Offshore staff
McMoRan Exploration Co. has updated its Gulf of Mexico exploration and production and its Main Pass Energy Hub activities.
McMoRan has four exploration wells currently in progress under its $500 million multi-year exploration venture with a private partner.
The company also announced positive drilling results from the King Kong exploration prospect in 12 ft of water at Vermilion blocks 16/17. Wireline logs have indicated that the well has encountered 14 hydrocarbon bearing sands totaling 150 ft/d. The well, which started drilling on Feb. 20, is drilling below 17,900 ft toward a proposed total depth of 19,500 ft. Use of production facilities in the area would allow a successful well to be brought online quickly. McMoRan is evaluating plans for drilling an offset well in the King Kong area.
The Little Bay prospect on Louisiana State Lease 5097 in Atchafalaya bay started drilling on March 11, and is currently drilling below 21,000 ft. The Little Bay well has a proposed total depth of 22,000 ft and is in less than 10 ft of water.
The Delmonico prospect on Louisiana State Lease 1706 in the Lake Sand field area started drilling on March 8, and is drilling below 17,500 ft. The Delmonico well has a proposed total depth of 19,000 ft and is in 9 ft of water.
The West Cameron block 43 No. 4 exploratory well in 30 ft of water, started drilling on April 25, and is currently drilling below 13,900 ft. The No. 4 well, which is 4,000 ft north of the West Cameron block 43 No. 3 discovery well, has a planned total depth of 18,500 ft. As previously announced, the No. 3 well reached 18,800 ft TD in 1Q 2005 and wireline logs indicated that the well encountered three hydrocarbon bearing sands in the lower Miocene with a total gross interval in excess of 100 ft. McMoRan will determine development plans for the No. 3 well following evaluation of the results of the No. 4 well.
McMoRan has drilled the Korn prospect at South Timbalier blocks 97/98 to 23,080 ft TD. Evaluation of the drilling results determined that the well did not contain commercial quantities of hydrocarbons and the well is being plugged and abandoned. McMoRan will charge approximately $7 million to exploration expense during 2Q 2005 for its share of the drilling and related costs.
Since inception of McMoRan's exploration venture in 2004, McMoRan and its private partner have participated in five discoveries on the 11 prospects that they drilled and evaluated. The partners have production on three discoveries and are considering development plans for the other discoveries. The positive results from King Kong and the potential discovery at Blueberry Hill would bring McMoRan's success rate to seven out of 13 prospects.
McMoRan has four exploration wells in progress. It expects to begin drilling at least eight deep gas exploration wells in the second half of 2005 including certain wells in Vermilion Parish, Louisiana, and JB Mountain Deep at South Marsh Island block 224. The company is also evaluating additional drilling opportunities at Hurricane Upthrown at South Marsh Island block 217 and King Kong.
McMoRan has rights to approximately 280,000 gross acres and continues to identify prospects to be drilled on its lease acreage position. McMoRan is also actively pursuing opportunities through its exploration venture to acquire additional acreage and prospects through farm-in or other arrangements.
McMoRan also announced that oil production at Main Pass bBlock 299 resumed on May 6, following successful modification of existing storage tanks to accommodate transportation of oil production by barge from Main Pass block 299. Oil production has averaged approximately 4,000 b/d since production was restored. McMoRan owns an 83.3% net revenue interest in Main Pass block 299. As previously reported, the company shut in production in September 2004 because of damage from Hurricane Ivan to a third-party offshore terminal facility that provided throughput services for the sale of Main Pass block 299 sour crude oil. McMoRan expects to record income of $4 million for insurance recovery related to Hurricane Ivan in its 2Q 2005 financial results.
McMoRan is also trying to establish a major new offshore LNG import terminal at Main Pass block 299 and has applied for a license for the proposed project under the Deepwater Port Act. In connection with the licensing process, the US Coast Guard (Coast Guard) and the Maritime Administration recently published a Draft Environmental Impact Statement (EIS) for the Main Pass Energy Hub Deepwater Port License Application, and will hold public meetings in July to allow public comments on the draft EIS.
The Main Pass Energy Hub terminal would be capable of regasifying LNG at a rate of 1 bcf/d. The use of existing facilities provides significant cost advantages and the proposed project's offshore location near established shipping lanes is advantageous. McMoRan is also considering additional investments to develop significant on site cavern storage for natural gas in the large salt dome structure at this site and for pipeline connections to enhance gas delivery from Main Pass to markets in the US. The proximity of the proposed project to major natural gas markets and the availability of on site salt dome cavern storage provide a potential opportunity to expand the project beyond a typical LNG receiving facility, creating opportunities for substantial additional values. The proposed design includes 28 bcf of initial cavern storage availability and aggregate peak deliverability from the proposed terminal, including deliveries from storage, of up to 2.5 bcf/d.
McMoRan is continuing discussions with potential LNG suppliers in the Atlantic basin and natural gas consumers in the US to develop commercial arrangements for the facilities.
06/22/05
