Marathon abandons Gulf of Mexico well

Marathon Oil announced that it has plugged and abandoned an exploration well in the Gulf of Mexico, dealing a disappointing blow to a closely watched project.

After seven months of drilling and a mechanical problem that delayed completion, the Solomon well reached its total depth of 34,600 feet, although Marathon did not disclose any additional results.

The company has released the rig from the Walker Ridge block area and has no further activity planned for the block, Marathon said in an announcement Thursday.

Despite the dry hole and its previously announced plans to sell off stakes in fields in the Gulf of Mexico to focus more on shale plays, Marathon isn’t completely sailing away from the region. The company continues to hold on to producing assets and acreage in the Gulf, including minority stakes in the Gunflint development that’s expected to start production next year and the deep-water Shenandoah discovery operated by Anadarko Petroleum Corp.

Analysts at investment banking firm Simmons & Co. described the Solomon results as disappointing, given speculation that the well had the potential to hold up to 450 million barrels of oil equivalent. Marathon did not disclose how much it had invested in the Solomon well, but Simmons & Co. estimated the dry hole expense at $270 million, based on a disclosure from Murphy Oil, an exploration and production company based in Arkansas that held a 20 percent interest in the project.

As the prolonged crude slump continues to crimp oil companies’ finances, many have signaled plans to curtail spending on expensive offshore exploration and production projects.

“Due to general lack of success, a greater need to preserve capital, and more favorable opportunities offshore, both (Marathon and Murphy) are moving away from high impact exploration,” Simmons & Co. analysts said in a note to investors Thursday.