McMoRan Underscores 3Q E&P Activities in Gulf of Mexico

McMoRan Exploration has provided an update on its exploration and production activities in the Gluf of Mexico with highlights from the third quarter 2009.


Third-quarter 2009 production averaged 215 MMcfe/d net to McMoRan, compared with 187 MMcfe/d in the second quarter of 2009 and 225 MMcfe/d in the third quarter of 2008. McMoRan’s third quarter production includes the restoration of most of the remaining production shut-in as a result of the September 2008 hurricanes in the Gulf of Mexico. Production is expected to average approximately 215 MMcfe/d in the fourth quarter of 2009 and 204 MMcfe/d for the year. 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. The Flatrock No. 5 well (#232) was recompleted in the primary Rob-L zone in September 2009. Production from the six wells in the field averaged a gross rate of approximately 280 MMcfe/d (52 MMcfe/d net to McMoRan) in the third quarter of 2009. The Flatrock No. 3 (#230) well is currently offline and will be recompleted 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.

As previously reported, the Flatrock No. 4 (#231) well was shut in in August 2009 because of a mechanical issue associated with the well bore (not reservoir related). The Flatrock No. 4 well produced at a rate of approximately 100 MMcfe/d (18 MMcfe/d net to McMoRan) for over six months prior to being shut in. Remedial activities are under way and the No. 4 well is expected to recommence production by year-end 2009.


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 million gross acres including 0.2 million gross acres associated with the ultra-deep trend.

Deep Gas Activities

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. As previously reported, McMoRan encountered mechanical problems during the third quarter in the original sidetrack (ST#1) well (drilled to true vertical depth (TVD) of 21,900 feet) and in the subsequent by-pass (BP) well (drilled to TVD of 22,778 feet). Based on information from log-while-drilling tools from the ST#1 well and wireline logs from the by-pass well, McMoRan has identified an approximate 190 foot vertical column of hydrocarbons at Blueberry Hill.

A second sidetrack (ST#2) well is being drilled to target the reservoir sand structurally high to the ST#1 and by-pass wells in order to pursue an optimum production take point in the hydrocarbon column. The ST#2 well, which is drilling below 21,500 feet towards a proposed TVD of 21,777 feet, is located approximately 1,000 feet to the southeast of the ST#1 and subsequent by-pass wells. McMoRan is in the planning stages for additional offset wells to further evaluate the Blueberry Hill area, including the deeper potential.

Blueberry Hill is located in approximately 10 feet of water approximately 11 miles southeast of Flatrock. 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 $42.2 million at September 30, 2009, $18.9 million of which was incurred on the sidetrack and by-pass wells and $23.3 million on the original well drilled in 2005.

McMoRan plans to commence sidetrack operations on the Hurricane Deep well in the fourth quarter of 2009. The Hurricane Deep sidetrack has a proposed total depth of 21,750 feet and is located on the southern flank of the Flatrock structure on South Marsh Island Block 217.

This up dip test will target 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 TVD 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.

Third-quarter 2009 exploration expense includes $6.3 million in costs associated with the previously reported non-productive well at the Sherwood prospect.

Ultra-Deep Activities

McMoRan expects to maintain an active ultra-deep drilling program in 2010. McMoRan’s ultra-deep prospects on the Shelf below the salt weld are targeting similar geologic features present in recent deepwater discoveries by other industry participants.

On June 28, 2009, McMoRan re-entered a well bore located on South Marsh Island Block 230 to evaluate the Davy Jones prospect, which involves a large ultra-deep structure encompassing four OCS lease blocks located in 20 feet of water on the Shelf of the Gulf of Mexico. The well is drilling below 25,000 feet to a proposed total depth of 28,000 feet. This exploratory well will test Eocene (Wilcox), Paleocene and possibly the Cretaceous (Tuscaloosa) sections below the salt weld (i.e. listric fault).

McMoRan operates the Davy Jones prospect and will fund 25.7 percent of the exploratory costs for a 32.7 percent working interest and 25.9 percent net revenue interest. Other working interest owners in the drilling of the Davy Jones well include: PXP (27.7%), Energy XXI  (15.8%), Nippon Oil Exploration USA Limited (12%), and W.A. "Tex" Moncrief, Jr. (Moncrief) (8.8%). McMoRan’s investment in Davy Jones totaled $11.5 million at September 30, 2009.

Drilling results at Davy Jones are expected to provide additional information about other ultra-deep structures on the Shelf of the Gulf of Mexico, including Blackbeard West on South Timbalier Block 168. This information will allow McMoRan to evaluate various options, including deepening the Blackbeard West well, drilling 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 EXXI hold a 35 percent working interest and 20 percent working interest, respectively. McMoRan’s investment in Blackbeard West totaled $31.7 million at September 30, 2009.

In September 2009, McMoRan announced that it entered into an agreement with Moncrief to participate in McMoRan's ultra-deep drilling program. Moncrief has agreed to fund drilling and production operations on a promoted basis to explore and develop ultra-deep prospects. McMoRan and two of its partners, PXP and EXXI, assigned 10 percent of their collective working interests in Davy Jones to Moncrief. Moncrief may also participate for 10 percent of the collective interests of these parties in future ultra-deep wells.