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McMoRan Exploration Co. Reports Third-Quarter/Nine-Month 2012 Results

Stocks in this article: MMR

Production from the Flatrock field averaged a gross rate of approximately 112 MMcfe/d (46 MMcfe/d net to McMoRan) in the third quarter of 2012 and, as anticipated, was lower than the year ago period which averaged 164 MMcfe/d (67 MMcfe/d net to McMoRan). Following depletion of currently producing zones, McMoRan is planning several recompletions to additional pay zones which are expected to increase production in future years. McMoRan owns a 55.0 percent working interest and a 41.3 percent net revenue interest in the Flatrock field.

DEVELOPMENT ACTIVITIES

Since 2008, McMoRan’s drilling activities in the shallow waters of the GOM below the salt weld (i.e. listric fault) have successfully confirmed McMoRan’s geologic model and the highly prospective nature of this emerging geologic trend. The data from six wells drilled to date indicate the presence below the salt weld of geologic formations including Upper/Middle/Lower Miocene, Frio, Vicksburg, Upper Eocene, Sparta carbonate, Wilcox, Tuscaloosa and Cretaceous carbonate, which have been prolific onshore, in the deepwater GOM and in international locations. The results of these activities indicate the potential for a major new geologic trend spanning 200 miles in the shallow waters of the GOM and onshore in the Gulf Coast area. Further drilling and flow testing will be required to determine the ultimate potential of this new trend.

At Davy Jones No. 1, McMoRan successfully cleaned out the wellbore to approximately 28,630 feet which will enable testing of all 165 feet of perforated sand sections in the Wilcox. Operations to clear the wellbore of the heavy drilling mud used to suppress flow in the well required more time than expected following Hurricane Isaac because residual barite material hardened at the perforations in the bottom of the wellbore while operations were interrupted. McMoRan has replaced heavy mud in the hole with clear completion fluid, which is the last step required before installing the production tubing. Once the tubing is set, McMoRan will remove the blow out preventer and install the production tree. During initial attempts to perforate and flow test the Wilcox "F" sand in March 2012 when the hydraulic perforating equipment malfunctioned, these steps took approximately two weeks. Once these steps are complete, McMoRan expects to commence flow testing from the first shallow water, ultra-deep sub-salt completion on the GOM Shelf. Commercial production is expected shortly thereafter. Timing of these activities depend on operating conditions in the well and other factors.

Completion and testing of the Davy Jones offset appraisal well (Davy Jones No. 2) is expected to commence following review of results from Davy Jones No. 1. Davy Jones is located on a 20,000 acre structure that has multiple additional drilling opportunities.

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.

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