McMoRan Exploration Co. updates exploration and development activities

Source: McMoRan Exploration Co.

McMoRan Exploration Co. (NYSE: MMR) today updated its ultra-deep exploration and development activities in the shallow waters of the Gulf of Mexico (GOM) Shelf and onshore in the Gulf Coast area, including completion operations at Davy Jones No. 1, which are in an advanced stage, new logging results from Blackbeard East and in progress operations at Lafitte, Blackbeard West No. 2 and Lineham Creek.

Completion activities of the Davy Jones No. 1 discovery well at South Marsh Island Block 230 are in an advanced stage with completion and flow testing expected in the first quarter of 2012. Since McMoRan’s last report on January 17, 2012, the wellbore has been cleaned out to total depth and oil based drilling mud is currently being displaced with completion fluid. Remaining steps include running a pulsed neutron log, running perforating guns and production tubing in the hole, removing the blowout preventers and installing the production tree. McMoRan will then pressure up the tubing to activate and fire the perforating guns in the hole to flow test the well. A successful flow test would have important implications on potential future reserve additions at Davy Jones and McMoRan’s other ultra-deep prospects. McMoRan expects first production from the well could be established shortly after a successful flow test.

As previously reported, McMoRan has drilled two successful sub-salt wells in the Davy Jones field. The Davy Jones No. 1 well logged 200 net feet of pay in multiple Wilcox sands, which were all full to base. The Davy Jones offset appraisal well (Davy Jones No. 2), which is located two and a half miles southwest of Davy Jones No. 1, confirmed 120 net feet of pay in multiple Wilcox sands, indicating continuity across the major structural features of the Davy Jones prospect, and also encountered 192 net feet of potential hydrocarbons in the Tuscaloosa and Lower Cretaceous carbonate sections. McMoRan expects to complete and flow test both wells in 2012.

Davy Jones involves a large ultra-deep structure encompassing four OCS lease blocks (20,000 acres). McMoRan holds a 63.4 percent working interest and a 50.2 percent net revenue interest in Davy Jones. Other working interest owners in Davy Jones include: Energy XXI (NASDAQ: EXXI - News) (15.8%), JX Nippon Oil Exploration (Gulf) Limited (12%) and Moncrief Offshore LLC (8.8%).

In January 2012, the Blackbeard East ultra-deep exploration by-pass well was drilled to a total depth of 33,318 feet true vertical depth. Analysis of wireline logs, conventional core samples and sonic logs in January 2012 indicated that the Blackbeard East well encountered potential hydrocarbons in the Sparta carbonate section of the Eocene and Vicksburg section of the Oligocene. The Sparta interval measures 300 feet thick and appears to be a hydrocarbon bearing fractured carbonate. The Vicksburg sand is credited with 10 net feet of pay over a 40 foot gross interval. Flow testing will be required to confirm the potential hydrocarbons and flow rates from these limestone and sandstone formations.

These new intervals are in addition to the 178 net feet of hydrocarbons previously announced above 25,000 feet in the Miocene and the hydrocarbon bearing sands in the Oligocene (Frio) with good porosity below 30,000 feet. A production liner will be set to total depth and the well will be temporarily abandoned while development options are evaluated. 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 72.0 percent working interest and a 57.4 percent net revenue interest in the well. Other working interest owners in Blackbeard East include EXXI (18.0%) and Moncrief Offshore LLC (10.0%).

The Lafitte ultra-deep exploration well, which is located on Eugene Island Block 223 in 140 feet of water, commenced drilling on October 3, 2010. The Lafitte well is currently drilling below 32,900 feet TVD. In January 2012, McMoRan obtained pressure data and rotary sidewall cores in the Cris R sand; this information is being evaluated. Flow testing will be required to confirm the potential hydrocarbons and flow rates from this Cris R sand. As previously reported, the Lafitte well has encountered 211 net feet of possible productive net sands, including 56 net feet in the Cris-R section of the Lower Miocene and 40 net feet in the Frio section of the Oligocene.

McMoRan is considering delineation drilling opportunities on the Lafitte structure to evaluate this prospect further. McMoRan controls approximately 15,000 gross acres in the immediate area of Lafitte. Results to date from Lafitte enhance the potential of McMoRan’s other acreage in the Lafitte strategic area, including McMoRan’s Barataria and Captain Blood ultra-deep prospects. Barataria (10,000 gross acres) is located west-southwest of Lafitte and Captain Blood (10,000 gross acres) is located immediately south of Lafitte.

McMoRan has applied for a permit to deepen Lafitte to 34,000 feet to evaluate additional Oligocene and potential Eocene objectives. McMoRan holds a 72.0 percent working interest and a 58.3 percent net revenue interest in Lafitte. Other working interest owners in Lafitte include EXXI (18.0%) and Moncrief Offshore LLC (10.0%).

The Blackbeard West No. 2 ultra-deep exploration well commenced drilling on November 25, 2011 and is currently drilling below 15,000 feet towards a proposed total depth of 26,000 feet. The well, which is located on Ship Shoal Block 188 within the Blackbeard West unit, is targeting Miocene aged sands seen below the salt weld approximately 13 miles east at Blackbeard East. McMoRan holds a 69.4 percent working interest and a 53.1 percent net revenue interest in Ship Shoal Block 188. Other working interest owners include EXXI (22.9%) and Moncrief Offshore LLC (7.7%).

Operations have commenced at the Lineham Creek exploration prospect, which is located onshore in Cameron Parish, Louisiana. Lineham Creek is targeting Eocene and Paleocene objectives below the salt weld. Operations commenced on December 31, 2011, and the initial exploratory well has a proposed total depth of 29,000 feet. Chevron U.S.A Inc., as operator of the well, holds a 50 percent working interest. McMoRan is participating for a 36.0 percent working interest. Other working interest owners include EXXI (9.0%) and W. A. “Tex” Moncrief Jr. (5.0%).

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