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Guyana's Big Oil Discovery: How ExxonMobil, Hess, And CNOOC Discovered Over A Billion Recoverable Barrels

ExxonMobil, Hess, and CNOOC strike it big in Guyana, a small South American country that borders Venezuela.

As the Liza-2 well uncovered commercially viable oil & gas reserves, the discovery is now estimated to house 800 million BOE - 1.4 billion BOE in recoverable resources.

This is just the beginning, as there are several other very promising prospects that are going to be tested out, including the Skipjack prospect.

By the next earnings cycle, updates on the commercial development process for the Liza find and results from the Skipjack well are expected.

Starting off with one of the biggest pieces of news to hit the offshore exploration space, Esso Exploration and Production Guyana Limited was able to prove the commercial viability of the Liza discovery in the Stabroek Block off the coast of Guyana. ExxonMobil Corporation (NYSE:XOM) is the operator of the venture with a 45% stake, with its partners Hess Corporation (NYSE:HES) and CNOOC Limited (NYSE:CEO) owning a 30% and 25% interest in the consortium, respectively.

Source: ExxonMobil Corporation May 2016 Presentation

The Liza-1 and Liza-2 wells were drilled to a total depth of 17,800 - 18,000 feet through 5,550 - 5,720 feet of water, which is shorter than most recent significant discoveries in the Gulf of Mexico. In 2015, the Liza-1 well hit 295 feet of oil bearing sandstone reservoirs, which was followed up by the Liza-2 well encountering 190 feet of oil bearing sandstone reservoirs this year.

On top of costing less to drill than the average deepwater GoM well (which tend to drill down through 7,000+ feet of water to a total depth of 25,000+ feet), the Liza exploration wells uncovered far more recoverable hydrocarbons than what the venture probably thought it would. At first, success at the Liza-1 last year pointed towards 500 million BOE of recoverable resources in the prospect that was guided to be heavily weighted towards crude oil.

As the consortium struck gold on the first try it decided to move ahead with another well see if this find was for real, even in the face of a terrible crude pricing environment. When some of the results from the Liza-2 well were made public at the end of June 2016, Esso Exploration and Production Guyana had proved that Guyana could become one of the world's next oil exporters. To supplement its knowledge, the venture pursued a 3D seismic endeavor that mapped out 17,000 square kilometers of its ~26,700 square kilometer (6.6 million acres) Stabroek Block that was completed a couple of months ago.

With all of its newfound knowledge in mind, ExxonMobil, Hess, and CNOOC now see the Liza discovery housing 800 million...


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