Red Willow is a non-operating partner in eight oil fields in the deepwater Gulf of Mexico. When Hurricane Nate entered the Gulf early in October of 2017, our partner-operator companies evacuated their personnel from the offshore facilities and shut-in the oil and gas production that was flowing from Red Willow’s fields.
All personnel were evacuated without injury and then returned to the offshore facilities a few days later to bring the production back on-line. Seven of Red Willow’s eight oil fields came back on-line without incident. However, the Niedermeyer Field, one of three oil fields that flow to the Delta House Floating Production Facility, experienced a mechanical failure with equipment located on the seafloor, in approximately 4,500 feet of water.
LLOG Exploration Company (LLOG) is Red Willow’s partner and the operator of these wells. LLOG’s speedy identification of the issue and rapid response mitigated what could have been a significant incident. LLOG immediately informed the Bureau of Safety and Environmental Enforcement (BSEE) and the U.S. Coast Guard (USCG) of the event. These two agencies share U.S. federal regulatory oversight of oil and gas operations in the Gulf of Mexico. After extensive reconnaissance by helicopters and planes, seafloor examinations via remote-operated submarines and detailed water sampling, BSEE and the USCG concluded that any oil released from the mechanical failure was minor and consumed by the bacteria that live on the seafloor.
A few weeks after the incident, BSEE approved LLOG’s request to re-start four of the eight shut-in wells, since those wells were unrelated to the incident. The other four wells remained shut-in while LLOG and the federal agencies continued their investigation. In July, all the wells were brought back on production except the “Incident Well”, Niedermeyer #2. Niedermeyer #2 is expected to come back on-line once BSEE finalizes its investigation, which may be as early as September of this year, or as late as February of 2019.
Having four high-flowrate oil wells off-line for such a long period of time caused a 23 percent reduction in Red Willow’s deepwater production, versus what was forecasted. Fortunately, other positive factors offset the delay in production; including six other Red Willow deepwater wells that continued to produce at rates considerably higher than budgeted for the year, operating expenses 29 percent below budget year-to-date, and most importantly, oil prices 32 percent above budget. So, despite lower production volumes, Red Willow’s year-to-date deepwater earnings are 11 percent above original estimates.
The deepwater Gulf of Mexico remains an important part of Red Willow’s portfolio, generating significant earnings for the Tribe, both currently and into the future. LLOG’s experience, rapid response, and timely mitigation of this incident are a testament to the quality and professionalism of our partner-operator in a highly technical and challenging operating environment.