Drilling Successes and Cost Reductions Offset Production Decline

Unocal Corporation's Spirit Energy 76 unit said its exploration drilling successes and aggressive development program on the Gulf of Mexico shelf area in the first half of 1999 should more than offset the natural production declines for the year. "We have a long record of low drilling and operating costs on the shelf, which enables us to enjoy returns that cannot be matched by the typical shelf operator," said Roger C. Beach, Unocal chairman and CEO. Beach noted Spirit Energy's GOM shelf prospects are predominantly natural gas and deliver production quickly, making them extremely attractive in the current capital-constrained environment. Spirit expects new projects on the shelf this year to generate the same amount of new production as last year with roughly one-third less capital investment. The company said the departure of other producers from the shelf region creates opportunities for Unocal to leverage its exploration, drilling and operating expertise across a larger asset base. Shelf/transition zone discoveries Spirit Energy's discoveries on the shelf and transition zone this year include: Mazda (High Island Block 133): The Mazda well was drilled to a total depth of 14,834 ft. and encountered approximately 360 ft. of net gas pay. First production from this new field began in June, with production expected to reach 50 million cu. ft. of natural gas per day (mmcfd) from two wells. Spirit Energy has a 100-percent working interest. Redfish Point (Vermilion Parish, Louisiana): The Redfish Point well was drilled to a total depth of 18,123 ft. and encountered 185 ft. of net gas pay. Production began in April at a gross daily rate of 900 barrels of oil and 4 mmcfd of gas. Spirit has a 50-percent working interest; PennzEnergy is operator. In the coming weeks, the company also expects to have the results of at least two, highly promising exploration wells, which are currently testing Norphlet formation targets in the offshore Mobile area. Next year, Spirit Energy will begin using the new Discoverer Spirit drillship to drill Unocal's "ultra deep" prospects in up to 10,000 ft. of water.