McMoRan's exploration strategy is focused on the "deep gas play," drilling to depths of 15,000 to 25,000 feet in the shallow waters of the Gulf of Mexico and Gulf Coast area to target large structures in the Deep Miocene, and on the "ultra-deep gas play" below 25,000 feet. 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 1.1 million gross acres including 188,000 gross acres associated with the ultra-deep trend. McMoRan has two deep gas prospects and one ultra-deep prospect in-progress. McMoRan also continues to evaluate additional deep gas and ultra-deep opportunities.
On March 29, 2009, McMoRan re-entered a previously existing well bore and commenced sidetracking operations at the Blueberry Hill deep gas prospect located on Louisiana State Lease 340. Drilling results to date confirm McMoRan’s wedge model where sands thicken on the flank of the structure. As previously reported, the exploratory sidetrack well was drilled to a true vertical depth of 21,900 feet and log-while-drilling tools indicated resistive zones approximating 150 gross feet. These zones will be evaluated with wireline logs. After encountering a mechanical issue during drilling, McMoRan has commenced by-pass operations at 18,600 feet and plans to deepen the well to a proposed total depth of 24,000 feet to evaluate the resistive zones further and to assess deeper targets. The well is targeting Gyro sands in a down-dip position on the flank of the structure that were encountered in the original Blueberry Hill well. The results to date indicate a large structure which McMoRan believes could lead to additional exploration and development opportunities.
Blueberry Hill is located in approximately 10 feet of water near existing infrastructure. McMoRan is reviewing the possibility of using production processing facilities in the area. McMoRan owns a 42.9 percent working interest and a 29.7 percent net revenue interest in the Blueberry Hill well. PXP holds a 47.9 percent working interest. McMoRan's investment in Blueberry Hill totaled $31.4 million at June 30, 2009, $8.1 million of which was incurred on the sidetrack and $23.3 million on the original well. As previously reported, in February 2005 McMoRan encountered four hydrocarbon bearing sands in the Gyro section below 22,200 feet in the original Blueberry Hill exploratory well; however, completion efforts in 2007 were unsuccessful because of blockage above the perforated intervals.
The Blueberry Hill discovery follows prior discoveries McMoRan has made in the Tiger Shoal/Mound Point area (OCS Block 310/Louisiana State Lease 340), including Flatrock, Hurricane, Hurricane Deep, JB Mountain, and Mound Point. McMoRan controls 150,000 gross acres in this important area and believes it has multiple additional exploration opportunities on this large acreage position. McMoRan is incorporating the new information from Blueberry Hill into its existing database for this high potential area.
The Sherwood deep gas exploratory prospect commenced drilling on July 2, 2009 and is drilling below 5,700 feet towards a proposed total depth of 16,200. The Sherwood prospect, which is located in 48 feet of water, is targeting Cris R sands in the Lower Miocene. McMoRan owns a 29.3 percent working interest and a 23.5 percent net revenue interest in the Sherwood prospect. Mariner Energy, Inc. is the operator of the well and holds a 60.0 percent working interest. McMoRan's investment in Sherwood totaled $0.3 million at June 30, 2009.
A drilling rig is on location at the Davy Jones ultra-deep prospect. McMoRan is re-entering a previously abandoned well bore located on South Marsh Island Block 230, which had been drilled to 19,957 feet, and plans to deepen the well to a proposed total depth of 28,000 feet. The Davy Jones prospect involves a large ultra-deep structure located in 20 feet of water. This exploratory well, which McMoRan will operate, will test Eocene (Wilcox), Paleocene and possibly the Cretaceous (Tuscaloosa) sections below the salt weld (i.e. listric fault) on the Shelf of the Gulf of Mexico. McMoRan’s partners in the well will include PXP and Energy XXI. The 8/8th investment in Davy Jones totaled $6.0 million at June 30, 2009, most of which is expected to be shared with partners.
As previously reported, in May 2009 the Minerals Management Service granted McMoRan's request for a geophysical Suspension of Operations (SOO) to extend its leases in the Blackbeard area, including South Timbalier Block 168. The SOO will provide time for seismic re-processing, which will provide additional information about the deep structure, and allow McMoRan to evaluate whether to drill deeper at Blackbeard West, drill an offset location or complete the well to test the existing zones. McMoRan is operator and owns a 32.3 percent working interest in the Blackbeard West well and PXP and Energy XXI hold a 35 percent working interest and 20 percent working interest, respectively. McMoRan's investment in Blackbeard West totaled $31.8 million at June 30, 2009.
McMoRan is reviewing plans for a sidetrack of the Hurricane Deep well on the southern flank of the Flatrock structure for an up dip test of the significant Gyro sand encountered in the Hurricane Deep well (No. 226) on South Marsh Island Block 217. As previously reported, the Hurricane Deep exploratory well was drilled to a true vertical depth of 20,712 feet in the first quarter of 2007 and logs indicated an exceptionally thick upper Gyro sand totaling 900 gross feet, the top 40 feet of which was hydrocarbon bearing. McMoRan believes an up dip well has the potential to contain a thicker hydrocarbon column. Second-quarter 2009 exploration expense includes $35.4 million in costs for two previously reported non productive wells at the Ammazzo and Cordage prospects.
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