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) (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%).
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 forward-looking 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 and costs, capital expenditures, reclamation, indemnification and environmental obligations and costs, the potential for or expectation of successful flow tests, anticipated and potential quarterly and annual production and flow rates, reserve estimates, projected operating cash flows and liquidity and other statements that are not historical facts. No assurance 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 may have on our results of operations or financial condition. Important factors that may cause actual results to differ materially from those 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, 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 at wells operated by third parties where we are a participant), changes in oil and natural gas reserve expectations, the potential adoption of new governmental regulations, unanticipated hazards for which we have limited or no insurance coverage, failure of third party partners to fulfill their capital and other 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 retain 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, as updated by our subsequent filings with the SEC.
Investors are cautioned that many of the assumptions upon which our forward-looking statements are based are likely to change after our forward-looking statements are made, including for example the market prices of oil and natural gas, which we cannot control, and production volumes and costs, some aspects of which we may or may not be able to control. Further, we may make changes to our business plans that could or will affect our results. We caution investors that we do not intend to update our forward-looking statements more frequently than quarterly, notwithstanding any changes in our assumptions, changes in our business plans, our actual experience, or other changes, and we undertake no obligation to update any forward-looking statements.
