McMoRan Updates Gulf of Mexico Drilling Activities

McMoRan Exploration reports that production from the South Marsh Island Block 223 (JB Mountain prospect) well commenced in early-June 2003, and production has recently approximated 50 Mmcfe/d. On June 14, 2003, drilling of a second well at JB Mountain commenced. This development well, the JB Mountain Offset, is currently drilling below 20,900 feet and has a total depth of 22,000 feet. Drilling data to date indicates we have encountered objective sands structurally high to the original JB Mountain well substantially as anticipated in the pre-drill geological prognosis. The log-while-drilling (LWD) tool being used in drilling this well has provided only intermittent data. Wireline logs will be run at total depth to evaluate the well.

The Louisiana State Lease 340 (Mound Point Offset) well was drilled earlier this year to a total depth of 19,000 feet. The well has encountered 120 feet of net gas pay in three sands. Development activities were substantially completed during the third quarter of 2003, with initial production from the well commencing in early October 2003 at a gross rate of approximately 30 Mmcfe/d. The well is estimated to have the potential of producing approximately 50 Mmcfe/d.

The JB Mountain and Mound Point deep-gas prospects 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 prospect and a 30.4 percent working interest and a 21.6 percent net revenue interest in the Mound Point Offset prospect. 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. Two of the four prospects in the program were determined by the operator to be non-commercial, and the operator has elected to reassign the acreage related to these prospects to McMoRan.

The exploratory well at the Hurricane (JB Mountain Intermediate) prospect commenced drilling on August 25, 2003, and is currently drilling below 15,200 feet, with total proposed depth of 17,000 feet. The Hurricane prospect, located on South Marsh Island Block 217 (which is part of OCS 310) approximately two miles northwest of the JB Mountain discovery well, 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.

McMoRan's current exploration acreage position consists of approximately 305,000 gross acres, including approximately 80,000 gross acres in the OCS 310/State Lease 340 area. We have identified 20 high-potential, high-risk prospects, most of which are deep gas targets in the shallow waters of the Gulf of Mexico near existing production infrastructure. We have identified six near-term prospects outside the OCS 310/State Lease 340 area involving approximately $60 million of exploratory drilling costs. We are developing plans to drill the prospects and are considering opportunities for others to participate in these operations.

McMoRan plans to commence drilling an exploratory well at the Raven/Gunnison prospect on Garden Banks Block 625 in the fourth quarter of 2003. McMoRan is in discussions with third parties to participate in this deep-test well of 22,000 feet total vertical depth.