Hokchi Energy Granted Extension To Evaluate Xaxamani

Hokchi Energy was granted a 39-day extension to evaluate the Xaxamani exploratory well, located in shallow waters off the coast of Veracruz. 

The 260.7km² area, which is believed to contain oil and gas reserves between 21° and 25° API, falls under shared production contract CNH-R03-L01-AS-CS-15/2018 that the company operates with US firm Talos Energy as a partner. Hokchi attributed the delays in its appraisal activities of the Xaxamani-2EXP to unforeseen damage caused to drilling equipment in the evaluation area. The Mexican arm of the Argentine E&P company Pan American Energy explained that equipment had to be replaced to prioritize health and safety. At the 71st extraordinary session of CNH, Hokchi also cited its contractors’ "learning curve" as leading to unproductive and lost time. 

Jaime Mario Serrano, General Director of Contract Monitoring, CNH, explained at the same session that contractors are free to request an extension in accordance with the regulation by notifying the regulator in writing at least 60 days prior to the end of the evaluation period, should they find themselves unable to conclude activities within the scheduled evaluation program for reasons out of their control. 

The resolution proposal was approved unanimously, with CNH concluding upon carrying out an analysis that the setbacks were not attributable to Hokchi. The company must now submit an updated schedule of the activities to be performed to the regulator.

The news comes after Hokchi announced its intention to invest US$52.8 million in May 2022, as part of its appraisal plan for Xaxamani. The company aims to gather enough information to determine the long-term commercial potential of the area. The approved appraisal entailed the drilling of two delimiter wells, Xaxamani-4DEL and Xaxamani-5DEL, as well as conducting a production test in the latter. Hokchi Energy expects to recover hydrocarbons between 22° to 34° API. Prospective resources for Xaxamani-4DEL are estimated to be around 53MMboe, with a 69 percent probability of geological success and average risk. The prospective resources for Xaxamani-5DEL, meanwhile, are estimated at 12MMboe. Likewise, the probability of geological success is 69 percent with average risk.

Hokchi  was the first private company to be handed an oil contract in 2015 and began producing in the middle of the pandemic by developing the eponymous shallow water field, originally discovered by PEMEX in 2009. The company reported a record production output of 21.5Mb/d in May, trailing only Italian IOC Eni as private operators surpassed 100Mb/d collectively for the first time. At the end of July, Hokchi announced the incorporation of a third producing well, Hokchi-11DES, as it expects to continue expanding its production output.