Texaco Discontinues Appraisal Drilling at Fuji and McKinley Prospects

Texaco will discontinue appraisal drilling of the Fuji and adjacent McKinley prospects in the Gulf of Mexico.

Making the announcement, Bruce Appelbaum, President of Texaco Exploration said, "Although several wells have logged significant pay sections in both prospects and have tested at potentially commercial rates, the size of the accumulations does not warrant future Texaco investment." Texaco will record a fourth quarter after-tax charge of $62 million to write off its investments in these areas.

Fuji is located 150 miles southwest of New Orleans. The No. 1 rank wildcat well (Green Canyon Block 506) was drilled in 1995 and encountered over 180 feet of oil pay. Three subsequent appraisal wells, two of which encountered notable oil pay, were drilled over the past three years. Test data, however, indicated that the reservoirs were of limited areal extent.

McKinley is located immediately northwest of Fuji. The No. 1 rank wildcat (Green Canyon 416) was drilled in 1998 and encountered over 100 feet of oil pay. An appraisal well drilled this month did not encounter significant hydrocarbons and was declared a dry hole.

The Gulf of Mexico continues to be an exploration focus area for Texaco with rank wildcat drilling planned for 2000 and beyond. Texaco holds over 400 deepwater Gulf of Mexico leases and has recently begun deepwater production at the Gemini Field. The Petronius Field will add additional deepwater production when it enters production in the second half of 2000.