Analyst predicts 4Q Gulf of Mexico upswing

Industry analyst James K. Dodson said that the number of wells drilled in the US Gulf of Mexico through May this year was 254...

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Industry analyst James K. Dodson said that the number of wells drilled in the US Gulf of Mexico through May this year was 254, less than half of the 558 drilled during the same period of 1998. Interestingly, the sharp decrease was in the number of wells drilled by top operators in the Gulf. The top 40 or so companies drilled 477 wells in the period to May of 1998, but only 174 in the period to May of 1999. Other companies drilled 81 wells in the 1998 period and 80 in the 1999 period.

Dodson said one reason for the apparent discrepancy is that more companies are moving into deeper water, where it costs more to drill wells. "They're saving their budgets for deepwater," he said. For the entire 1999 year, Dodson predicts slightly over 600 wells, about 40% less than the 1,025 US Gulf wells drilled during 1998. Dodson predicts the real upswing will begin at the end of the third quarter, when he believes drilling will occur at about the same annualized rate as during 1998. (See table.)

Coastal boosts capital budget by $290 million

Coastal said June 28 that it is increasing its 1999 capital expenditure budget for exploration and production by $290 million to $880 million. "The $290 million increase for Coastal Oil & Gas Corp. is a direct result of recent strength in natural gas prices," said David A. Arledge, chairman, president, and CEO of Coastal.

Almost two-thirds of the increase is earmarked for acquisitions, and the remaining $100 million will be used for additional drilling and well workover programs. The increase is seen as a sign of optimism about continued stronger commodity prices.

DOD wants to reduce Lease Sale 181

The US Department of Defense (DOD) said oil and gas leasing in the Gulf of Mexico area east of 86°48' longitude is incompatible with military operations. The DOD was responding to the US Minerals Management Service's request for more commentary on the proposed Lease Sale 181 area. The DOD said that although the area contains existing oil and gas leases, joint area use is not feasible, and could preclude or inhibit testing or training of major weapon systems. It was hinted but not stated that further activity on existing leases should be curtailed.

"The requirement exists for new generations of destructive weapons systems that would not be compatible with oil and gas platforms," said the letter. Seventeen percent (179 tracts) of the proposed 1,033-tract area may have to be removed from the sale. The DOD said that joint use of the large area west of the 86°48' line is feasible, if the lease sale agreement includes traditional military stipulations of hold harmless, coordination of operations, and communications constraints. Also, exploration of the feasibility of subsea production facilities was recommended. Lease Sale 181 will be held in 2001 or 2002.

Major deepwater field set for decommissioning

EEX has awarded Cal Dive International a deepwater decommissioning contract for the Cooper Field development, located on Garden Banks 387/388. The company will plug and abandon seven subsea wells, recover subsea trees and templates, and flush and remove pipelines, flowline jumpers, and a 1,400-ft production riser. Cal Dive will also disconnect and tow the floating production facility to shore and recover 12 deepwater mooring legs. The company will use three deepwater vessels and the services of alliance partners and others.

Giant Crazy Horse prospect near Mensa

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BP Amoco says its latest find is the largest ever in the Gulf of Mexico, with an estimated 1 billion boe of recoverable reserves. Crazy Horse is located in 6,000 ft water depth on Mississippi Canyon 776, 777, and 778. The well was drilled to 20,000 ft TD. The field is in the Boarshead Basin, two blocks away from Shell's Mensa gas field. BP Amoco operates Crazy Horse with 75%, and Mobil holds 25%. BP Amoco announced three more Gulf of Mexico discoveries, all in the 4,000-6,500 ft water depth range in the Green Canyon area. One is the previously announced Mad Dog find, located on Green Canyon 825, 826, and 782 (400-800 MMboe); Atlantis, located on Green Canyon 698, 699, 700, 742, 743, and 744; and Holstein, located on Green Canyon 644 and 645.

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