CLEVELAND -- Standard Oil Co. (Ohio) Friday announced it is abandoning its $1.5 billion Mulkuk well offshore Alaska -- the most expensive ever drilled -- because final tests confirmed it is a dry hole.
Sohio and 10 other companies spent $1.5 billion to purchase leases in the Mukluk area, which some oil analysts had predicted would prove to be the largest oil field discovered in North America since the lucrative Prudhoe Bay field was found in the 1960s.
The first Mukluk exploratory well is located 65 miles northwest of Prudhoe Bay in the Beaufort Sea.
Sohio, which said the Mukluk well was the most costly ever drilled, assumed the field would contain oil reserves of at least 1.5 billion barrels when it bid on the lease for the tract.
In Houston, Sohio's production subsidiary said tests from four zones in the Mukluk well yielded salt water and only traces of oil. One zone produced 27,000 cubic feet of natural gas a day with the water flow from the well.
The Sohio announcement confirmed preliminary data released by the company on Dec. 5 indicating the Mukluk well contained water.
The Cleveland-based company had invested $430 million in the 9,860-foot well that was drilled in 50-foot-deep water. Sohio has the largest stake of 31.4 percent in the well.
Sohio said it will take a $163 million after-tax writeoff for the well against its 1983 earnings. The well will be plugged.
'We didn't write off the whole investment because we may decide to do additional drilling in parts of the Mukluk area,' said Richard Nash, director of Sohio investor relations.
'Obviously the company is disappointed,' he said. 'In the oil business, you drill a lot of holes and more are this way than successful. It is the nature of the beast.'
Eugene L. Nowak, energy group director for Dean Witter Reynolds Inc. in New York, said the test results on the first Mukluk well will make oil companies 'take a second and third look' at the Beaufort Sea area.
'It will slow drilling activity close to the Sohio field,' said Nowak, who still believes the Beaufort Sea area is promising.
Sohio, in which British Petroleum has a 53 percent interest, said its write-off would reduce its 1983 fourth-quarter profits by $163 million after taxes, or 66 cents per share.
'We didn't write off the whole investment because we may decide to do additional drilling in parts of the Mukluk area,' Nash said.
In London, BP said it will take an after-tax writeoff equal to about $140 million against its fourth-quarter earnings because of the Mukluk well.
Other companies with interests in the well are Mobil Corp., Shell Oil Co., Texaco Inc., Diamond Shamrock, British Petroleum Ltd., Placid, Amerada Hess, Gulf Oil Corp., Koch and Elf Aquataine.
Texaco Chairman John McKinley said earlier indications the Mukluk well would be a disappointment prompted his company to make a $9.9 billion takeover bid for Getty Oil Co., which has substantial domestic oil reserves.
