Saratoga Resources, Inc. (NYSE AMEX: SARA) today announced that it is in advanced discussions with McMoRan Oil and Gas LLC (McMoRan) regarding a potential joint venture on Saratoga’s Long John Silver Prospect at Vermilion 16 field.
While specific terms of the proposed joint venture are still being discussed and subject to confidentiality obligations, Saratoga anticipates contributing its deep rights (approximately 20,000 feet and below) to approximately 4,000 acres and access to Saratoga’s production and pipeline facilities in Vermilion 16 with McMoRan expected to contribute approximately 6,000 acres to the joint venture. The joint venture objective is expected to target ultradeep shelf Lower Tertiary (Wilcox) and Cretaceous objectives at depths of 23,000-30,000 feet subsea. All of the subject acreage is in Louisiana state waters in Vermilion Parish with water depths ranging from 5-10 feet.
The Long John Silver Prospect is situated in one of the main Lower Wilcox depositional fairways that fed McMoRan’s Davey Jones discovery on the Gulf of Mexico Shelf and the Walker Ridge Wilcox discoveries in Gulf of Mexico Deepwater.
Saratoga will retain its existing rights to all shallower objectives in the subject acreage, including all proved, probable and possible reserves, consisting of 8.7 million barrels of oil equivalent (MMBOE) of proved reserves and 18.6 MMBOE of total reserves at January 1, 2011. Additionally, Saratoga will retain the right to process its production from such shallower objectives at Saratoga’s production and pipeline facilities. Saratoga owns and operates a central production facility in Vermilion Block 16 with production capacity of 100 million cubic feet per day and a two mile pipeline to shore. Saratoga intends to continue its current development plans with respect to its shallower reserves in Vermilion 16, including drilling of development wells commencing in the first quarter of 2012.Saratoga President, Mr. Andy Clifford, said "We are excited at the prospect of partnering with McMoRan in our ultradeep shelf play. McMoRan’s management team, under the visionary leadership of James Moffett, has established its position as a pioneer and the preeminent player in the ultradeep shelf play. We have gained valuable insights into the ultradeep Wilcox play through our involvement in the University of Texas Deep Shelf Consortium and through my years at BHP Billiton, a participant in the original Blackbeard well and a participant in the Cascade and Chinook Wilcox discoveries in Walker Ridge. We believe our Long John Silver Prospect has similar characteristics to recent high profile Wilcox successes, including McMoRan’s highly acclaimed Davey Jones well. Our 3D mapped deep shelf plays in Vermilion 16 and Grand Bay add exciting potential to our ongoing developmental drilling program."