At the most elementary level, it was just two people—a geologist and a geophysicist—who used preliminary reprocessed, 1990s-era narrow azimuth seismic to identify the four-way closure that in December 2012 became Cobalt International Energy Inc.'s North Platte #1 Gulf of Mexico deepwater discovery.

But it took a village of specialized workers and a half-dozen years of disciplined patience to move from that original faint image to a deepwater discovery.

Likewise, Cobalt's North Platte success transformed the Inboard Lower Tertiary from an emerging trend into a major industry objective. Its vast potential, some 3 billion barrels of recoverable oil in multiple structures on Cobalt's acreage, has earned Oil and Gas Investor's Best Discovery award for 2012.

The Inboard Lower Tertiary technically was discovered 42 miles to the east, in the stratigraphic column for Anadarko Petroleum Corp.'s 2009 Shenandoah #1. But the North Platte well validated Cobalt's geologic thesis that the Inboard Lower Tertiary would be present in the subsalt layer closer to shore—hence the name ”Inboard”—and would potentially provide large structures with better reservoir quality when compared to earlier Lower Tertiary “outboard” discoveries at Jack, St. Malo, Chinook and Cascade.

North Platte was Cobalt's first operated discovery in the deepwater Gulf of Mexico with 40% partner Total E&P USA Inc. Cobalt was a 20% nonoperated partner in Shenandoah.

The North Platte discovery suggests that opportunity still abounds for agile independents in the industry's most technically challenging endeavor, on a playing field where peers include the largest integrated oil and gas companies.

Cobalt's strategy is to specialize in the sub-salt area of two deepwater basins, the Gulf of Mexico and West Africa, rather than compete in all global deepwater basins against all other operators. After its formation in November 2005, the company recruited a seasoned staff of specialists in all phases of exploration and development. Many have more than 30 years of offshore experience. With a two-basin subsalt focus, specialized personnel can work interchangeably on tasks related to both basins rather than creating individual project silos of expertise.

Regardless of experience, people still need tools, and Cobalt's aggressive adoption of rapidly changing industry technology, especially in seismic imaging, also played a crucial role in the North Platte discovery.

“Several things have leveled the playing field,” says James H. Painter, Cobalt's executive vice president of execution and appraisal, recounting the initial 2006 work underlying the North Platte effort.

“Most of the technology and the time transfer is relatively short. We went to wide azimuth (seismic) data in a matter of months after it evolved from proprietary workings to the industry at large.”

Coupling industry alliances with vendors to a seasoned internal team that can add “a Cobalt twist” on specific basins, particularly through seismic imaging, keeps Cobalt in the hunt as a world-class explorationist.

History, challenges

Like all discoveries, North Platte has an intriguing history. The well was drilled in 4,400 feet of water to a total measured depth of 34,500 feet, the fourth deepest in the Gulf of Mexico. It was drilled without incident in record time post-Macondo, encountering more than 550 feet of net oil pay with preliminary hydrocarbon recovery estimates in the range of 350- to 800 million barrels.

The well itself overcame several challenges. Initially, the Ensco 8503 set anchors on the North Platte site in 2010, just two days before the Macondo-instigated drilling moratorium was imposed in the Gulf. Cobalt scrambled to get the rig sub-leased until the moratorium was lifted. Two years later, the Ensco 8503 returned and began drilling for Miocene targets on the Ligurian #2 structure as part of a two-well package that included the North Platte.

Suffice it to say that internal Cobalt interest was acute when the Ensco 8503 spudded the North Platte exploratory well on Garden Banks Block 959 in July 2012. Drilling the well involved negotiating a thick salt layer, adding to the technological hurdles.

“The next time you are in your car, put your odometer on zero and see how far six miles is,” Painter says. “Three miles of that was salt. So there were all the issues going in and coming out of the salt to make sure you're drilling it safely. It's 200 or 300 degrees at bottom hole, so you're drilling in conditions that would cause normal metals to have issues.

“You are doing it in a way where you can't lose focus at all. If you lose focus, either some-

“The next time you are in your car, put your odometer on zero and see how far six miles is." James H. Painter, Cobalt International Energy Inc.

thing happens mechanically or someone can get hurt. You have huge redundancies on the rig to make sure nothing happens and huge redundancies in the office with your people to make sure somebody is always watching— usually four or five people are watching at a minimum—to make sure drilling is done safely and without incident.”

History will record that a Cobalt geologist and geophysicist, working with a preliminary subset of reprocessed 1990s-era 3-D seismic data, noticed the faint outlines of a four-way structure and worked it up just three weeks before the lease sale that brought the North Platte opportunity. That team of two became a half-dozen team members seeking board approval and financing to go after leases in the 2006 OCS Lease Sale 200, Western Gulf of Mexico. When the envelopes were opened, Cobalt was the lead bidder at $22 million on five blocks with as many as six structures, beating out competitors such as ExxonMobil, Anadarko Petroleum Corp., Chevron, and Royal Dutch Shell.

“People were still buying Miocene prospects, not really moving into the Inboard Lower Tertiary,” Painter recalls. “For us, we were looking for a new play and trying to build a position in that whole area. It really confirmed our geologic model where we thought there could be higher quality and more commercial reservoirs rather than the conventional outboard Lower Tertiary that had been drilled out of the salt.

“The thing that made it so important for Cobalt is we bought the North Platte acreage before others saw the trend, and we were ahead of everybody in that lease sale, so we were successful in acquiring a good number of offset leases, as well,” Painter adds.

“What you see for us is not just a single prospect. We've got four of five other prospects to drill now that North Platte worked. It's not just that North Platte, by itself, would have been world class for most people, but having all the running room in this new trend for a company our size puts us in a good spot.”

Cobalt developed the Inboard Lower Tertiary geologic concept through a basin-wide technical, regional, sub-regional and ultimately, prospect-level review of the Gulf. The play resides in a paleo-delta system that extends southeast of Galveston. The initial discoveries at Jack, St. Malo, Chinook and Cascade in the late-1990s and early 2000s were at the far end, or outboard, portion of the deltaic system. Because they were beyond the Gulf's salt layer, they were visible to the industry through seismic. In theory, the Inboard Lower Tertiary had better permeability and porosity as a petroleum system, but was masked from industry view by up to three miles of highly rugose, or undulating salt.

“Think about seismic through salt like looking at something through a cracked windowpane,” Painter says. “The better imaging we get, the less cracks there are in that view. If it's really cracked, I can't see anything on the other side. If I can get it to where there are only three or four cracks, and they are all big ones, I can see it and use my geologic expertise to make the real picture, and that's what we do with the imaging.”

But salt also has a specific benefit, particularly in regards to its properties in cooling the surrounding earth.

“If we didn't have three miles of salt, we'd be at 350 to 400 degrees,” Painter says. “The three miles of salt puts us at 200 to 300 degrees, and that's the difference. If I didn't have that two to three miles of salt, everything out here would be gas.”

The industry is currently developing better clarity on the regional Lower Tertiary in tandem with rapid advances in seismic imaging and improved deepwater drilling capabilities in the service sector. Cobalt has gone through several generations of evolution in the quality of seismic imaging, including the original move to wide azimuth seismic.

“Wide azimuth made us more certain of what we were drilling and it reduced the risk,” Painter said. “Narrow azimuth showed the structure, but not as well.”

Cobalt is following up on the North Platte discovery currently with the Ensco 8503 drilling an exploratory well on a three-way enclosure on the Ardennes prospect 28 miles northeast of Shenandoah, which will test both Miocene and Inboard Lower Tertiary targets. Cobalt, which is operator at 42% with partners ConocoPhillips at 30% and Total at 28%, will follow the Ardennes well with the Aegean exploratory well later this year, approximately 21 miles southwest of the North Platte discovery.

The company is acquiring another generation of seismic over North Platte in 2013 and will develop appraisal plans thereafter.

“The Gulf is still one of the best-margin basins in the world and it is one that keeps on giving,” Painter says. “Every time you think it's dried up, we find a new play like the Inboard Lower Tertiary, or we find something we couldn't image before, or we get rigs that can drill deeper than we could before. What this does is set off another trend that people will be following for the next five or 10 years.”