McMoRan Exploration Co. updated its Gulf of Mexico exploration and production activities, including exploratory drilling at the Ammazzo and Cordage deep gas prospects, results from the Tom Sauk exploratory well, activities in the Flatrock area and current production rates and estimates.
James R. Moffett, McMoRan's Co-Chairman, said, "We have validated our concept for large accumulations of deep gas in multiple successful discoveries below 15,000 feet in the Miocene trend in the shallow waters on the Shelf of the Gulf of Mexico. Through our activities in 2008 to test deeper objectives, we have confirmed our belief that there are also large structures on the Shelf with Miocene and older aged sands below 30,000 feet in the ultra-deep trend. This ultra-deep play represents an exciting new exploration frontier in an area where McMoRan maintains a leadership position. The exploration model we have established, combined with our geologic and drilling expertise and large acreage position on the Shelf of the Gulf of Mexico, enables us to pursue our deep gas and ultra-deep drilling activities, where we believe we have multiple additional high potential exploration targets at costs substantially below the costs of developing deepwater Gulf of Mexico targets. We will prudently manage our capital program in response to current economic and market conditions while remaining focused on these exciting exploration opportunities."
The Ammazzo deep gas exploratory prospect in 25 feet of water commenced drilling on Nov. 22, 2008 and is drilling below 17,700 feet towards a proposed total depth of 24,500 feet. The Ammazzo prospect is targeting one of the largest undrilled deep structures below 15,000 feet on the Shelf of the Gulf of Mexico. It is located on the southern portion of the structural ridge extending from the Flatrock and JB Mountain discoveries (located approximately 16 and 11 miles northnorthwest, respectively), where McMoRan has successfully drilled to productive Rob-L, Operc and Gyro sands in the Middle Miocene.
McMoRan is operating the well and holds a 25.9% working interest and 21.1% net revenue interest. McMoRan's partners, Plains Exploration & Production Company and Energy XXI, hold a 28.1% working interest and 16.0% working interest, respectively.
McMoRan was high bidder on South Marsh Island Block 256, which is a southern offset to the Ammazzo prospect, at the March 2009 Minerals Management Service Central Gulf of Mexico Lease Sale 208.
The Cordage deep gas exploratory prospect commenced drilling on March 18, 2009 and is drilling below 3,600 feet towards a proposed total depth of 19,500 feet. The Cordage prospect, which is located in 50 feet of water on West Cameron Block 207, is targeting Rob-L and Rob-M (Operc) sands in the Middle Miocene. McMoRan has rights to a 50.0 percent working interest and a 40.7%net revenue interest in the well. Mariner Energy, Inc. is the operator of the well and holds a 50% working interest.
McMoRan and its partners are engaged in engineering plans for the anticipated completion and production test of the South Timbalier Block 168 No. 1 ultra-deep exploratory well (formerly known as Blackbeard West No. 1). As previously reported, this well was drilled to a total depth of 32,997 feet in October 2008 and logs indicated four potential hydrocarbon bearing zones below 30,067 feet that require further evaluation. The well has been temporarily abandoned. McMoRan is reviewing additional drilling opportunities on the flanks of this structure. South Timbalier Block 168 is located in 70 feet of water approximately 115 miles southwest of New Orleans.
McMoRan operates the well, which is the deepest well ever drilled below the mud line in the Gulf of Mexico, and owns a 32.3% working interest. McMoRan's partners, PXP and Energy XXI, hold a 35% working interest and 20% working interest, respectively.
McMoRan has identified multiple additional ultra-deep prospects within this trend and is actively pursuing these high potential opportunities.
The Tom Sauk deep gas exploratory prospect on Louisiana State Lease 340 commenced drilling on Aug. 14, 2008 and was drilled to a total depth of 20,783 feet. Evaluation of the well determined that it did not contain commercial quantities of hydrocarbons and it is being plugged and abandoned. First-quarter 2009 exploration expense will include approximately $10.5 million for drilling and related costs associated with the well.
McMoRan is one of the largest acreage holders on the Shelf of the Gulf of Mexico and onshore in the Gulf Coast area with rights to approximately 1.2 million gross acres including 227,000 gross acres associated with the ultra-deep trend. In addition to South Marsh Island Block 256, McMoRan was also high bidder on an ultra-deep lease located on Ship Shoal Block 185 at the Central Gulf of Mexico Lease Sale 208.
Flatrock Field and Production Update
Following the Flatrock discovery in OCS 310 on South Marsh Island Block 212 in July 2007, McMoRan has drilled five additional successful wells in the field. Four wells are currently producing at a gross rate of approximately 230 MMcfe/d (43 MMcfe/d net to McMoRan).
Completion efforts are under way at Flatrock Nos. 5 and 6. McMoRan controls approximately 150,000 gross acres in the Tiger Shoal/Mound Point area (OCS 310/Louisiana State Lease 340) and has multiple additional exploration opportunities with significant potential on this large acreage position.
McMoRan has a 25.0% working interest and an 18.8% net revenue interest in Flatrock. PXP holds a 30.0% working interest.
McMoRan continues to restore production that was shut-in as a result of the September 2008 hurricane events in the Gulf of Mexico. Current production approximates 200 MMcfe/d and is expected to average approximately 195 MMcfe/d in the first quarter of 2009. An estimated 45 MMcfe/d continues to be constrained by outages at third party facilities. Because of the estimated timing of restoration of certain properties affected by Hurricane Ike and scheduled downtime at other properties, McMoRan has revised its 2009 production estimates to approximately 215 MMcfe/d compared with January 21, 2009 estimates of 220-230 MMcfe/d. McMoRan will continue to work with third party pipelines to restore production as soon as possible.
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