BANGALORE - McMoRan Exploration Co and its partner Energy XXI Ltd unveiled a gas discovery in the shallow waters of the Gulf of Mexico, sending their shares soaring and rekindling excitement about the region's potential as a major energy source.
McMoRan shares surged as much as 50 percent, their biggest single-day percentage gain ever, while those of Energy XXI rose as much as 48 percent. Shares of Plains Exploration and Production Co, another company with interests in the well, also touched a year high, rising as much as 6 percent to $32.20.
McMoRan said the Davy Jones ultra-deep prospect was drilled to 28,263 feet, in about 20 feet of shallow water, and the results indicated a total of 135 net feet of hydrocarbon bearing sands.
Co-Chairman James Moffett said in a statement the discovery could be one of the largest in the Gulf of Mexico, adding that the region provides significant additional development potential.
Wunderlich Securities analyst Neal Dingmann said the discovery was positive news for all the companies involved.
While it's tough to quantify it, the results are clearly very positive, not just with the stock, not just with the well, but for that entire (Davy Jones) prospect, he said.
The announcement follows recent finds by other companies including Anadarko Petroleum Corp. Anadarko's fifth discovery of 2009 in December was at Lucius exploration well in the Keathley Canyon block in the Gulf of Mexico, which encountered more than 200 feet of net pay in subsalt sands.
However, Devon Energy Corp opted to sell its Gulf of Mexico and international assets as they were taking up too much of its exploration budget.
McMoRan plans to deepen the well, which is located on South Marsh Island Block 230, to 29,000 feet to test additional objectives.
McMoRan said it holds one of the largest acreages on the shelf of the Gulf of Mexico and onshore in the Gulf Coast area with rights to about one million gross acres including 150,000 gross acres associated with the ultra-deep gas play.
The geologic results from this well are important and are redefining the subsurface geologic landscape below 20,000 feet on the Shelf of the Gulf of Mexico, Moffett said.
New Orleans-based McMoRan operates the Davy Jones prospect. It is funding 25.7 percent of the exploratory costs and has a 32.7 percent working interest. Energy XXI has 15.8 percent working interest, while Plains Exploration holds a 27.7 percent interest in the Davy Jones well.
McMoRan in October made a similar discovery at the Blueberry Hill project in Louisiana, where it holds a 42.9 working interest, with Plains Exploration holding the rest.
McMoRan shares were up $3.79 at $12.98 in midday trade on the New York Stock Exchange. Plains Exploration was trading up 75 cents at $32.25 while Energy XXI rose 76 cents at $3.39 on the Nasdaq. (Editing by Dinesh Nair)