McMoRan Exploration Co. (NYSE: MMR) today updated its
exploration and development activities and also provided an update
on its cumulative findings to date from its shallow water,
ultra-deep exploration and development activities on the Gulf of
Mexico (GOM) Shelf.
McMoRan has actively pursued large ultra-deep targets located in
the shallow waters of the GOM below the salt weld (i.e. listric
fault) at depths generally below 25,000 feet since 2008. The data
gained to date from four wells confirms McMoRan’s geologic model
and the highly prospective nature of this emerging geologic trend.
Prior to McMoRan’s involvement in the ultra-deep, there had been
only two wells drilled on the Shelf targeting these objectives; one
did not reach its targeted depth and the other was outside of
McMoRan’s focus area. Importantly, McMoRan’s results to date have
indicated the potential for large accumulations of hydrocarbons at
these deeper depths in the shallow waters of the GOM, which is
expected to reduce the risk of future activities.
McMoRan’s activities to date have confirmed that drilling below
the salt weld on the Shelf of the GOM can be achieved safely. In
addition, the data indicates the presence below salt of geologic
formations including Middle/Lower Miocene, Wilcox, Frio, Tuscaloosa
and Cretaceous Carbonate. These formations have been prolific
onshore, in the deepwater GOM and in international locations.
McMoRan is encouraged by the results which indicate the potential
for prospects with high quality reservoirs on large structures with
multi-Tcfe of gross unrisked potential. McMoRan intends to conduct
further drilling and flow testing to determine with greater
certainty the ultimate potential of this emerging geologic
trend.
Shallow Water, Ultra-Deep Exploration Update
The Davy Jones offset appraisal well (Davy Jones No. 2),
located on South Marsh Island Block 234 two and a half miles
southwest of the Davy Jones No. 1 discovery well, was drilled to a
total depth of 30,546 feet. As previously reported in February
2011, preliminary log results above 27,300 feet confirmed
hydrocarbon bearing Wilcox sands with continuity across the major
structural features of the Davy Jones prospect.
In June 2011, results from wireline logs of the Cretaceous
section indicated that the Davy Jones No. 2 well encountered 192
net feet of potential hydrocarbons in the Tuscaloosa and Lower
Cretaceous carbonate sections. Flow testing will be required to
confirm the potential hydrocarbons and flow rates from these
sandstones and limestones. A 6 5/8 inch production liner has been
set to 30,511 feet and the well has been temporarily abandoned.
McMoRan is evaluating development options and expects to complete
the No. 2 well in the second quarter of 2012. McMoRan is also
considering updip locations in a subsequent well to the north to
evaluate the Tuscaloosa sands and Lower Cretaceous carbonates
higher on the Davy Jones structure.
The Tuscaloosa sands are correlative with the prolific
Tuscaloosa trend onshore South Louisiana and the carbonate section
may be analogous to productive fields located offshore and onshore
Mexico in the southern GOM. These potential hydrocarbon bearing
zones are the first Cretaceous sandstones and limestones
encountered offshore Central Louisiana on the Gulf of Mexico
Shelf. McMoRan believes the combination of productive Wilcox
and Cretaceous intervals on the same structure could enhance the
value of Davy Jones and the prospectivity of McMoRan’s other
ultra-deep prospects on its acreage position within the Davy Jones
trend.
As previously reported, in January 2010 McMoRan logged 200 net
feet of pay in multiple Wilcox sands in the Davy Jones No. 1 well
on South Marsh Island Block 230. In March 2010, a production liner
was set and the well was temporarily abandoned to prepare for
completion. McMoRan is preparing to complete and flow test the No.
1 well in late 2011.
Davy Jones involves a large ultra-deep structure encompassing
four OCS lease blocks (20,000 acres). McMoRan holds a 60.4 percent
working interest and a 47.9 percent net revenue interest in Davy
Jones. Other working interest owners in Davy Jones include: Energy
XXI (NASDAQ: EXXI) (15.8%), Nippon Oil Exploration USA Limited
(12%), W.A. "Tex" Moncrief, Jr. (8.8%) and a private investor
(3%).
The Blackbeard East ultra-deep exploration well commenced
drilling on March 8, 2010 and has been drilled to a TVD of 32,559
feet. McMoRan is continuing to address a mechanical issue that was
encountered in drilling the well during the first quarter of 2011.
To date, 1,888 feet of previously stuck pipe has been retrieved
from the well. The remaining 1,351 feet of pipe, the top of which
is currently located at 31,120 feet, is no longer stuck and
operations are ongoing to push the pipe to bottom before attempting
to pull it out of the hole. Pending resolution of the mechanical
issue, McMoRan plans to deepen the well to a proposed total depth
of 34,000 feet. Based on interpretations of drilling data, McMoRan
believes the well has encountered Sparta sands in the Eocene, which
are younger than the Wilcox. Sparta sands are productive in certain
onshore fields in South Louisiana. Wireline logs will be required
to evaluate this interval.
As reported in January 2011, wireline logs indicated that
Blackbeard East encountered hydrocarbon bearing sands in the
Oligocene (Frio) with good porosity below 30,000 feet. McMoRan is
considering down dip drilling opportunities on the flanks of the
structure to evaluate this section further. This is the first
hydrocarbon bearing Frio sand encountered either on the GOM Shelf
or in the deepwater offshore Louisiana. The Frio sand section below
30,000 feet is in addition to the 178 net feet of hydrocarbons in
the Miocene sands announced in December 2010 above 25,000 feet at
Blackbeard East. Pressure and temperature data below the salt weld
between 19,500 feet and 24,600 feet at Blackbeard East indicate
that a completion at these depths could utilize conventional
equipment and technologies.
Blackbeard East is located in 80 feet of water on South
Timbalier Block 144. McMoRan holds a 70.0 percent working interest
and a 56.2 percent net revenue interest in the well. Other working
interest owners in Blackbeard East include: EXXI (18.0%), W.A.
"Tex" Moncrief, Jr. (10.0%) and a private investor (2.0%).
The Lafitte ultra-deep exploration well commenced
drilling on October 3, 2010 and is currently drilling below 24,100
feet towards a proposed total depth of 29,950 feet. Lafitte is
located on Eugene Island Block 223 in 140 feet of water. The well
is targeting Miocene objectives and possibly Oligocene (Frio)
sections below the salt weld. McMoRan holds a 72.0 percent working
interest and 58.3 percent net revenue interest in Lafitte. Other
working interest owners in Lafitte include: EXXI (18.0%), and W.A.
"Tex" Moncrief, Jr. (10.0%).
Shallow Water, Deep Gas Exploration Update
The Hurricane Deep well, which is located on the southern
flank of the Flatrock structure in 12 feet of water on South Marsh
Island Block 217, commenced drilling on January 20, 2011 and is
drilling below 21,100 feet. The well encountered a significant Gyro
sand section measuring approximately 1,300 gross feet and
log-while-drilling tools indicated resistivity in the top 10 feet.
Drilling continues to a proposed total depth of 21,700 feet to
evaluate potential deeper Gyro zones. McMoRan holds a 79.8 percent
working interest and a 57.4 percent net revenue interest in the
deepening of Hurricane Deep.
The Boudin deep gas exploration well commenced drilling
on February 27, 2011 and is drilling below 17,500 feet. Boudin,
which is located in 20 feet of water on Eugene Island Block 26, has
a proposed total depth of 23,100 feet and will test Miocene
objectives. McMoRan holds a 53.5 percent working interest and a
42.4 percent net revenue interest in Boudin. EXXI holds a 20.6
percent working interest.
In the second quarter of 2011, McMoRan re-perforated the
hydrocarbon bearing sands encountered in the Blueberry Hill #9 STK1
offset appraisal well and performed additional production testing.
Evaluation of the results from the production test indicated that
the well was non-commercial. McMoRan plans to study the results
from this test and reevaluate its opportunities in the Blueberry
Hill area. As previously reported, the Blueberry Hill sidetrack #2
well was cased for future utility. The well had two gas sands
behind pipe credited with 45 feet of net pay. The thickest sand,
which measured 30 feet, was also seen in two other penetrations in
the immediate area. The #2 well cased in 2009 is located
approximately 2,000 feet northeast of the #9 STK1 offset well.
McMoRan controls approximately 11,100 acres in the Blueberry Hill
area. McMoRan’s second-quarter 2011 results will include a charge
to exploration expense of approximately $37 million for the
capitalized costs associated with the Blueberry Hill #9 STK1
well.
The Brazos A-23 development well commenced drilling on February
13, 2011, and was drilled to a total depth of 15,946 feet. This
traditional Shelf well targeted proved undeveloped reserves updip
from logged pay zones. Log evaluation indicated that the well
encountered 30 net feet of hydrocarbon bearing sands and a
protective liner has been set. The well has been temporarily
abandoned while future plans are developed. McMoRan owns a 100.0
percent working interest and an 81.25 percent net revenue interest
in the well. McMoRan will be assessing the carrying value of the
Brazos A-23 well which currently approximates $40 million.
As previously reported, McMoRan successfully commenced
production from the Laphroaig No. 2 well in St. Mary Parish,
Louisiana in late April 2011. Daily production from the well
currently approximates 45 Million cubic feet of natural gas (MMcf)
of natural gas and 425 barrels of condensate (approximately 14
MMcfe/d net to McMoRan). McMoRan owns a 38.4 percent working
interest and a 29.5 percent net revenue interest in the Laphroaig
No. 2 well.
WEBCAST INFORMATION
A conference call with securities analysts to discuss McMoRan’s
ultra-deep activities is scheduled for today at 10:00 a.m. Eastern
Time. The conference call will be broadcast on the internet along
with slides. Interested parties may listen to the conference call
live and view the slides by accessing “www.mcmoran.com”. A replay
of the webcast will be available through Friday, August 5,
2011.
McMoRan Exploration Co. is an independent public company engaged
in the exploration, development and production of natural gas and
oil in the shallow waters of the GOM Shelf and onshore in the Gulf
Coast area. Additional information about McMoRan is available on
its internet website “www.mcmoran.com”.
CAUTIONARY STATEMENT: This press release contains
forward-looking statements that involve a number of assumptions,
risks and uncertainties that could cause actual results to differ
materially from those contained in the forward-looking statements.
We caution readers that those statements are not guarantees of
future performance or exploration and development success, and our
actual exploration experience and future financial results may
differ materially from those anticipated, projected or assumed in
the forward-looking statements. Such forward-looking statements
include, but are not limited to, statements regarding various oil
and gas discoveries, oil and gas exploration, development and
production activities, capital expenditures, reclamation costs,
anticipated and potential production and flow rates, and other
statements that are not historical facts. No assurances can be
given that any of the events anticipated by the forward-looking
statements will transpire or occur, or if any of them do so, what
impact they will have on our results of operations or financial
condition. Important factors that can cause actual results to
differ materially from the results anticipated by forward-looking
statements include, but are not limited to, those associated with
general economic and business conditions, failure to realize
expected value creation from acquired properties, exercise of
preferential rights to purchase, variations in the market demand
for, and prices of, oil and natural gas, drilling results,
unanticipated fluctuations in flow rates of producing wells due to
mechanical or operational issues (including those experienced by
wells operated by third parties where we are a participant), oil
and natural gas reserve expectations, the potential adoption of new
governmental regulations, failure of third party partners to
fulfill their commitments, the ability to satisfy future cash
obligations and environmental costs, adverse conditions, such as
high temperatures and pressure that could lead to mechanical
failures or increased costs, the ability to hold current or future
lease acreage rights, the ability to satisfy future cash
obligations and environmental costs, access to capital to fund
drilling activities, as well as other general exploration and
development risks and hazards, and other factors described in more
detail in Part I, Item 1A. "Risk Factors" included in our Annual
Report on Form 10-K for the year ended December 31, 2010 filed with
the SEC.
The SEC requires oil and gas companies, in their filings with
the SEC, to disclose 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. Beginning with year-end reserves for 2010,
the SEC permits oil and gas companies, in their filings with the
SEC, to disclose probable and possible reserves, as such terms are
defined by the SEC. We use certain phrases and terms in this press
release, such as "gross unrisked potential” and “resource potential
" which the SEC's guidelines prohibit us from including in filings
with the SEC “Gross unrisked potential” and “resource potential” do
not take into account the certainty of resource recovery, which is
contingent on exploration success, technical improvements in
drilling access, commerciality and other factors, and are therefore
not indicative of expected future resource recovery and should not
be relied upon. We urge you to consider closely the disclosure of
proved reserves included in our Annual Report on Form 10-K for the
year ended December 31, 2010 filed with the SEC.
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