Unocal Drills Duster in the Gulf of Mexico

Unocal has concluded drilling operations at its Sequoia prospect in the Gulf of Mexico deepwater.

The well was completed as a dry hole. Located in Mississippi Canyon block 941, the well was drilled to a total depth of 29,100 feet to test the deeper Miocene intervals of the 1999 discovery called Mirage. The Mirage drilling program included an initial well drilled to 16,600 feet and a sidetrack that reached a depth of 22,400 feet. Unocal had hoped that a successful test of the deeper intervals with the Sequoia well would lead to development, but the hydrocarbons encountered in the deeper interval were deemed to be noncommercial.

Unocal operated the well; other working interest holders in the well include Total E&P USA, Inc., Marathon Oil, and Spinnaker Exploration. The development of the Mirage discovery is now unlikely given the results of the Sequoia well. Unocal expects to take a $29 million pretax write-down in the fourth quarter 2004 to cover its share of costs associated with the Sequoia well and the earlier Mirage exploration well. Unocal estimates that fourth quarter 2004 dry hole expense will be between $75 and $85 million. This compares with an estimate of $50 to $75 million that the company announced on Oct. 28, 2004.