SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):November 20, 2000
McMoRan Exploration Co.
Delaware 001-07791 72-1424200
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation or Number)
organization)
1615 Poydras Street
New Orleans, Louisiana 70112
Registrant's telephone number, including area code:(504)582-4000
Item 5. Other Events.
McMoRan Exploration Co. announces the following exploration and
operations update:
The Eugene Island Block 97 #1 exploratory well
(Thunderbolt-shallow prospect) has encountered 75 feet of net
hydrocarbon pay in 3 pay sands logged between measured depths of
14,000 and 14,290 feet. The well was drilled to a total depth
of 17,030 feet and will be saved for future production.
Additional wells will be needed to evaluate the full potential
of this discovery.
We hold a 38.0 percent working interest and a 27.4 percent net
revenue interest in the Eugene Island Block 97 #1 well. Ocean
Energy, Inc., the operator, holds a 35.0 percent working
interest; Samedan Oil Corporation, a wholly owned subsidiary of
Noble Affiliates, Inc., holds a 25.0 percent working interest;
and an individual investor holds the remaining 2.0 percent
working interest in the shallow prospect. The Eugene Island
Block 97 discovery is located in 27 feet of water, approximately
25 miles offshore Louisiana in the Gulf of Mexico. We control
19,375 acres in the area.
We have also identified a separate prospect at a greater depth
in the immediate area of Eugene Island Block 97 (Hornung-deep
prospect). The deep prospect is expected to be drilled to
approximately 21,000 feet during the first quarter of 2001.
Our Main Pass Block 86 #1 well (Shiner prospect) has 80 feet of
gross pay indicated by its log-while-drilling tool which would
indicate a minimum of 40 to 50 feet of net hydrocarbon pay
between depths of 9,910 and 9,990 feet. We have noted
additional zones that have resistivity that could possibly
indicate that additional sands are hydrocarbon bearing. The
well was drilled to a total depth of 10,500 and will be saved
for future production. Additional wells will be needed to
evaluate the full potential of this discovery. We have a 71.3
percent working interest and a 51.3 percent net revenue interest
in the well. Ocean Energy, Inc., the operator, holds a 25.0
percent working interest and the remaining 3.7 percent working
interest is held by an individual investor. The Main Pass 86
discovery is located in 69 feet of water, approximately 60 miles
offshore Louisiana.
Details of our other exploration, development and operational
activities follow:
West Delta Block 12 #1 (Intruder/Prowler prospect). This
exploration well has been drilled to approximately 17,500 feet
and logged several sands between 16,950 and 17,400 feet that
have resistivity which could possibly indicate the sands are
hydrocarbon bearing. Casing has been set through 17,500 feet
and the well will be drilled deeper to test additional
objectives to a total depth of approximately 20,700 feet. The
17,000-foot sands that are behind pipe will be further evaluated
after the deeper potentials between 17,400 feet and total depth
have been tested. We have a 47.5 percent working interest and a
32.1 percent net revenue interest in the well. Samedan holds a
25.0 percent working interest. Ocean Energy, Inc., the
operator, holds a 25.0 percent working interest and the
remaining 2.5 percent working interest is held by an individual
investor. The West Delta 12 exploration well is located in
state waters offshore Louisiana with a water depth of
approximately 17 feet.
Louisiana State Lease 340 # 1 (Mound Point prospect). We are
currently drilling below 10,000 feet on this exploration well
with a proposed total depth of 18,500 feet. The well is located
offshore Vermilion and Iberia Parishes in less than 10 feet of
water on tracts that encompass a total of approximately 35,450
acres. We have a 30.4 percent working interest and a 23.9
percent net revenue interest in the prospect. Samedan holds a
25.0 percent working interest; Texaco, a 43.0 percent working
interest; and an individual investor, the remaining 1.6 percent
working interest.
Eugene Island Block 193 #3 (Tern-deep prospect). Drilling has
begun on this exploration well, with a planned total depth of
17,600 feet. We have a 56.25 percent working interest and a
45.2 percent net revenue interest and Texaco has a 43.75 percent
net working interest. We control 10,000 acres in the area in
approximately 100 feet of water.
Vermilion Blocks 195/196/207 (Lombardi) and Ship Shoal Block 296
(Raptor). We plan to install platform and production facilities
on both of these discoveries and expect both fields to be on
production by mid-2001. Although they have not been tested, we
believe that these two discoveries could flow in excess of 30
million cubic feet of gas per day, in total net to our interest.
We hold a 34.2 percent net revenue interest in Vermilion
195/196/207 and a 43.5 percent net revenue interest in Ship
Shoal 296. Samedan holds a 25.0 percent working interest in
Vermilion 195/196/207.
We continue to identify prospects to be drilled on our
exploration lease acreage position, including 660,000 acres
acquired from Shell and Texaco earlier this year. To date we
have drilled 8 prospects on this acreage, of which 4 have
indicated discoveries. The 4 discoveries are all on the shelf
of the Gulf of Mexico, 3 in less than 120 feet of water, and can
be brought on to production readily because of the relatively
shallow water depths and the immediate availability of
production platform facilities.
The ownership interests for all the exploration and development
activities above reflect our minimum estimated interests
assuming certain agreements and participation elections by other
parties, except that Halliburton's option to participate for 6
percent of our interest is not reflected.
Brazos A-19 insurance claim. We are in negotiations with our
insurers for the business interruption loss that we believe was
triggered by the loss of the Brazos A-19 JC #1 well. As
previously reported, the Brazos A-19 well was damaged during the
early production phase in November 1999, after producing
approximately 84 million cubic feet of natural gas per day for
approximately one month. Attempts to repair the well were
unsuccessful, and subsequently the well was plugged and
abandoned. The insurers have offered approximately $14 million
in settlement of the claim and we have counter offered to settle
for $30 million. The proceeds of the claim will be recognized
as a gain when received.
Sulphur business sale. As previously announced, we are engaged
in a process to sell our sulphur transportation and logistics
assets and are being assisted by Chase Securities Inc. in the
marketing of these assets. A number of parties have expressed
interest and are completing due diligence. We expect interested
parties to submit definitive proposals in mid-December 2000 and
that the sale will be completed soon thereafter. We remain
confident that the sale will generate proceeds in excess of the
book value of the assets or a minimum of $75 million.
Main Pass 299 alternative use. Since the cessation of sulphur
production at our Main Pass Block 299 mine, we have been
evaluating alternative uses for the Main Pass 299 facilities.
We have signed a letter of intent pursuant to which the Main
Pass facilities would be utilized to provide logistical support
and services for deepwater offshore oilfield operations and
commercial production of brine. The cash flows from this
potential alternative use of the Main Pass sulphur facility are
expected to offset a significant portion of the long-term
liabilities for the eventual abandonment of the facilities. In
addition, commercial operation of the facility is expected to
defer the time when abandonment would otherwise be required. We
will retain the rights to the sulphur and oil reserves at Main
Pass 299. These business arrangements are subject to certain
regulatory approvals and the execution of definitive agreements.
Sulphur project claim. We have received notice from the U. S.
State Department that our $8.9 million claim for payments due us
for the construction, installation and sale of a sulphur
distillation plant to the government of Iraq in 1991 has been
certified by the United Nations Compensation Commission on Iraqi
claims. The U. S. State Department has received approximately
$5 million attributable to our claim and we expect to receive
those funds within the next 90 days. We expect to receive the
balance of the claim in 2001 and will recognize the receipts as
gains when funds are received.
Although there can be no assurance as to the timing or the
completion of the transactions mentioned above, if these
transactions can be completed in the current quarter or the
first quarter of 2001 as anticipated, then we may add in excess
of $100 million cash to our financial position. As of November
17, 2000, our net debt position was $30 million ($45 million of
net debt in our sulphur business and $15 million cash in our oil
and gas business). The $100 million cash, together with $50
million available under our oil and gas bank credit facility;
our $64.5 million sulphur business credit facility (of which
approximately $45 million is currently drawn); and our oil and
gas production income, would provide us with a strong financial
position to continue our aggressive exploration and development
activities.
Cautionary Statement: This report contains forward-looking
statements in which we discuss factors and events that we
believe may affect our performance in the future. Forward-
looking statements are all statements other than historical
facts, such as statements regarding discoveries at Eugene
Island 97 and Main Pass 86; future oil and gas drilling and
production activities; future oil and gas income; the sale
of the sulphur transportation assets; and the pursuit of
insurance and other claims. Important factors that might
cause future results to differ from these projections
include drilling risks, the market value of oil and gas,
uncertainties in interpreting engineering data, industry
risks and other factors described in our most recent Form
10-K and subsequent Forms 10-Q filed with the SEC.
SIGNATURE
------------------
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
McMoRan Exploration Co.
By: /s/ C. Donald Whitmire Jr.
----------------------------
C. Donald Whitmire, Jr.
Vice President & Controller -
Financial Reporting
(authorized signatory and
Principal Accounting Officer)
Date: November 21, 2000
