Unocal announces second significant deepwater Gulf of Mexico discovery
Sugar Land, Texas, April 12, 1999 - Unocal Corporation's Spirit Energy 76 unit today announced a "very significant" oil and gas discovery on the Mad Dog prospect in the Gulf of Mexico deepwater Green Canyon block 826.
The well encountered 300 net feet of hydrocarbons, primarily crude oil.
Spirit Energy holds a 25-percent interest in the 2-1/2-block drilling unit that encompasses most of the Mad Dog structure. Based on the available data, the company believes its net resource potential for the Mad Dog drilling unit is likely in excess of 100 million barrels of oil equivalent (mmboe) and possibly as high as 200 mmboe.
Although further appraisal drilling is required to determine the extent of the discovery, Spirit Energy believes the gross resource potential within the drilling unit to be in excess of 400 mmboe and as much as 800 mmboe. If the upper range of this initial resource estimate is confirmed, Mad Dog could be one of the largest discoveries yet announced in the Gulf of Mexico.
"Mad Dog is the second deepwater discovery we've announced this year, and it signifies a major step toward our goal of adding substantial value to the corporation through a successful deepwater program in the Gulf of Mexico," said Roger C. Beach, Unocal chairman and chief executive officer. "We began our Gulf of Mexico deepwater program from a standing start in 1997 and have quickly delivered results as we built an extremely attractive prospect inventory for continued future success."
John T. Donohue, Spirit Energy 76 president, added, "While further appraisal drilling will be needed to determine the full extent and size of this find, we can say that Mad Dog is without question a very significant discovery. We are considering an appraisal program with our partners that anticipates additional drilling later this year or early next year."
David A. Johnson, Spirit Energy's vice president for exploration, said that the well likely represents the "trend opening" discovery for the Eastern Fold Belt and Salt Canopy play that the company was betting on when it acquired a considerable deepwater acreage position in last year's Lease Sale 171. Unocal's deepwater holdings contain several other major prospects and leads in this trend that have geological characteristics similar to Mad Dog.
"This discovery demonstrates the potential value of Unocal's deepwater blocks on this trend, which were acquired in Lease Sale 171. It has substantially decreased some of the risk parameters associated with this trend and increases the value of the prospects and leads we have already identified in our acreage," Johnson said.
The Mad Dog drilling unit is located in 5,000 to 7,000 feet of water in Green Canyon blocks 825, 826 and 782, about 150 miles southwest of Venice, La. The well spudded in May 1998 and was drilled to a total depth of 22,410 feet. The pay zones were sampled, but not tested.
BP Amoco is the operator of the Mad Dog well, with a 64-percent working interest; BHP holds the remaining 11-percent interest.
The company also announced that it reached an agreement with Conoco to acquire a 50-percent working interest in the oil and gas lease covering Green Canyon Block 562 (K2 prospect). The K2 prospect is located just north of Mad Dog on the same geologic trend. "K2 is a very interesting prospect with attractive resource potential located inboard of the Mad Dog discovery. We are excited to have a substantial interest in the project," Johnson said.
Last month, Spirit Energy 76 and Vastar Resources, Inc., announced a significant discovery at the Mirage prospect in Mississippi Canyon block 941.
Spirit Energy is scheduled to begin a five-well deepwater drilling program as operator this month. The drilling program currently includes plans to drill wells in the South Sierra (Garden Banks 551), Nag (Mississippi Canyon 541), Bow Shock (Garden Banks 460) and Sumatra (Garden Banks 941) prospects.
Spirit Energy 76, Unocal's U.S. Lower 48 exploration and production unit, has major operations onshore in Texas and Louisiana and on the Gulf of Mexico shelf, in addition to a significant presence in the Gulf of Mexico deepwater.
Unocal is one of the world's largest independent oil and gas exploration and production companies, with resource development, power plant and pipeline projects in Asia, the U.S. Gulf of Mexico region and Latin America.
Forward-looking statements regarding exploration activities and resource potential in this news release are based on assumptions concerning market, competitive, regulatory, environmental, operational and other considerations. Actual results could differ materially as a result of factors discussed in Unocal's 1998 Form 10-K report filed with the Securities and Exchange Commission.
Updated: April 1999