McMoRan Updates Activities in GOM

McMoRan updated its shallow water Gulf of Mexico (GOM) exploration and development activities, including updates on its three in-progress ultra-deep exploration wells, the Laphroaig #2, Hurricane Deep and Boudin deep gas wells, and other development and production activities.

Shallow Water, Ultra-Deep Exploration Activities

The Davy Jones offset appraisal well (Davy Jones #2) is drilling below a true vertical depth (TVD) of 29,800 feet to evaluate exploration objectives below the Wilcox pay sands, including possibly the Upper Cretaceous (Tuscaloosa) sections. The Davy Jones #2 well has a proposed total depth of 30,450 feet. Based on interpretations of drilling data, McMoRan believes the well has possibly encountered Upper Cretaceous sands, and may be immediately above the Lower Tuscaloosa. The Tuscaloosa section, if present in deeper horizons on the Shelf at Davy Jones, would be correlative with the prolific Tuscaloosa trend onshore South Louisiana. If confirmed, McMoRan believes the combination of productive Wilcox and Tuscaloosa sands on the same structure could enhance the prospectivity of Davy Jones and the value of McMoRan's other ultra-deep prospects on its acreage position within the Davy Jones trend. McMoRan plans to evaluate the well with wireline logs upon reaching the proposed total depth.

As previously reported, in January 2010 McMoRan logged 200 net feet of pay in multiple Wilcox sands in the Davy Jones #1 well on South Marsh Island Block 230. In March 2010, a production liner was set and the well was temporarily abandoned to prepare for completion. McMoRan is preparing to complete and flow test the #1 well, which is expected in late 2011. In April 2010, McMoRan commenced drilling an offset appraisal well two and a half miles southwest of the Davy Jones #1 well. In February 2011, preliminary log results from the Davy Jones #2 well confirmed Wilcox sand continuity and the major structural features of the Davy Jones prospect.

Davy Jones involves a large ultra-deep structure encompassing four OCS lease blocks (20,000 acres). McMoRan holds a 60.4 percent working interest and a 47.9 percent net revenue interest in Davy Jones. Other working interest owners in Davy Jones include: Energy XXI (NASDAQ:EXXI - News) (15.8%), Nippon Oil Exploration USA Limited (12%), W.A. "Tex" Moncrief, Jr. (8.8%) and a private investor (3%).

The Blackbeard East ultra-deep exploration well commenced drilling on March 8, 2010 and has been drilled to a TVD of 32,559 feet. The well recently encountered a mechanical issue that is currently being addressed. Based on interpretations of drilling data, McMoRan believes the well has encountered Sparta sands in the Eocene, which are younger than the Wilcox and have been found to be productive in certain onshore fields in South Louisiana. Wireline logs will be required to evaluate this interval.

As reported in January 2011, wireline logs have indicated that Blackbeard East has encountered hydrocarbon bearing sands in the Oligocene (Frio) with good porosity below 30,000 feet. McMoRan is considering down dip drilling opportunities on the flanks of the structure to evaluate this section further. This is the first hydrocarbon bearing Frio sand encountered either on the GOM Shelf or in the deepwater offshore Louisiana. The Frio sand section below 30,000 feet is in addition to the 178 net feet of hydrocarbons in the Miocene sands announced in December 2010 above 25,000 feet at Blackbeard East. Pressure and temperature data below the salt weld between 19,500 feet and 24,600 feet at Blackbeard East indicate that a completion could utilize conventional equipment and technologies. In 2011, McMoRan plans to drill a 25,000 foot offset appraisal well to further evaluate and delineate these Miocene zones.

Blackbeard East is located in 80 feet of water on South Timbalier Block 144. McMoRan holds a 70.0 percent working interest and a 56.2 percent net revenue interest in the well. Other working interest owners in Blackbeard East include: EXXI (18.0%), W.A. "Tex" Moncrief, Jr. (10.0%) and a private investor (2.0%).

The Lafitte ultra-deep exploration well commenced drilling on October 3, 2010 and is currently drilling below 20,200 feet towards a proposed total depth of 29,950 feet. Lafitte is located on Eugene Island Block 223 in 140 feet of water. The well is targeting Middle and Deep Miocene objectives and possibly Oligocene (Frio) sections below the salt weld. McMoRan holds a 72.0 percent working interest and 58.3 percent net revenue interest in Lafitte. Other working interest owners in Lafitte include: EXXI (18.0%), and W.A. "Tex" Moncrief, Jr. (10.0%).

Shallow Water, Deep Gas Exploration Activities

McMoRan also announced that completion operations at the Laphroaig #2 deep gas well in St. Mary Parish, Louisiana to develop the previously announced 140 net feet of pay are in progress. The Laphroaig #2 is expected to commence production mid-year 2011. McMoRan has a 37.3 percent working interest and a 28.5 percent net revenue interest in the Laphroaig field. EXXI holds an 18.6 percent working interest.

The Hurricane Deep well, which is located on the southern flank of the Flatrock structure in 12 feet of water on South Marsh Island Block 217, commenced drilling on January 20, 2011 and is drilling below 14,100 feet. The well has a proposed total depth of 20,000 feet and is targeting the thick Gyro sand encountered in the Hurricane Deep No. 226 well in 2007. The location also offers the opportunity to evaluate deeper potential Gyro zones. McMoRan holds a 55.0 percent working interest and a 38.8 percent net revenue interest in Hurricane Deep. Certain of McMoRan's costs to re-drill the well to 18,450 feet are expected to be recovered from insurance programs.

The Boudin deep gas exploration well commenced drilling on February 27, 2011 and is drilling below 8,800 feet. Boudin, which is located in 20 feet of water on Eugene Island Block 26, has a proposed total depth of 23,100 feet and will test Miocene objectives. McMoRan holds a 74.1 percent working interest and a 58.8 percent net revenue interest in Boudin.

Other

The Brazos A-23 development well commenced drilling on February 13, 2011, and is currently drilling below 12,300 feet with a planned total depth of 16,120 feet. This traditional shelf well is targeting proved undeveloped reserves updip from logged pay zones. McMoRan holds a 100.0 percent working interest and an 81.25 percent net revenue interest in the well.

Production Update

McMoRan also announced that it estimates first quarter 2011 production to approximate 190 million cubic feet of natural gas equivalents per day (MMcfe/d), exceeding previous estimates reported in January 2011 of 175 MMcfe/d.

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