Yorktown temporarily abandoned as drilling costs reach $86 million

Petroleum News

After a year of turmoil and mushrooming drilling expenses, operator Devon Energy and partner Kerr-McGee have decided to “temporarily abandon” their deepwater Yorktown exploration well in the deepwater Gulf of Mexico.

Yorktown costs have now escalated to $86 million, ranking it among the most expensive wells ever drilled in the gulf. Costs would further increase should the partners decide to return to Mississippi Canyon Block 886 and complete the well.

Yorktown has been plagued with downhole problems and strong ocean currents that have disrupted operations and forced lengthy delays. The decision to halt operations altogether and leave the drill site was made because deterioration of the lower end of the bore hole prevented Devon from reaching its target at the 25,000-foot level, a company spokesman said.

Devon said it would evaluate the situation before deciding the next move, although Kerr-McGee said in a prepared statement that a revised drilling plan for Yorktown would be developed. However, operations are not expected to resume until 2004, Kerr-McGee added.

Both companies said they would not expense well costs on their respective balance sheets until after it’s decided what to do with Yorktown. Devon and Kerr-McGee are equal partners in the well, but their drilling agreement would require Devon to pick up about $61 million of the $86 million in expenses.

Neither partner has disclosed information on what the well may have found on the way down to its elusive 25,000 target depth. After heavy ocean currents subsided a few weeks ago, drilling resumed at around the 23,400-foot level.

As an operator, Devon has run into a string of bad luck, reporting a recent dry hole at its Tuscany prospect in the eastern gulf and an apparent non-commercial well at its Shiner Deep prospect in the western gulf.

However, operator and Devon partner ChevronTexaco had a bit more luck with the drillbit, reporting Oct. 9 an oil discovery at its Sturgis deepwater prospect in the prolific Atwater Foldbelt trend, which has given rise to such major discoveries as BP’s Mad Dog and Atlantis. ChevronTexaco and Devon said the Sturgis No. 1 well, on Atwater Valley Block 183, uncovered more than 100 feet of net pay but shed no light on the extent of the discovery. A sidetrack also was drilled but more drilling will be required to better determine the size of the find, ChevronTexaco said.