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McCovey unit set to expire Partners write off dry hole costs, EnCana says no plans for prospect Kay Cashman Petroleum News Publisher & Managing Editor
Operator EnCana Oil & Gas has no plans to ask for an extension of the life of the Beaufort Sea McCovey unit where it drilled an exploratory well this past winter. The federal unit, which includes three federal and four state of Alaska leases about 12.5 miles northeast of West Dock at Prudhoe Bay, expires June 30.
The Calgary-based independent spud the McCovey No. 1 exploration well on Dec. 6 and permanently plugged it Feb. 9. A month later ConocoPhillips, a partner with EnCana and ChevronTexaco in the offshore North Slope prospect, added dry hole costs for McCovey to its preliminary 2002 financial results. Harding says no plans Pre-application permitting meetings for a second well at McCovey for the 2003-04 drilling season began last fall but ground to a halt in late January. State records show that a second plan of exploration is due by June 30 in order to hold the unit. (The first plan was filed Jan. 25, 2002.)
But according to federal regulations, EnCana has 180 days from Feb. 9 — i.e. until Aug. 8 — to either commence a new drilling program or file for an extension of the suspension of operation that the U.S. Minerals Management Service granted them in April 2002, MMS spokeswoman Robin Cacy told Petroleum News in February.
The MMS employee in charge of the McCovey unit was not in the office as this issue of Petroleum News went to press, so it was not clear whether or not the unit would automatically expire on June 30 or remain intact until Aug. 8, but Steve Harding, EnCana’s vice president for Alaska and the Mackenzie Delta, told Petroleum News June 9 that his company does not plan to take any action that would extend the life of the unit past its expiration date. State to re-offer leases The state Division of Oil and Gas said the state leases within the McCovey unit would be offered for lease in the next Beaufort Sea sale, which will be held Sept. 24.
In the Oct. 24, 2002, Beaufort Sea state areawide oil and gas lease sale the three McCovey partners formed a bidding group that took five leases adjacent to the McCovey unit on the south, 12,160 acres, at prices ranging from $11.29 to $28.75 an acre. An EnCana and ChevronTexaco bidding group also took three tracts (7,680 acres) to the southwest of McCovey, paying $42.69 an acre for one tract and $11.29 an acre for the other two.
None of those leases were included in the McCovey unit. Alaska still priority for EnCana On Feb. 5, two days after EnCana filed an application to permanently plug the McCovey No. 1, the company’s CEO Gwyn Morgan listed Alaska, along with the Gulf of Mexico, Australia and North Africa, among EnCana’s “high-impact opportunities to be drilled” in a presentation to a Credit Suisse First Boston energy summit.
Although there was no mention of upcoming Alaska drilling in the company’s Feb. 20 news release containing highlights of its first year in existence and its plans for 2003, EnCana is now being rated among the likely bidders for leases in the June 17, 2004, National Petroleum Reserve-Alaska lease sale.
Along with ConocoPhillips, Anadarko Petroleum and Total, the company has expressed optimism that NPR-A has untapped potential, despite the shrinking interest in the region by North Slope producer BP. EnCana picked up its first leases in the NPR-A in June 2002.
In a conference call with analysts on Feb. 20, Morgan pledged to continue exploration in the state.
He said he had “nothing new to report” on McCovey, noting it was normal for a well to be plugged and abandoned without any comment being made until after the mandatory period for disclosure.
The well, drilled from a surface location in federal OCS lease block Y-1577 to a bottom hole location to the northwest in OCS lease block Y-1578, was drilled to earn EnCana a 30 percent interest in the unit leases held by a 50-50 partnership of ConocoPhillips and ChevronTexaco.
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