy resources.
"Red Willow bought hundreds of small
leases, many of which were on tribal
land," he recounts. "In 1994, we bought
a small gathering company in the northern
San Juan Basin. We built it until we
were handling 700 million cubic feet a
day from coalbed methane, but we saw
the peak was coming in 2000, and we
needed to reorganize."
So the Southern Ute Growth Fund
was formed, which has a business plan
that Zahradnik says separates the tribes'
business activities from its governmental
activities. Noting that the growth fund
was authorized to begin investing off the
reservation, he adds, "We buy and operate
properties, including real estate from San
Diego to Baltimore. It is a multibilliondollar fund."
Included in those holdings, Red Willow
has an active role as a nonoperator in the
Gulf of Mexico.
"We formed a partnership with Houston
Energy in 2003," Zahradnik relates. "Red
Willow and Helis (later replaced by
Ridgewood Energy) each had 47.5 percent
of that initial project in Mississippi
Canyon. Houston Energy had a 5.0 percent
working interest and developed it. Helis
has a good staff and does a great job."
He says Red Willow Offshore had
the high bid on eight blocks in the March
Central Gulf lease sale totaling $59
million. LLOG Bluewater Holdings, Red
Willow and Ridgewood Energy also had
the combined high bid of $17 million for
Mississippi Canyon Block 769, he adds.
"Our group bids on leases and then
we work a deal with an operator," Zahradnik explains. "Noble Energy operated
the first two wells we drilled. We have
drilled a number of wells with LLOG
Exploration Co., and we have an 18 percent working interest in the Delta House
reserves. We have interests in six deepwater wells that are on production, five
more that will begin producing this year,
and 30 exploration projects. Six of those
will be drilled this year.
"We typically have a 20-30 percent
working interest," he adds.
He says Red Willow's nonoperating
partnerships have been a huge success
for the Southern Ute Growth Fund, and
he credits Houston Energy, LLOG, Noble,

American Oil and Gas Reporter - June 2015

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