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ConocoPhillips (COP - Analyst Report) has made a major oil discovery at its Shenandoah appraisal well 2 in the deepwater Gulf of Mexico (GoM). The latest find could be considered one of the largest discoveries in the Gulf.

The well in the Shenandoah Basin encountered more than 1,000 feet of net oil pay in high-quality Lower Tertiary-aged reservoirs. Located on Walker Ridge Block 52 in the GoM is the Shenandoah oil field, the well was drilled to 31,405 feet in about 5,800 feet of water.

The data collected in the Shenandoah-2 well specifies superior reservoir quality as well as liquid characteristics that are identical to those encountered in the 2009 Shenandoah-1 discovery well. Apart from ConocoPhillips (with a 40% stake), Anadarko Petroleum Corporation (APC - Analyst Report) has a 30% interest and serves as the operator of the Shenandoah-2 well, as well as the Shenandoah-1 well about a mile to the northeast.

Other co-owners are Cobalt International Energy, L.P. (CIE - Snapshot Report) with a 20% working interest, and Venari Offshore LLC and Marathon Oil Company (MRO - Analyst Report), each with a 10% working interest.

ConocoPhillips expects Shenandoah 2 to be the most significant deepwater GoM oil discovery to date. The latest significant discovery, along with encouraging hydrocarbons indications in the Coronado well, further strengthens ConocoPhillips’ foothold in the Lower Tertiary Play.

ConocoPhillips is considered one of the biggest leaseholders in the deepwater GoM region, holding approximately 2 million net acres. It has boosted its acreage position in the Gulf by twofold in the last 2 years.

The company intends to drill 5 to 8 wells this year, including the Ardennes prospect and the Thorn well. Ardennes was spud in early March, while the Thorn is scheduled for drilling in the second quarter this year. The Thorn well marks the company’s reentry into the Gulf as an operator. ConocoPhillips remains on track with major growth projects that are expected to offset production declines and diversify its portfolio.

Currently, the shares of ConocoPhillips retain a Zacks Rank #3 (Hold).

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