McMoRan's Deep Miocene activities

McMoRan continues an active Deep Miocene gas exploration program in the Gulf of Mexico under a $500 million multi-year exploration venture. Four wells the company is currently drilling include: Korn at South Timbalier blocks 97/98, King Kong at Vermilion blocks 16/17, Delmonico at Louisiana State Lease 1706, and Little Bay at Louisiana State Lease 5097

Offshore staff

McMoran continues an active Deep Miocene gas exploration program in the Gulf of Mexico under a $500 million multi-year exploration venture. Four wells the company is currently drilling include:
• Korn at South Timbalier blocks 97/98
• King Kong at Vermilion blocks 16/17
• Delmonico at Louisiana State Lease 1706
• Little Bay at Louisiana State Lease 5097

Since the inception of the exploration venture, McMoRan and its private partner have participated in five discoveries on the 10 prospects that have been drilled and evaluated. Production has been established on three of the discoveries, currently totaling 94 MMcf/d gross and 26 MMcf/d net to McMoRan.

At least eight additional exploratory wells are expected to start drilling by year-end.

The company's annual report outlines a dual-objective business plan, which include its Deep Miocene exploration program and its proposed Main Pass Energy Hub (MPEH) offshore LNG project. The company's exploration results to date confirm the presence of hydrocarbons below 15,000 ft in the GoM and Gulf Coast areas, as well as its ability to establish high production rates quickly from successful wells.

During 2004, McMoRan established a multi-year exploration venture with a private partner for an initial commitment of $500 million for future expenditures to acquire and exploit high-potential prospects, primarily Deep Miocene targets in the shallow waters of the GoM and Gulf Coast areas. McMoRan and its private partner have experienced positive drilling results at Blueberry Hill, a potential sixth discovery. Production has begun on three discoveries and development plans are being considered for three others.

The Korn prospect at South Timbalier blocks 97/98 started drilling on Feb. 3, and is currently drilling below 19,600 ft. The Korn well has a proposed total depth of 23,000 ft and is in 60 ft water depth. The company has an 18.8% working interest and a 15.4% net revenue interest in the well. McMoRan has rights to approximately 9,800 gross acres in the Korn prospect area. Leasehold and related drilling costs incurred on Korn through March 31 totaled $3.5 million, net to McMoRan's interest.

The King Kong prospect at Vermilion block 16/17 began drilling on Feb. 20, and is currently drilling below 13,100 ft. The King Kong well has a proposed TD of 19,500 ft and is in 12 ft of water. McMoRan has a 40% working interest and a 29.2% net revenue interest in the well. The company has rights to approximately 1,850 gross acres in the King Kong prospect area. Leasehold and related drilling costs incurred on King Kong through March 31 totaled $3.7 million, net to McMoRan's interest.

The Delmonico prospect on Louisiana State Lease 1706 in the Lake Sand Field Area started drilling on March 8, and is currently drilling below 13,300 ft. The Delmonico well has a proposed TD of 19,000 ft and is in 9 ft of water. McMoRan has a 25% working interest and an 18.8% net revenue interest in the well. The company has rights to approximately 8,800 gross acres in the Delmonico prospect area.

The Little Bay prospect on Louisiana State Lease 5097 in Atchafalaya Bay began drilling on March 11, and is currently drilling below 11,700 ft. The Little Bay well has a proposed TD of 20,000 ft and is in less than 10 ft of water. McMoRan has a 37.5% working interest and a 27.4% net revenue interest in the well. McMoRan has rights to approximately 6,250 gross acres in the Little Bay prospect area. Leasehold and related drilling costs incurred on Little Bay through March 31 totaled $3.1 million, net to McMoRan's interest.

The Blueberry Hill well at Louisiana State Lease 340 reached 23,903 ft TD in 1Q 2005. Wireline logs indicated that the well encountered four potentially productive hydrocarbon-bearing sands. A 4 1/2-in. production liner has been run and cemented to protect the identified potential pay zones. The drilling rig moved off location while the necessary 20,000-lb completion equipment for the anticipated high pressure well is procured. Subsequently, completion and testing of the well will determine future plans for this prospect.

McMoRan operates Blueberry Hill, 7 mi east of the JB Mountain discovery and 7 mi south-southeast of the Mound Point offset discovery. McMoRan holds a 35.3% working interest and a 24% net revenue interest in the Blueberry Hill well. The company's investment in Blueberry Hill totaled $9.8 million at March 31.

On April 21, the Coast Guard resumed its statutory review period under the Deepwater Port Act for McMoRan's proposed MPEH LNG project license application. As a result of this resumption, McMoRan expects a record of decision on the permit application by year-end.

The MPEH terminal would be capable of regasifying LNG at a rate of 1 bcf/d. The use of existing facilities provides significant cost advantages and the proposed project's offshore location near established shipping lanes is advantageous. Additional investments are being considered to develop significant on-site cavern storage for natural gas in the large salt dome structure at this site and for pipeline connections to enhance gas delivery from Main Pass to markets in the US.

The proximity of the proposed project to major natural gas markets and the availability of on-site salt dome cavern storage provide a potential opportunity to expand the project beyond a typical LNG receiving facility, creating opportunities for substantial additional values. The proposed design includes 28 bcf of initial cavern storage availability and aggregate peak deliverability from the proposed terminal, including deliveries from storage, of up to 2.5 bcf/d. McMoRan is continuing discussions with potential LNG suppliers in the Atlantic basin and natural gas consumers in the US to develop commercial arrangements for the facilities.

4/22/05

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