CALGARY (CP) -- Energy company Nexen said Tuesday it has found oil at its offshore Knotty Head prospect in what it's calling the deepest well ever drilled in the Gulf of Mexico.
Testing at the site revealed ''high-quality crude oil in good-quality reservoir sands'' in about a kilometre of water, the company said.
''This is an exciting discovery and represents a significant milestone in our U.S. program,'' CEO Charlie Fischer said in a statement.
''We are looking forward to completing the additional drilling required to confirm our estimate of the total resource we have captured.''
Nexen operates the block and holds a 25% working interest alongside equal partners Anadarko Petroleum Corp. [NYSE: APC], BHP Billiton [NYSE:BHP] and Chevron Texaco [NYSE:CVX].
The company said the well reached a total depth of 10,400 metres, the deepest drilled to date in the Gulf of Mexico, and under about one-kilometre-deep water.
The well beat the previous record set by Shell earlier this year of 9,975 metres, according to Weatherford International, the drilling services company which supplied the equipment used to drill both wells.
''This equipment demonstrates a significant step-change in industry capability that can enable production from previously unreachable reserves using existing infrastructure not only in the Gulf of Mexico but also across ultra-deep hydrocarbon resources around the world,'' said Bernard Duroc-Danner, Weatherford's chief executive.
Earlier this month, Nexen announced plans for a record C$2.9 billion in capital spending next year as the company develops major new projects in the northern Alberta oilsands and the North Sea.
Nexen's capital spending plans for next year are expected to be C$100 million greater than its C$2.8-billion budget for 2005.
More than 20% of Nexen's budget, or C$600 million, will go toward its exploration program.
The company plans to use the cash to find more oil and gas near recent exploration successes in the Gulf of Mexico, the North Sea and offshore Nigeria.
The biggest single expense in Nexen's budget for next year is $650 million toward its Long Lake oilsands project. The company said it will also spend C$450 million to finish the Buzzard oil platform, which it owns along with Petro-Canada [TSX:PCA; NYSE:PCA], in the North Sea.
Nexen [TSX:NXY; NYSE:NXY] shares were up C$2.59 at C$58.99 in trading Tuesday on the Toronto Stock Exchange.
© The Canadian Press 2005
