Ocean Energy Inc. said last week that it has decided to cease exploration activity on two international oil and natural gas blocks and use the freed up resources on more profitable endeavors. In addition, the Houston-based independent energy company updated its second half guidance for production volumes.

The company said it will discontinue current exploratory activities on its blocks in the Arabian Sea offshore Pakistan and on Block 19 in the Lower Congo Basin offshore Angola. After it satisfies contractual obligations, Ocean said the discontinuations will result in an approximate $76 million impairment for the quarter ending Sept. 30 ($50 million after tax), of which $70 million will be non-cash. However, the company said it still plans to continue activities on its other blocks in Angola, including the drilling of an exploratory well on Block 24 in the fourth quarter and acquisition of seismic data on Block 10 in early 2003.

“We are very fortunate to have an excellent inventory of prospects worldwide, and following our exploratory assessment of these two areas, we believe that Ocean’s other opportunities offer greater economic potential,” said James T. Hackett, CEO of Ocean Energy.

Ocean also adjusted its anticipated production volumes for the third quarter of 2002. The company said it now expects an 8% increase over second quarter production to approximately 165,000 boe/d in comparison to a previously announced mid-point of 170,000 boe/d.

Ocean noted that the change primarily reflects the timing of first production on several high-rate completions in the Nansen, Boomvang and Zafiro developments. In addition, the company cited the rerouting of third-party pipelines associated with platform abandonments as reason for a 10-day shut down in production from a Gulf of Mexico shelf property. As a result, Ocean now estimates that its production for 2002 will exceed 2001 levels by approximately 6-8%.

“We are confident that our worldwide program will continue to achieve annual double-digit production growth for the next three years,” continued Hackett, “although the timing of new deepwater production may vary from quarter to quarter.”

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