After testing an ultra-deep trend in shallow waters of the Gulf of Mexico (GOM), New Orleans-based McMoRan Exploration Co. (MMR) said Tuesday it may have hit on a “frontier” pocket of natural gas.

“We have validated our concept for large accumulations of deep gas in multiple successful discoveries below 15,000 feet in the Miocene trend in the shallow waters on the Outer Continental Shelf (OCS) of the Gulf of Mexico,” said Co-Chairman James R. Moffett. “Through our activities in 2008 to test deeper objectives, we have confirmed our belief that there are also large structures on the shelf with Miocene and older-aged sands below 30,000 feet in the ultra-deep trend.”

The Ammazzo deep gas exploratory prospect is in 25 feet of water near South Marsh Island Block 256 in one of the largest undrilled deep structures below 15,000 feet on the shelf, MMR said. Drilling began in November and is below 17,700 feet toward a proposed total depth of 24,500 feet. The prospect is on the southern portion of the structural ridge extending from the Flatrock and JB Mountain discoveries. MMR operates the well and holds a 26% working interest and 21% net revenue interest. Plains Exploration & Production Co. (PXP) has a 28% stake; Energy XXI holds a 16% stake.

In addition, drilling at the Cordage deep gas exploratory prospect ramped up earlier this month and is below 3,600 feet toward a proposed total depth of 19,500 feet. The Cordage prospect, which is in 50 feet of water on West Cameron Block 207, is targeting sands in the Middle Miocene. MMR has a 50% working interest and a 40.7% net revenue interest; Mariner Energy Inc. is the operator with a 50% stake.

MMR and its partners also plan more tests at the South Timbalier Block 168 No. 1 ultra-deep exploratory well (formerly known as Blackbeard West No. 1). This well was drilled to a total depth of 32,997 feet last October, and logs indicated four potential hydrocarbon-bearing zones below 30,067 feet that require further evaluation, MMR said. South Timbalier Block 168 is located in 70 feet of water about 115 miles southwest of New Orleans. MMR operates the well, which is the deepest well ever drilled below the mud line in the Gulf of Mexico, and it owns a 32.3% working interest. PXP holds a 35% stake; Energy XXI has a 20% stake.

In related news, MMR said it continues to restore production that was shut in as a result of last September’s hurricanes. Current production is 200 MMcfe/d, and it is expected to average 195 MMcfe/d through March. An estimated 45 MMcfe/d “continues to be constrained by outages at third-party facilities,” the company said.

“Because of the estimated timing of restoration of certain properties affected by Hurricane Ike and scheduled downtime at other properties, McMoRan has revised its 2009 production estimates to approximately 215 MMcfe/d, compared with Jan. 21, 2009 estimates of 220-230 MMcfe/d,” said the company. MMR said it would continue to work with third-party pipelines to restore production as soon as possible.

“In response to current market conditions, McMoRan continues to seek reductions in operating and administrative costs, capital expenditures and other cash expenditures,” it said. Capital expenditures for 2009 have been cut by $30 million and are expected to be about $200 million, including $100 million in exploration costs, $45 million in development costs and $55 million for costs incurred in 2008 that will be funded in 2009.

“Capital spending will continue to be driven by opportunities and will be managed based on available cash and cash flows,” said MMR. The company said it also “may pursue additional partner arrangements to further reduce capital expenditures.”

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