Freeport-McMoRan 2013 Annual Report Download - page 56

MANAGEMENT’S DISCUSSION AND ANALYSIS
54 | FREEPORT-McMoRan
have reduced drilling activity at Eagle Ford from eight rigs in
mid-2013. At December 31, 2013, there were three drilling rigs
operating, which we expect to reduce to two during 2014. At
December 31, 2013, there were 36 wells that were drilling or were
drilled and pending completion or connection to pipelines.
California. Development plans are principally focused on
maintaining stable production levels in our long established
producing fields principally onshore in California through
continued drilling.
Haynesville. We have rights to a substantial natural gas resource,
located in the Haynesville shale play in north Louisiana. Drilling
activities in recent years have been significantly reduced to
maximize cash flows in a low natural gas price environment and
to benefit from potentially higher future natural gas prices.
Inboard Lower Tertiary/Cretaceous. We have an industry-leading
position in the emerging shallow-water Inboard Lower Tertiary/
Cretaceous natural gas trend, located on the Shelf of the GOM and
onshore South Louisiana. We have a significant onshore and
offshore lease acreage position with high-quality prospects and
the potential to develop a significant long-term, low-cost source
of natural gas. Data from eight wells drilled to date indicate the
presence of geologic formations that are analogous to
productive formations in the Deepwater GOM and onshore in the
Gulf Coast region. The near-term focus is on defining the trend
onshore. We are currently completing two Inboard Lower Tertiary/
Cretaceous exploration prospects, including one onshore well,
and plan to perform production tests on these two wells and a
third well in 2014.
The Lomond North discovery well within the Highlander area,
in which we are the operator and have a 72 percent working
interest, located in St. Martin Parish, Louisiana, is currently drilling
and has encountered gas pay in several Wilcox and Cretaceous
aged sands between 24,000 feet and 29,000 feet. The wireline log
and core data obtained from the Wilcox and Cretaceous sand
packages indicated favorable reservoir characteristics with
approximately 150 feet of net pay. The Lomond North discovery
well is currently in completion operations to test Lower Wilcox
and Cretaceous objectives found below the salt weld. We have
identified multiple exploratory prospects in the Highlander area
where we control rights to approximately 56,000 gross acres.
During 2013, we commenced completion operations at Davy
Jones No. 2, in which we have a 75 percent working interest,
located on South Marsh Island Block 234. Flow testing is
anticipated in the first half of 2014. During 2014, we also plan to
complete the Blackbeard West No. 2 well, in which we have a
92 percent working interest, located on Ship Shoal Block 188. The
Lineham Creek exploration well, in which we have a 36 percent
working interest, located in Cameron Parish, has been suspended
while future plans are being developed.
Gulf of Mexico. Multiple development and exploration
opportunities have been identified in the Deepwater GOM that are
expected to benefit from tie-back opportunities to available
production capacity at the FM O&G operated large-scale Holstein,
Marlin and Horn Mountain deepwater production platforms.
Holstein, in which we have a 100 percent working interest, is
located in Green Canyon and has production facilities capable
of producing in excess of 100 MBOE per day. The Holstein platform
rig refurbishment program was conducted in the second half of
2013 in preparation for drilling and workover activity, which
commenced in first-quarter 2014. Over the 2014 to 2016 period,
we expect to drill seven sidetrack wells from the Holstein platform
and five subsea tie-back wells from contracted drill ships to
enhance production volumes from the spar. Near-term tie-back
prospects in the Holstein area include Holstein Deep and Copper.
The Holstein Deep development, in which we have a 100 percent
working interest, is located four miles west of the Holstein platform.
FM O&G acquired the acreage associated with this development
in the 2013 lease sale held by the Bureau of Ocean Energy
Management (BOEM). Two successful wells had previously been
drilled and encountered approximately 500 net feet of oil pay in
recent years. We plan to delineate this prospect during 2014.
The Copper exploration prospect, in which we have a 100 percent
working interest, is located southeast of the Holstein field in
4,400 feet of water and is a subsea tie-back opportunity to the
Holstein facility. The prospect is a Holstein analog play with
Pliocene objectives and has a proposed total depth of 14,500 feet.
Development of the Lucius field in Keathley Canyon, in which
our subsidiary Plains Offshore has a 23.33 percent working
interest, is progressing with first production anticipated in the
second half of 2014. The geologic results from the six wells
drilled since 2009 confirm a significant oil resource. Subsea
infrastructure is currently being installed, and topside facilities are
more than 90 percent complete and on schedule to be delivered
and lifted into place during first-quarter 2014. The sanctioned
development of Lucius is a subsea development consisting of a
truss spar hull located in 7,200 feet of water with a topside
capacity of 80 MBbls of oil per day and 450 millon cubic feet
(MMcf) of gas per day.
During 2014, Plains Offshore also plans to commence drilling
at the Tara exploration prospect, in which we have a 100 percent
working interest, located northwest of the Lucius discovery
in Keathley Canyon in 8,700 feet of water. Tara is a Lucius analog
prospect with Pliocene/Miocene objectives and has a proposed
total depth of 23,000 feet.
Eagle Ford. We have an attractive position in an oil- and
NGL-rich section of the Eagle Ford shale play in South Texas.
Production from the field has grown significantly in recent years
and averaged 46 MBOE per day during the seven-month period
following the acquisition date of our oil and gas operations
in 2013. As part of our capital spending reduction initiatives, we