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): January 2,2001
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 and Regulation FD Disclosure.
McMoRan Exploration Co. announces the following exploration and
operations update:
Gas Discovery at Eugene Island 193 #3 (North Tern-deep) -
exploration well. The Eugene Island Block 193 #3 exploratory
well (North Tern-deep prospect) has discovered 230 feet of net
gas pay in two sands, the first between 16,460 and 16,613 feet
and the second between 16,790 and 16,952 feet. McMoRan
anticipates the well can be completed and put on production
during the second quarter of 2001 utilizing the Eugene Island 193-
A platform acquired in 2000. Although the #3 well has not been
flow tested, because of the thickness and porosity of the sands,
McMoRan believes the well could produce at an initial flow rate
of approximately 50 million cubic feet of natural gas per day
(mmcf/d). McMoRan has a 53.4 percent working interest and a 42.9
percent net revenue interest. McMoRan controls 10,000 acres in
the area in approximately 90 feet of water, approximately 50
miles offshore Louisiana.
Main Pass 86/97 (Shiner) - second discovery well and development
plan. McMoRan's Main Pass Block 86 #2 well (Shiner prospect)
has discovered 20 gross feet of hydrocarbon pay between depths of
2,668 and 2,688 feet. The #2 well, which targeted a separate
objective approximately one mile northwest from the #1 well,
reached a total depth of 3,000 feet. McMoRan subsequently
drilled a sidetrack to the #2 well at a 73-degree angle that
exposes 71 feet of the productive zone to the sidetrack,
providing for a greatly enhanced flow from the well. While this
sand is relatively thin, it is an isolated reservoir with no
water level contact; it is at a shallow depth (2,668 feet) and
the 3-D seismic bright spot outline appears to cover a
significant area. Consequently, McMoRan anticipates that a total
of three wells could be completed in the bright spot-outlined
zones above 3,000 feet that are now determined to be productive.
McMoRan estimates these three wells could be completed for
approximately $15 million in total, because of the shallow 70-
foot water depth and the shallow 2,668-foot well depth. Based
upon further evaluation, the Main Pass 86 #1 well has 108 feet of
gross pay at a depth of 9,888. The #1 well was previously
reported to have 80 feet of gross pay. 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.
The discovery sands at 2,668 feet and 9,888 feet were associated
with geophysical bright spots and McMoRan and its partners in the
prospect are planning to drill additional wells in 2001 to test
additional bright spot objectives between 2,500 and 10,000 feet
in the Main Pass 86/97 area. Development plans for the Shiner
prospect are currently underway and production from the two
discovery wells is expected during the second quarter of 2001.
McMoRan has a 71.3 percent working interest and a 51.3
percent net revenue interest in the two wells that have been
drilled. Ocean Energy Inc. operates the Main Pass 86/97
property with a 25 percent working interest. The Main Pass 86/97
discoveries are located approximately 45 miles offshore Louisiana
in 70 feet of water where McMoRan controls approximately 10,000
acres. Additional wells will be needed to evaluate the full
potential of the discovery.
Eugene Island 193 #B-2 (Tern) well re-entry. McMoRan has re-
entered the existing Eugene Island Block 193 #B-2 (Tern) well and
identified additional hydrocarbons in a sand that will be
produced through a new completion at approximately 12,000 feet.
McMoRan is currently testing the well to determine an estimated
flow rate. A cased-hole log indicated this sand and three
additional reservoirs between 11,500 and 12,000 feet that have
not been previously produced. McMoRan is re-entering the #B-1
well to recomplete an oil producing zone and test two additional
sands indicated to be productive by cased-hole log analysis. The
B-1 and B-2 wells are on the Eugene Island 193-B platform
acquired in 2000 and can be immediately placed on production.
McMoRan owns a 53.4 percent working interest and a 42.9 percent
net revenue interest in Eugene Island 193.
West Cameron 616 and Vermilion 160 workovers. McMoRan's
scheduled workover at West Cameron Block 616 has been completed
and the property is now flowing at approximately 8 mmcf/d.
McMoRan owns a 100 percent working interest and a 74.7 percent
net revenue interest in West Cameron 616. McMoRan will
recomplete a well at Vermilion Block 160 early in the first
quarter of 2001, which is expected to add to this field's
production rates. McMoRan owns a 73.0 percent working interest
and a 58.4 percent net revenue interest in Vermilion 160.
Vermilion 195/196/207 (Lombardi), Ship Shoal Block 296 (Raptor)
and Eugene Island 97 (Thunderbolt-shallow) - development plans.
As previously reported, McMoRan plans to install platforms and
production facilities on both the Lombardi and Raptor discoveries
and expects both fields to be on production by mid-2001.
McMoRan and its partners plan to develop the Thunderbolt-shallow
discovery with first production expected in the second quarter of
2001. Although the three discoveries have not been flow tested,
McMoRan believes that collectively the three could initially flow
in excess of 38 mmcf/d to McMoRan's net revenue interest.
McMoRan holds a 34.2 percent net revenue interest in Vermilion
195/196/207, a 43.5 percent net revenue interest in Ship Shoal
296 and a 27.4 percent net revenue interest in Eugene Island 97.
McMoRan estimates net production to reach 100 mmcf/d in second
quarter of 2001. While there can be no assurance that the oil
and gas discoveries referred to above will achieve the initial
flow rates discussed and while sustained flow rates will be
dependent on reservoir performance, these new discoveries along
with McMoRan's existing operations and workovers are anticipated
to reach a combined flow rate, net to McMoRan's interest, of
approximately 100 mmcf/d during the second quarter of 2001.
West Delta 12 (Intruder/N. Prowler) - exploration well. The
West Delta Block 12 (Intruder/N. Prowler prospect) exploration
well has been drilled to approximately 18,800 feet and logged
additional sands between 17,700 and 18,550 feet that have
resistivity which could possibly indicate that the sands are
hydrocarbon bearing. Additional resistive sands have been
identified, some of which have been previously announced, between
16,000 and 17,400 feet. McMoRan is completing the well in order
to flow test the resistive zones. McMoRan has a 47.5 percent
working interest and a 32.1 percent net revenue interest in the
prospect. The West Delta 12 exploration well is located in state
waters offshore Louisiana where McMoRan controls approximately
2,800 acres, with a water depth of approximately 17 feet.
Garden Banks 272 (Crete) - exploration well. On November 30,
2000, McMoRan commenced drilling of the Garden Banks Block 272
(Crete prospect) # 1 exploratory well. The well is currently at
approximately 8,800 feet with a planned total depth of 22,850
feet. The well is located in 560 feet of water approximately
135 miles offshore Texas. McMoRan controls 17,280 acres in the
immediate area of the prospect including two blocks directly
north and south of Block 272. McMoRan, the operator, currently
owns a 71.3 percent working interest and a 51.3 percent net
revenue interest in the Crete prospect.
Louisiana State Lease 340 (Mound Point) - exploration well.
McMoRan began drilling the Louisiana SL 340 #1 well (Mound Point
prospect) on October 22, 2000, under a turnkey drilling contract
with a planned total depth of approximately 18,500 feet. The
well was sidetracked after encountering mechanical difficulties
and has reached a depth of approximately 10,800 feet. McMoRan
has a 29.6 percent working interest and a 22.3 percent net
revenue interest in the well. McMoRan controls approximately
35,000 acres the LA SL 340 area with an average water depth less
than 10 feet.
Sale of High Island A-520 - $1 million. McMoRan has agreed to
sell its mineral lease rights in the southern half of High Island
Block A-520 for $1 million. The sale is expected to be completed
in first quarter of 2001.
Sulphur Business asset sales. During the fourth quarter,
McMoRan sold its remaining Culberson sulphur mine assets for
approximately $3.5 million. The assets sold include the
Culberson mine's power plant, mine site and surrounding real
estate. The sales proceeds will be used to reduce McMoRan's
indebtedness and are expected to result in a gain of $3.2 million
in the fourth quarter of 2000. During November 2000, McMoRan
sold its Grand Isle base facility previously used for offshore
logistical support of its sulphur operations for $1.2 million.
The sale proceeds, which will be used to reduce indebtedness,
will result in a gain of approximately $1.2 million in the fourth
quarter of 2000. McMoRan continues to be engaged in the process
of selling its sulphur marketing and transportation business.
Other Fourth Quarter Items. As previously reported, McMoRan's
fourth quarter 2000 results will include gains of $23.3 million
associated with proceeds from the Brazos A-19 insurance claim
(approximately $21 million of which has been received) and $5
million associated with proceeds to be received related to a
claim (total claim: $8.9 million) for the 1991 sale of a sulphur
distillation plant to Iraq. McMoRan has revised its estimates
of future abandonment costs associated with it non-operating
sulphur properties and expects to record a fourth-quarter charge
of approximately $8 million to reflect the increase in its
estimates.
Since acquiring 660,000 acres of exploration acreage from
Shell and Texaco earlier this year, McMoRan has raised over $230
million from its public offering of common stock, the Halliburton-
guaranteed bank credit facility, sale of oil and gas property
interests and previously reported exploration alliances. In
addition, McMoRan anticipates receiving in excess of $80 million
in potential near-term proceeds associated with its sulphur
business (including the expected sale of its sulphur
transportation and marketing assets) and, separately, has signed
a letter of intent for an alternative use of its Main Pass
sulphur facility which would generate cash flow which would serve
to offset and defer a significant portion of the long-term
abandonment obligations associated with the facility. Although
there can be no assurance as to the timing or the completion of
these transactions, McMoRan anticipates these transactions could
be completed in the next few months. The $230 million reflected
above, the anticipated near-term sulphur business transactions
and the cash flows from McMoRan's oil and gas production
activities provide the Company with a solid capital base to fund
its aggressive oil and gas exploration and development
activities. As of December 31, 2000, McMoRan had $48.9 million
in cash and two credit facilities, a $64.5 million sulphur bank
credit facility of which $46.0 million is drawn and the
Halliburton-guaranteed $50 million oil and gas bank credit
facility which is currently undrawn and available.
McMoRan continues to identify prospects to be drilled on its
exploratory lease acreage position, including the acreage
acquired from Shell and Texaco. To date, McMoRan has drilled and
evaluated 9 prospects on this acreage, of which 5 have indicated
discoveries. Three additional prospects are currently drilling.
The 5 discoveries are all on the shelf of the Gulf of Mexico, 4
in less than 120 feet of water, and all 5 discoveries can be
brought on production readily because of the relatively shallow
water depths and the immediate availability of production
platform facilities.
Cautionary Statements: This Current Report on Form 8-K
contains forward-looking statements in which we discuss factors
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 193, Main Pass 86/97 and Eugene Island 97; future oil
and gas exploration drilling, development and production
activities; future oil and gas production flow rates and
revenues; the sale of the sulphur transportation and
logistics assets; and the pursuit of alternative use for
Main Pass. 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 risk 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: January 3, 2001
