It's a bust: ConocoPhillips takes dry hole costs for McCovey

Petroleum News Alaska Staff

Operator EnCana Oil & Gas (USA) Inc. applied to plug and abandon the Beaufort Sea McCovey No. 1 exploration well in early February.

ConocoPhillips, a partner in the project with EnCana and ChevronTexaco, completed the bad news March 10: it said it is adding dry hole costs for McCovey to preliminary 2002 financial results.

A deepwater Gulf of Mexico well was also a dry hole for ConocoPhillips.

Drilling began at McCovey, which is north of Prudhoe Bay, late last year from the SDC, the steel drilling caisson. The well reached total depth Jan. 27.

EnCana applied to the Minerals Management Service Feb. 2 to permanently plug and abandon the well. The company shouldered a disproportionate amount of the cost of drilling the well in return for a 35.5 percent interest in the McCovey unit leases.

ConocoPhillips spokesperson Kristi DesJarlais told PNA March 10 that ConocoPhillips now holds a 30 percent interest in the prospect, leaving ChevronTexaco with a 34.5 percent interest.

According to federal regulations, unit operator EnCana has 180 days from the plug and abandon date of Feb. 9 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 of last year, MMS spokesperson Robin Cacy told PNA.

EnCana, ConocoPhillips and ChevronTexaco have declined to comment about their plans for McCovey, but a state official told PNA March 11 that at least one of the three partners has expressed interest in continuing exploration at McCovey.

Other dry hole in deepwater GOM

Neither well encountered commercial quantities of hydrocarbons, the company said.

Dry hole costs for the two wells in 2002 were $18 million, increasing the company's net loss for 2002 to $295 million or 61 cents per share. ConocoPhillips said remaining drilling costs on these wells incurred in 2003 will be charged to dry hole expense in the first quarter of 2003.