EXPLORATION UPDATEOn November 25, 2011, McMoRan commenced drilling the Blackbeard West No. 2 ultra-deep exploration well on Ship Shoal Block 188. In May 2012, McMoRan set a liner after the well encountered a high pressure gas flow immediately below the salt weld. The well is currently drilling below 21,100 feet to evaluate this high pressure section and other objectives below the salt weld. The well is targeting Miocene aged sands seen below the salt weld approximately 13 miles east at Blackbeard East and has a proposed total depth of 24,500 feet. 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%). McMoRan’s investment in Blackbeard West No. 2 totaled $50.4 million at June 30, 2012. The Lineham Creek exploration prospect, which is located onshore in Cameron Parish, Louisiana commenced operations on December 31, 2011. The well, which is targeting Eocene and Paleocene objectives below the salt weld, is currently drilling below 19,000 feet towards 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’s investment in Lineham Creek totaled $28.1 million at June 30, 2012. McMoRan has acquired exploratory rights to a 68,000 gross acre area located in Iberia, St. Martin, Assumption and Iberville Parishes, Louisiana and plans to commence drilling the Highlander ultra-deep exploration prospect on this lease position in the second half of 2012. The well has a proposed total depth of 30,000 feet and will target Eocene, Paleocene and Cretaceous objectives below the salt weld. McMoRan will operate the well and hold a 72.0 percent working interest. Energy XXI and Moncrief Offshore are expected to participate. CENTRAL GULF OF MEXICO LEASE SALE 216/222 In June 2012, McMoRan participated in Central Gulf of Mexico Lease Sale 216/222 held by the BOEM in New Orleans, Louisiana. As previously reported, McMoRan was the apparent high bidder on a total of 14 lease blocks on the outer Continental Shelf of the Gulf of Mexico. Six of the 14 bids were sole bids by McMoRan and the remaining eight bids were made jointly with Chevron U.S.A. Inc. The lease blocks are located in the Vermilion, South Timbalier, South Marsh Island and Eugene Island areas and are targeted in and around McMoRan’s current shallow water, ultra-deep exploration plays, including Davy Jones West, England, Calico Jack, Barataria, Captain Blood and Lafitte. Additionally, certain wells drilled on these lease blocks if completed to depths exceeding 19,999 feet may receive royalty suspension volumes of 35 billion cubic feet of natural gas.