McMoRan's Discovery 50% Larger

McMoRan Exploration Co.'s gas discovery at Eugene Island appears to be twice as big as expected, and now is expected to recover 100 Bcf of natural gas. The well, will be put into production in the second quarter by the New Orleans-based company, expects production to reach 100 MMcf/d by then.

Initially, the target for the Eugene Island Block 193 No. 3 exploration well in the North Tern deep prospect was a gross unrisked potential of approximately 50 Bcf. However, the pay sands encountered were about twice as thick as indicated by the 3-D seismic data. The drilling has discovered 230 feet of net gas pay in two sands, with the first between 16,460 and 16,613 feet and the second between 16,790 and 16,952 feet. In the Eugene Island prospect, McMoRan holds a 53.4% working interest and a 42.9% net revenue interest, controlling 10,000 acres in 90 feet of water in an area about 50 miles offshore Louisiana.

McMoRan provided an exploration and development activities update Tuesday, including a second discovery well --- the Main Pass Block 86 No. 2 well --- in the Shiner prospect. There, the company has discovered 20 gross feet of hydrocarbon pay between depths of 2,668 and 2,688 feet. The No. 2 well, which targeted a separate objective about one mile northwest of the first well, reached a total depth of 3,000 feet. The Main Pass Block, covering about 10,000 acres, is about 45 miles offshore Louisiana in 70 feet of water.

McMoRan, which holds a 71.3% working interest and a 51.3% net revenue interest in two wells already drilled in the Main Pass block, wants to drill up to three wells within a 3-D seismic bright spot outline, which it estimates could produce as much as 20 Bcf. The Main Pass No. 1 well has 108 feet of gross pay at 9,888 feet deep --- about 20 feet more than previously estimated.

"Although the two discovery wells have not been flow tested, McMoRan believes the aggregate initial flow from the two wells could exceed 25 MMcf/d," said the company. Additional wells are expected to be drilled there this year to test 3-D seismic bright spot objectives between 2,500 and 10,000 feet in the Main Pass 86/97 area.

Along with its drilling update, McMoRan has revised its future abandonment costs estimate with its non-operating sulfur properties, reflecting a charge of $8 million in the fourth quarter. It expects to receive more than $80 million in potential near-term proceeds from its sulfur business.

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