So deep is its conviction that McMoRan acquired shallow water assets on the Gulf's shelf from Plains Exploration & Production
McMoRan is not alone in its quest to find natural gas from the deeper (and older) rock formations under the Gulf. But the real question is: Why?
The company, along with its public partner Energy XXI
Currently, Ultra Petroleum
Not a smooth ride
Thanks to last year's Deepwater Horizon disaster, government regulations have become stricter. Higher costs, more ardous compliance, and greater attention to safety will undoubtedly be a part of new efforts in the region. This will not rest lightly on management's shoulders.
From an operational standpoint, the Davy Jones well No. 1 is expected to undergo a flow test at the end of this year. Well No. 2 is expected to undergo the flow test in the second quarter of 2012. As a potential investor, I recognize that that's a long way off.
Things do not look too rosy at the moment from a financial standpoint, though. Another loss in the second quarter is only going to make investors jittery. Capital expenditures for 2011 are expected to be in the range of $300 million to $500 million. This makes each well that's being drilled cost upwards of $250 million. Hitting a dry hole is definitely not an option here.
Foolish bottom line
Overall, management seems to be going ahead with a lot of conviction. However, it is too early and risky to come up with a specific conclusion on the growth prospects of this company.
Think otherwise? Leave your comments below.