McMoRan Posts 4Q Production; Touts GOM Activity

Fourth-quarter 2009 production averaged 209 MMcfe/d net to McMoRan, compared with 162 MMcfe/d in the fourth quarter of 2008. Full-year 2009 production averaged 202 MMcfe/d net to McMoRan, compared with 245 MMcfe/d in 2008.

McMoRan's fourth quarter 2008 production was adversely impacted by shut-ins as a result of the September 2008 hurricanes in the Gulf of Mexico. Production in the fourth quarter of 2009 was slightly below publicly reported estimates of 215 MMcfe/d because of delays in the timing of recompletions originally planned for the fourth quarter that are now expected to be completed in 2010. Production is expected to average approximately 200 MMcfe/d in the first quarter of 2010 and 180 MMcfe/d for the year.

There is a potential to increase production rates with exploration success. McMoRan's estimated production rates are dependent on the timing of planned recompletions, production performance and other factors. 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. Production from these six wells in the Flatrock field averaged a gross rate of approximately 272 MMcfe/d (50 MMcfe/d net to McMoRan) in the fourth quarter of 2009. McMoRan has a 25.0 percent working interest in Flatrock and Plains Exploration & Production Company holds a 30.0 percent working interest.

Remedial activities at the Flatrock No. 4 (#231) well were completed in the fourth quarter of 2009 and production recommenced in December 2009. This well is currently flowing at a gross rate of 80 MMcfe/d and is constrained by down hole equipment not related to the reservoir. The Flatrock No. 3 (#230) well was recompleted in the fourth quarter of 2009. Production from the six wells in the Flatrock field currently approximates over 300 MMcfe/d gross, over 55 MMcfe/d net to McMoRan.

EXPLORATION ACTIVITIES

 McMoRan's exploration strategy is focused on the "deep gas play," drilling to depths of between 15,000 to 25,000 feet in the shallow waters of the Gulf of Mexico and Gulf Coast area and on the "ultradeep gas play" of depths below 25,000 feet. Deep gas prospects target large structures above the salt weld (i.e. listric fault) in the Deep Miocene. Ultra-deep prospects target objectives below the salt weld in the Miocene and older age sections that have been correlated to those productive sections seen in deepwater discoveries by other industry participants. McMoRan is one of the largest acreage holders on the Shelf of the Gulf of Mexico and onshore in the Gulf Coast area and has rights to approximately one million gross acres, including 150,000 gross acres associated with the ultra-deep gas play below the salt weld.

Deep Gas Exploration Activities

The Blueberry Hill offset appraisal well on Louisiana State Lease 340 commenced on November 8, 2009 and is currently drilling below 17,000 feet towards a proposed total depth of 21,850 feet. The offset appraisal well is located in 10 feet of water approximately 2,000 feet southeast of the sidetrack #2 well, which was drilled to a total depth of 21,942 feet and encountered 45 net feet of pay in October 2009. McMoRan believes the sands could thicken in the offset well as they are expected to be structurally high to the sands in the sidetrack #1, by-pass and sidetrack #2 wells drilled in 2009. The offset well is also expected to test deeper potential in this 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 $53.5 million at December 31, 2009, $6.7 million of which was incurred on the offset appraisal well currently in progress.

The Hurricane Deep sidetrack well on South Marsh Island Block 217 commenced on November 17, 2009 and is currently drilling below 16,100 feet towards a proposed total depth of 21,750 feet. The Hurricane Deep sidetrack is located on the southern flank of the Flatrock structure. This up dip test well is targeting the significant Gyro sand encountered in the Hurricane Deep well (No. 226) and deeper potential.
As previously reported, the No. 226 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. McMoRan owns a 25.0 percent working interest and 17.7 percent net revenue interest in the well. PXP holds a 30.0 percent working interest. McMoRan’s investment in Hurricane Deep totaled $16.5 million at December 31, 2009, including $3.1 million on sidetrack operations that commenced in 2009.

Ultra-deep Exploration Activities

As previously reported, the Davy Jones ultra-deep prospect located 10 miles offshore Louisiana on South Marsh Island Block 230 in approximately 20 feet of water was logged with pipe-conveyed wireline logs to 28,134 feet in January 2010. The wireline log results indicated a total of 135 net feet of hydrocarbon bearing sands in four zones in the Wilcox section of the Eocene/Paleocene. All of the zones
were full to base with two of the zones containing a combined 90 net feet. The Eocene/Paleocene (Wilcox) suite of sands logged below 27,300 feet appears to be of exceptional quality. Flow testing will be required to confirm the ultimate hydrocarbon flow rates from the four separate zones. The resistivity log obtained on January 10th was the last data needed to confirm hydrocarbons in South Marsh Island Block 230. The Davy Jones ultra-deep well has been drilled to 28,603 feet and McMoRan is preparing to log the newly drilled section below 28,134 feet. The well has a proposed total depth of 29,000 feet.

McMoRan plans to complete and flow test the Davy Jones discovery well as quickly as possible. The timing of a completion and flow test is dependent upon the availability of necessary equipment required to handle the pressures and temperatures encountered in the well. Because Davy Jones is located in shallow water near existing infrastructure, the lead times for commencing production are not expected to be as long or expensive as development would be in the deepwater Gulf of Mexico. McMoRan will update expected timing of the completion and flow test as information becomes available.

The data received to date from ultra-deep drilling on the Shelf at Davy Jones and Blackbeard West (South Timbalier Block 168) confirm our original geologic modeling, which correlates our objective sections on the Shelf below the salt weld (i.e. listric fault) in the Miocene and older age sections to those productive sections seen in deepwater discoveries by other industry participants.

McMoRan operates the Davy Jones discovery well, which involves a large ultra-deep structure encompassing four OCS lease blocks (20,000 acres), and is funding 25.7 percent of the exploratory costs and holds a 32.7 percent working interest and 25.9 percent net revenue interest. Other working interests owners in Davy Jones include: PXP (27.7%), Energy XXI (NASDAQ: EXXI) (15.8%), Nippon Oil Exploration
USA Limited (12%), W.A. "Tex" Moncrief, Jr. (8.8%) and a private investor (3%). McMoRan's investment in Davy Jones totaled $21.2 million at December 31, 2009.

McMoRan is currently utilizing the Rowan Mississippi jackup rig to drill the Davy Jones ultra-deep well and has the Rowan Ralph Coffman, which is the sister rig to the Rowan Mississippi, under contract. These two rigs will allow McMoRan to maintain an active ultra-deep drilling program in 2010. Future prospective wells within the ultra-deep play include Blackbeard East, Lafitte and additional opportunities in the Davy Jones area, including an appraisal well to the southwest of the Davy Jones discovery well (which would allow McMoRan to test similar sections approximately 1,000 feet shallower than in the Davy Jones discovery well). McMoRan is also considering the priorities of deepening or drilling an offset at Blackbeard West and John Paul Jones (previously referred to as Davy Jones North). McMoRan's investment in
Blackbeard West totaled $31.6 million at December 31, 2009.

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