As previously reported the JB Mountain Offset well commenced drilling in June 2003 and is located less than one mile southeast of the initial JB Mountain discovery well. Production from the initial JB Mountain well commenced in early-June 2003, and production has recently approximated 50 Mmcfe/d.
James R. Moffett, Co-Chairman of McMoRan said, "This is our third successful deep gas well within the last twelve months in an area where McMoRan has rights to approximately 80,000 acres. We look forward to the follow-on drilling opportunities on our large acreage position."
The JB Mountain and Mound Point deep-gas fields are located in water depths of 10-feet in an area where McMoRan is a participant in an exploration farm-out program with El Paso Production Company (El Paso) which currently controls approximately 45,000 acres within an approximate 80,000-acre exploratory area, including portions of OCS Lease 310 and portions of the adjoining Louisiana State Lease 340. The program currently holds a 55 percent working interest and a 38.8 percent net revenue interest in the JB Mountain field and a 30.4 percent working interest and a 21.6 percent net revenue interest in the Mound Point field. As previously reported, under terms of the program, the operator is funding all of the costs attributable to McMoRan's interests in four prospects, including the JB Mountain and Mound Point Offset prospects, and will own all of the program's interests until the program's aggregate production from the four prospects totals 100 billion cubic feet of gas equivalent (Bcfe) attributable to the program's net revenue interest, at which point 50 percent of the program's interests would revert to McMoRan. Under the terms of this program, all exploration and development costs associated with the program's interest in any future wells in these areas will be funded by El Paso during the period prior to when McMoRan's potential reversion occurs.
The Hurricane exploratory well at South Marsh Island Block 217 continues to drill towards its total depth of 17,000 feet. As previously announced, the Hurricane well is located approximately two miles northwest of the JB Mountain discovery well, and will target the intermediate sands seen in the JB Mountain well. McMoRan has an agreement with the operator, whereby the operator will fund all drilling costs of this exploration well and McMoRan will have an election at total depth to participate for 50 percent of the operator's interest in the future activities on this well and the surrounding 9,500-acre area. Pursuant to this agreement, if McMoRan joins at total depth, McMoRan would participate in any production from this well immediately and the production would be excluded from the 100 Bcfe sharing arrangement described above.
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