McMoRan Exploration Co. Updates Gulf of Mexico Operations and Impacts of Hurricanes Gustav and Ike
October 07 2008 - 8:41AM
Business Wire
McMoRan Exploration Co. (NYSE: MMR) today reported on the status of
its operations following Hurricanes Gustav and Ike, which impacted
Gulf of Mexico operations prior to making landfall on the coasts of
Louisiana and Texas on September 1, 2008 and September 13, 2008,
respectively. Following these events, McMoRan completed initial
assessments of the McMoRan-operated structures and received reports
from third-party operators on certain properties, including
Flatrock at South Marsh Island Block 212. There was no significant
damage to McMoRan�s properties resulting from Hurricane Gustav.
Assessments following Hurricane Ike identified several platforms,
comprising approximately 3 percent of production and 2 percent of
reserves, with significant structural damage. Substantially all of
McMoRan�s remaining production facilities are capable of resuming
production pending restoration of downstream pipelines and
facilities operated by third parties. McMoRan has re-established
production at a current rate of approximately 140 million cubic
feet of natural gas equivalents per day (MMcfe/d), approximately 50
percent of average production rates in July and August of 2008.
Based on reports from third party operators of downstream
facilities and pipelines, McMoRan expects significant additional
production to be restored in the fourth quarter of 2008. The
operator of the Tiger Shoal facility, which processes production
from the OCS 310/Louisiana State Lease 340 area including Flatrock,
indicated no material damage to the structures and production at
Flatrock was re-established on September 22, 2008. The three wells
are currently producing at a gross rate of approximately 175
MMcfe/d, 32.5 MMcfe/d net to McMoRan. Exploration and development
activities in this important area are continuing as previously
scheduled. McMoRan�s third quarter production was previously
estimated in July 2008 to approximate 280 MMcfe/d. Through August
31, 2008, McMoRan�s production averaged approximately 290 MMcfe/d.
McMoRan estimates that its third quarter 2008 net production
averaged approximately 220 MMcfe/d. Based on current information
from third party operators of downstream facilities, McMoRan
currently expects fourth quarter production to average
approximately 180 MMcfe/day and reach pre-storm levels in early
2009; however the timing is likely to change as new information on
these facilities becomes available. McMoRan will provide an update
of its production outlook when it reports third quarter 2008
results on October 20, 2008. McMoRan is engaged in development
activities at Flatrock (completion of the No. 4 well and drilling
of the No. 5 well) and in exploratory activities on the following
prospects, South Timbalier Block 168, Tom Sauk on Louisiana State
Lease 340, and Northeast Belle Isle in St. Mary Parish, Louisiana.
These rigs sustained no significant damage in the storms and
operations have resumed. Following is a status report on McMoRan�s
in-progress exploration and development wells: In-progress wells �
Working Interest � Current Depth � Status Flatrock No. 4 � �C�
location Development Well 25.0% 18,500� Completing in the Rob-L
section Flatrock No. 5 � �E� location Development Well 25.0%
15,300� Spud July 1, 2008: targeting Rob-L and Operc sands,
drilling to proposed total depth of 18,400� South Timbalier Block
168 32.3% 32,850� Drilling ahead: permitted to 35,000� Tom Sauk
Louisiana State Lease 340 18.3% 11,700� Spud August 14, 2008:
drilling towards a proposed total depth of 19,000� Northeast Belle
Isle St. Mary Parish, LA 35.7% 9,400� Spud August 24, 2008:
drilling towards a proposed total depth of 18,500� The Flatrock No.
4 (�C� location) infill development well was drilled to a total
depth of 18,500 feet in August 2008 and is being completed in the
same Rob-L sand which is currently producing at an approximate rate
of 100 MMcfe/d in the Flatrock No. 2 well (�B� location). The No. 4
well should be capable of flowing at similar high rates. The
Flatrock No. 5 (�E� location), which commenced drilling on July 1,
2008, is located between the Flatrock No. 1 discovery and the
Flatrock No. 2 wells. The No. 5 well is drilling below 15,300 feet
and log-while-drilling tools have indicated hydrocarbon bearing
sands in the Rob-L section approximating 115 net feet over a total
approximate 205 foot gross interval. The primary Rob-L sand should
be capable of flowing at similar high rates seen in the Flatrock
No. 2 well mentioned above. The well will be deepened to a proposed
total depth of 18,400 feet to evaluate additional targets in the
Rob-L and Operc sections. Following completion activities at
Flatrock No. 4, the rig will be moved to the Flatrock �F� location
to drill the No. 6 delineation well on South Marsh Island Block
217. The Flatrock No. 6 well is located approximately 3,000 feet
southeast of the Flatrock No. 3 well currently producing in the
Operc and approximately 8,000 feet north northwest of the Hurricane
Deep well that was productive in the Gyro. Flatrock No. 6 will
target the deeper Operc, which could add significant new reserves
to the Flatrock field, already a major discovery, and possibly
penetrate the upper Gyro section of the Flatrock/Hurricane Deep
structure. McMoRan controls approximately 150,000 gross acres in
the Tiger Shoal/Mound Point area (OCS 310/Louisiana State Lease
340) and has multiple additional exploration opportunities with
significant potential on this large acreage position. McMoRan has a
25.0 percent working interest and an 18.8 percent net revenue
interest in Flatrock. Plains Exploration & Production Company
(NYSE: PXP) holds a 30.0 percent working interest. The South
Timbalier Block 168 No. 1 ultra-deep exploratory well (formerly
known as Blackbeard West No. 1) is drilling below 32,850 feet to
evaluate potentially significant targets. Previous logs had
indicated three potential hydrocarbon bearing zones that would
require further evaluation. Recent logs in October 2008 indicated
that the well has encountered a fourth potential hydrocarbon
bearing zone. The South Timbalier Block 168 well, which is
permitted to 35,000 feet, is located on the top of the identified
structure. Seismic data on the prospect indicated the potential for
significantly thicker sands on the flanks of the structure as
confirmed in recent major deepwater discoveries. Based on
information obtained to date in the South Timbalier Block 168 well,
McMoRan believes additional drilling on the flanks could result in
significant reserve potential. McMoRan operates the well and owns a
32.3 percent working interest. McMoRan�s partners, PXP and Energy
XXI (NASDAQ: EXXI), hold a 35 percent working interest and 20
percent working interest, respectively. In September 2008, McMoRan
entered into a drilling contract with Rowan Companies, Inc. for the
new 240C class jack-up, Rowan-Mississippi. This rig will allow
McMoRan to continue to execute its deep and ultra deep exploration
program on the Shelf of the Gulf of Mexico. McMoRan�s partners in
the ultra deep trend include PXP and Energy XXI. McMoRan expects
drilling operations to commence with this rig at the Ammazzo
exploration prospect located on South Marsh Island Block 251 in 25
feet of water in November 2008. The Ammazzo prospect has a proposed
total depth of 24,500 feet. Based on geologic and seismic data, the
Ammazzo prospect is targeting one of the largest undrilled deep
structures below 15,000 feet on the Shelf of the Gulf of Mexico. It
is positioned on the southern portion of the structural ridge
extending from the Flatrock and JB Mountain discoveries (located
approximately 16 and 11 miles north-northwest, respectively), where
McMoRan has successfully proven the existence of Rob-L, Operc and
Gryo sands in the Middle Miocene. There are multiple targets at the
Ammazzo prospect in these sections representing significant
exploration potential (500 billion cubic feet of natural gas
equivalents to greater than 1 trillion cubic feet), similar to
Flatrock and potentially larger. McMoRan will operate the well and
holds a 25.9 percent working interest and 21.1 percent net revenue
interest. McMoRan�s partners, PXP and Energy XXI, hold a 28.1
percent working interest and 16.0 percent working interest,
respectively. A charge to third quarter results will be required to
reduce the net book value of certain property damaged in the storm
and for related adjustments to estimated future abandonment costs
associated with damaged structures and well abandonment.
Preliminary estimates indicate a charge of approximately $150
million. McMoRan intends to pursue recovery of costs under its
insurance program, which is subject to a $50 million deductible.
McMoRan ended the third quarter of 2008 in a strong liquidity
position with $160 million in cash and no borrowings under its $450
million bank credit facility. McMoRan Exploration Co. is an
independent public company engaged in the exploration, development
and production of oil and natural gas offshore in the Gulf of
Mexico and onshore in the Gulf Coast area. McMoRan is also pursuing
plans for the development of a multifaceted energy facility at the
MEPH�, including the potential development of a facility to receive
and process liquefied natural gas and store and distribute natural
gas. Additional information about McMoRan and the MPEH� project is
available on its internet website �www.mcmoran.com� and at
�www.mpeh.com�. CAUTIONARY STATEMENT: This press release contains
certain forward-looking statements regarding various oil and gas
discoveries, oil and gas exploration, development and production
activities, anticipated and potential production and flow rates;
anticipated revenues; the economic potential of properties; and
estimated exploration and development costs. Accuracy of these
forward-looking statements depends on assumptions about events that
change over time and is thus susceptible to periodic change based
on actual experience and new developments. McMoRan cautions readers
that it assumes no obligation to update or publicly release any
revisions to the forward-looking statements in this press release
and, except to the extent required by applicable law, does not
intend to update or otherwise revise these statements more
frequently than quarterly. Important factors that might cause
future results to differ from these forward-looking statements
include: adverse conditions such as high temperature and pressure
that could lead to mechanical failures or increased costs;
variations in the market prices of oil and natural gas; drilling
results; unanticipated fluctuations in flow rates of producing
wells; oil and natural gas reserves expectations; the ability to
satisfy future cash obligations and environmental costs; as well as
other general exploration and development risks and hazards. These
and other factors are more fully described in McMoRan�s 2007 Annual
Report on Form 10-K on file with the Securities and Exchange
Commission. The Securities and Exchange Commission permits oil and
gas companies in their filings with the SEC to disclose only proved
reserves that a company has demonstrated by actual production or
conclusive formation tests to be economically and legally
producible under existing economic and operating conditions. We use
certain phrases and terms, such as "reserve potential� and
�exploration potential," which the SEC's guidelines strictly
prohibit us from including in filings with the SEC. We urge you to
consider closely the disclosure of proved reserves included in
McMoRan's Annual Report on Form 10-K for the year ended December
31, 2007.
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