McMoRan Makes Significant Discovery at Eugene Island 193

Eugene Island OCS
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McMoRan Exploration has made a significant discovery at Eugene Island 193 in the shallow waters of the Gulf of Mexico.

The Deep Tern well at Eugene Island Block 193 has been drilled to a total measured depth of 20,731 feet and the well is being prepared for completion in the Miocene sands. The well encountered five sands with a total gross interval of approximately 340 feet, including approximately 170 feet of new pay discovered below 19,165 feet that was not previously announced. The gross intervals of hydrocarbons have been confirmed by log-while-drilling (LWD) or wireline logs. The well is expected to be producing by year-end 2004 using our facilities at Eugene Island Block 193. Development options for these newly discovered hydrocarbons are being evaluated. We control 17,500 acres in the Deep Tern area, which is located approximately 50 miles offshore Louisiana in 90 feet of water.

As previously reported, the Deep Tern well encountered a gross interval of 86 feet of hydrocarbon bearing sands in the Basal Pliocene section where we own a 20.6 percent net revenue interest. Further drilling indicated additional gross intervals of approximately 255 feet, 170 feet announced today and 85 feet previously reported, of hydrocarbon bearing sands in the Basal Pliocene and Miocene sections of the well where we own a 37.2 percent net revenue interest.

The Minuteman well at Eugene Island Block 213 has been drilled to a total measured depth of 20,432 feet. As previously reported, the by-pass well was drilled to 21,024 feet and encountered a laminated sand section from 19,790 to 20,230 feet. The well was sidetracked and wireline logs have indicated that the well has encountered a gross interval of approximately 60 feet of hydrocarbons with excellent porosity and permeability in the upper portion of the laminated sand section. The well is being prepared for completion and production by year-end 2004 using our Eugene Island Block 215 facilities, which are located approximately 7 miles from the well. Spinnaker Exploration Company operates Minuteman with a 33.3 percent working interest. We have the rights to interests in approximately 9,600 acres in the immediate area surrounding the Minuteman prospect, which is located approximately 40 miles offshore Louisiana.

We are participating in a "take point" well at the Dawson Deep prospect at Garden Banks Block 625. As previously reported, the "take point" well has encountered apparent hydrocarbon-bearing sands as indicated by more than 100 feet of total vertical thickness of resistivity, measured by LWD logging tool. These sands are shallower than the objective zone that was seen in the sidetrack wells drilled earlier in 2004. Further drilling and LWD logs have indicated that the well encountered an additional gross interval of approximately 100 feet of hydrocarbon bearing sands in the deeper zone which was the original objective of this "take point" well. The well was sidetracked and drilled to a total depth of 22,790 feet. The operator plans to set casing and temporarily abandon the well while development options are considered. Sanctioning of the project is possible in the first quarter of 2005. Estimated timing of first production is pending the final plan. The Dawson Deep prospect is located on a 5,760 acre block located approximately 150 miles offshore Texas and is adjacent to the Gunnison spar facility. McMoRan owns a 30.0 percent working interest and a 24.0 percent net revenue interest in the well.

In late-October 2004, the Poblano well at East Cameron Block 137 reached its proposed total depth of 17,000 feet and was evaluated to be nonproductive. The well will be plugged and abandoned. We recorded $1.5 million of well drilling and related costs incurred through September 30, 2004 to exploration expense in our third-quarter 2004 results which were filed with the Securities and Exchange Commission. During the fourth quarter of 2004, we will record an approximate $1.6 million additional charge to exploration expense for the costs incurred on the well subsequent to September 30, 2004. The Poblano prospect is part of a farm-in agreement covering three blocks, East Cameron Block 137, West Cameron Block 251 and West Cameron Block 262.

The King of the Hill well at High Island Block 131 is currently drilling below 16,900 feet towards a total depth of 17,300 feet. The King of the Hill well is being drilled under a turnkey contract.

The Hurricane Upthrown well at South Marsh Island Block 217 in the JB Mountain/Mound Point area is currently drilling below 12,100 feet proceeding towards a total depth of 19,500 feet. We are the operator of the Hurricane Upthrown well. This prospect is located northwest of the initial Hurricane prospect. That well provided significant geologic data which was used to plan the currently drilling Upthrown prospect. McMoRan operates the Hurricane Upthrown prospect and would earn a 27.5 percent working interest and a 19.4 percent net revenue interest. McMoRan has rights to approximately 7,700 gross acres in the Hurricane prospect area which is located offshore Louisiana in 10 feet of water.

The Blueberry Hill well at Louisiana State Lease 340 in the JB Mountain/Mound Point area is currently drilling below 1,500 feet towards a total depth of 22,000 feet. We are the operator of the Blueberry Hill well. The Blueberry Hill prospect on State Lease 340 is located 7 miles east of the JB Mountain discovery and 7 miles south southeast of the Mound Point Offset discovery. McMoRan holds a 35.3 percent working interest and a 24.2 percent net revenue interest in the Blueberry Hill well.

The West Cameron Block 43 No. 3 exploratory well is currently drilling below 900 feet towards a total proposed depth of 17,500 feet. The well is being drilling by a third-party operator under a turnkey arrangement.

The Gandalf prospect at Mustang Island Blocks 829/830, which has a rig on location, is expected to spud imminently. McMoRan has a 20.0 percent working interest and a 15.2 percent net revenue interest in the well.

Each of the wells mentioned above, with the exception of Dawson Deep, Blueberry Hill and Gandalf, are eligible for Deep Gas Royalty Relief under current Mineral Management Service guidelines. Depending upon applicability of the royalty relief eligibility criteria, each of the leases on which these wells are located could be eligible for between 10 to 25 billion cubic feet (Bcf). Each 25 Bcf of royalty relief would equate to approximately $21 million in gross savings per well at current gas prices approximating $5.00 per mcf. McMoRan expects that royalty relief would be available on additional deep shelf prospects being planned for drilling.

McMoRan expects to commence drilling Caracara at Vermilion Blocks 227/228 during the fourth quarter of 2004. Additional wells expected to commence drilling in the first quarter of 2005 include Delmonico in Louisiana state waters near the Lake Sand Field Area and JB Mountain Deep at South Marsh Island Block 224. McMoRan currently has rights to approximately 231,000 gross acres and continues to identify prospects to be drilled on its lease acreage position. McMoRan is also actively pursuing opportunities through its new exploration venture to acquire additional acreage and prospects through farm-in or other arrangements.

Our near-term exploration activities include the following wells:

                                       Net          Proposed
                            Working  Revenue  Water  Total
                            Interest Interest Depth  Depth  Spud Date
In-Progress Wells
Eugene Island Block 193                                      July 13,
"Deep Tern - Development"       26.7%   20.6%   90'  17,123'   2004
Eugene Island Block 193                                         At
"Deep Tern - Exploration"       48.6%   37.2%   90'  20,731'  17,123'
Eugene Island Blocks 212/213                                 August 7,
"Minuteman"                     33.3%   24.3%  100'  20,432'   2004
Garden Banks Block 625                                      August 18,
"Dawson Deep Take Point"        30.0%   24.0%2,900'  22,790'   2004
High Island Block 131                                        August 9,
"King of the Hill"              25.0%   19.6%   40'  17,300'   2004
South Marsh Island Block 217                                 September
 "Hurricane Upthrown"           27.5%   19.4%   10'  19,500'  7, 2004
Louisiana State Lease 340                                    November
 "Blueberry Hill"              35.3 %   24.2%   10'  22,000'  2, 2004
West Cameron Block 43           23.4%   18.0%   30'  17,500'  6, 2004
Mustang Island Blocks 829/830                                November
"Gandalf"                       20.0%   15.2%  176'  12,000'   2004
Near-Term Wells
Vermilion Blocks 227/228                                     November
 "Caracara"                     33.3%   27.8%  115'  18,000'   2004
Lake Sand Field Area                                         Quarter
 "Delmonico"                    25.0%   18.8%   10'  19,000'  2005
South Marsh Island Block 224                                 Quarter
"JB Mountain Deep"              27.5%   19.4%   10'  23,000'   2005
West Cameron Block 342                                        Half
"Falcon"                        25.0%   18.8%  260'  19,000'  2005

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