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Yorktown deepwater well costs escalate to $76 million Strong ocean currents force operator to suspend deepwater drilling Petroleum News
Exploration well expenses continue to mount at the Yorktown deepwater prospect in the Gulf of Mexico, rising to an anticipated $76 million and ranking the well among the most expensive in the Gulf. Worse, drilling has been suspended because of unusually strong ocean currents.
“As a result of this phenomenon, virtually no progress has been made on this well in the last three weeks,” said Rick Buterbaugh, vice president of investor relations for Yorktown partner Kerr-McGee.
Buterbaugh also said in an Aug. 27 conference call with analysts that an exploration well on its Saratoga prospect on Green Canyon 534 was declared non-commercial. Saratoga is the second consecutive duster in the Gulf for joint venture partners Kerr-McGee and Devon Energy. Santa Rosa in the Eastern Gulf's Atwater Valley was declared a dry hole in August.
The Devon-operated Yorktown well, located in 2,100 feet of water on Mississippi Canyon Block 886, was spud some 11 months ago with a pre-drill reserve estimate of around 200 million barrels of oil equivalent. The well has since turned into a money pit for the deepwater partners, with Devon responsible for $56 million of the now projected $76 million in well costs.
Just four months ago Devon disclosed that Yorktown expenses had reached $55 million and were expected to increase to $65 million. The company said the well had encountered down hole pressure problems and that another few weeks would be required to finish the job. Currents also a problem However, the partners also have been plagued by so-called loop currents that have broken rig anchors and resulted in drilling delays.
“Once again we have experienced additional delays due to strong loop currents in the area,” Kerr-McGee's Buterbaugh said. “It's uncertain when these conditions might subside” and drilling can resume.
Drilling on the Yorktown prospect was halted at 23,400 feet on its way to a target depth of around 25,000 feet, Buterbaugh said.
In the meantime, he said, exploration drilling on the Kerr-McGee-Devon Shiner Deep prospect on Garden Banks 700 had reached 17,000 feet and headed toward 24,000 feet.
In addition, Buterbaugh said a fourth well to further test the 100 percent owned Kerr-McGee Constitution discovery on Green Canyon Block 680 had been completed and that two side tracts are planned to determine the southern extent of the field. No reserve estimates have been released for Constitution.
He said Kerr-McGee recently acquired a 100 percent working interest in the eastern portion of adjacent Green Canyon Block 679 and plans to drill a well to test Constitution's western reach.
In the conference call, Buterbaugh said Kerr-McGee would report 2003 third-quarter exploration expenses of $100 million, up 50 percent from second-quarter exploration costs of $66.6 million.
He said Kerr-McGee oil production for the third-quarter was expected to average between 134,000 and 150,000 barrels per day, compared to 154,800 per day in the second quarter.
Natural gas volumes during the third quarter, he added, were expected to average between 670,000 and 755,000 million cubic feet per day, compared to 697,000 million cubic feet per day for the second quarter.
Lower production rates for the third quarter were attributed largely to property sales in China and onshore United States.
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