Plains Exploration & Production Co. said stricter U.S. permitting requirements for drilling in the deep waters of the Gulf of Mexico are causing the company to focus on larger projects.
Today’s Gulf permitting process is intended to be more “thoughtful” than before, Plains Chief Executive Officer James Flores said in an interview today in Houston. Companies with strong balance sheets will be able to pursue top projects in the Gulf, whereas more developments may have been considered in the past, he said.
“Only the biggest and best projects are going to get done,” Flores said. “A concentrated strategy is going to be more important than a just-be-everywhere-all-the-time strategy.”
Plains said Oct. 28 it had executed a securities purchase agreement with EIG Global Energy Partners, which will bring Plains $450 million in exchange for an equity interest in Plains’s offshore subsidiary. The unit was set up to hold Gulf assets, including a stake in the Lucius oil project that may begin producing in 2014.
The company, which is based in Houston, said proceeds raised are expected to go toward capital investment in Lucius and drilling planned for 2012 at the Phobos prospect. The resource potential for Plains is the equivalent of 106 million barrels of oil from Lucius and 306 million barrels of oil from Phobos, according to presentation slides.
The stricter permitting process was put in place following last year’s record offshore U.S. oil spill at BP Plc’s Macondo well in the Gulf.
Flores appeared today at a Jefferies & Co. energy conference in Houston. Anadarko Petroleum Corp. is the operator of the Lucius and Phobos projects.