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McMoRan Exploration (NYSE:MMR)

Q3 2012 Earnings Call

October 19, 2012 10:00 am ET

Executives

Kathleen L. Quirk - Senior Vice President and Treasurer

Richard C. Adkerson - Co-Chairman

James R. Moffett - Co-Chairman, Chief Executive Officer and President

Analysts

Leon G. Cooperman - Omega Advisors, Inc.

Noel A. Parks - Ladenburg Thalmann & Co. Inc., Research Division

Duane Grubert - Susquehanna Financial Group, LLLP, Research Division

Eric B. Anderson - Hartford Financial Management, Inc.

Joan E. Lappin - Gramercy Capital Management Corp.

Leo P. Mariani - RBC Capital Markets, LLC, Research Division

Richard M. Tullis - Capital One Southcoast, Inc., Research Division

Brian L. Kuzma - Weiss Multi-Strategy Advisers, LLC

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McMoRan Exploration Conference Call. [Operator Instructions] I would now like to turn the conference over to Ms. Kathleen Quirk, Senior Vice President and Treasurer. Please go ahead, ma'am.

Kathleen L. Quirk

Thank you, and good morning. Welcome to the McMoRan Exploration Third Quarter 2012 Conference Call. Our results were released earlier this morning, and a copy of the press release is available on our website at mcmoran.com. Our conference call today is being broadcast live on the Internet, and anyone may listen to the call by accessing our website home page and clicking on the webcast link for the conference call. We have several slides to supplement our comments this morning, and we'll be referring to the slides during the call. The slides are also accessible using the webcast link on mcmoran.com. In addition to analysts and investors, the financial press has been invited to listen to today's call, and a replay of the webcast will be available on our website later today.

Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on the call include forward-looking statements. I'd like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings. On the call today are McMoRan's co-chairmen, Jim Bob Moffett and Richard Adkerson.

I'll start by briefly summarizing the financial results and then turn the call over to Richard and Jim Bob, who'll be reviewing our performance and outlook. As usual, after our remarks, we'll open up the call for questions.

Today, McMoRan reported a net loss applicable to common stock of $64 million, $0.40 per share, for the third quarter of 2012 compared with a net loss of $9.4 million, $0.06 per share, for the third quarter of 2011. The third quarter 2012 results include noncash charges to exploration resulting from the write-down of leasehold of certain allocated carrying values totaling $37 million from the December 2010 property acquisition, a $6 million noncash loss on the debt exchange associated with the exchange of our 5 1/4% convertible senior notes and a $7.6 million charge to lease operating expenses for unsuccessful work over expenses during the quarter.

Our production during the third quarter 2012 averaged 134 million cubic feet of equivalents per day, net to McMoRan. That compared with our previous guidance of approximately 135 million cubic feet of equivalents per day. Our third quarter 2012 production was affected by downtime associated with Hurricane Isaac, which impacted Gulf of Mexico operations prior to making landfall on the coast of Louisiana in late August.

Our third quarter 2012 oil and gas revenues totaled $88 million. That compared to $134.5 million during the third quarter of 2011. The realized gas prices in the third quarter of 2012 averaged $3.12 per Mcf. That was lower than the year-ago quarter of $4.38 per Mcf, and our realized prices for oil and condensate averaged $103 per barrel in the third quarter of 2012 compared with $101 per barrel in the year-ago period.

Our earnings before interest, taxes and depreciation and exploration expenses, or EBITDAX, totaled $33 million in the third quarter of 2012, and our operating cash flows, which were net of $16.3 million of -- in working capital sources and $20.6 million of abandonment expenditures, totaled $12.1 million for the third quarter of 2012.

We funded capital expenditures totaling of $103 million during the third quarter of 2012 and ended the quarter with $557 million of debt, which included $257 million in convertible securities. We were successful in September of completing an exchange offer of our 5 1/4% notes. We extended the maturity by 1 year. The $68 million of notes, we extended the maturity by 1 year. And the terms of the new notes are identical to the terms of the existing notes except the new notes have a maturity date of October 2013.

We ended the quarter with $192 million in cash. Currently, we have 162 million common shares outstanding. And assuming conversion of our convertible securities, we would have approximately 224 million shares outstanding on a converted basis.

I'd now like to turn the call over to Richard, who will be referring to the presentation materials on our website.

Richard C. Adkerson

Good morning, everyone. We're here today. We know there's a lot of focus on the well testing at Davy Jones, and we've got some positive news to report to you on our progress towards moving to get the well tested. But it's important that you see on Page 3 to put this in the context of our overall ultra-deep trend exploration effort, what Jim Bob has called in earlier conference calls our sub-salt franchise. It started with exploration concepts really that we began focusing on almost 12 years ago when we began our deep gas play. And then following our acquisition 5 years ago of Newfield and the access we had to the Blackbeard project, we have now extended our 3D database, getting more geological analysis to tie in these massive structures with production history onshore and into deepwater. We have positive drilling results now from 6 wells. With the granting of our leases from the recent lease sale, we've extended our industry-leading, ultra-deep acreage position and established the acreage around a whole series of very important prospects for us. We've invested heavily to deal with the specialty completion equipment and technologies that are necessary to allow us to produce discoveries from their ultra deep. So we want to give you reports on where we stand with Davy Jones and other projects. But the big picture is, we've got an overall effort now that has tremendous opportunity for our shareholders.

Page -- Slide 4 covers our third quarter's specific highlights. Operations at Davy Jones to flow test this well have progressed with an important way [ph]. We have 3 wells drilling currently in our ultra-deep program, 2 offshore and 1 onshore, which is the first of a series of efforts to extend this to the onshore where we have important -- really significant potential.

During the quarter, the Bureau of Ocean Energy Management awarded all the leases that we submitted, high bids zone, in the June lease sale, important step. And as we've previously disclosed, we reached agreements to sell 2 packages of noncore conventional producing properties at attractive valuations, which provide us some liquidity to go forward.

On Slide 5, we have the financial details that Kathleen just reviewed for you, and that information is there for your information.

Slide 6. With the Davy Jones status report, Jim Bob will be giving you some more color on this, but we've known successfully cleaned out the wellbore, and that will now allow us to test all 165 feet of the sands that we perforated in the Wilcox. We have now replaced the heavy drilling mud with completion fluid. That was a challenge for us because we had to suspend operations during Hurricane Isaac. And we had some material that hardened on us in the bottom of the wellbore, we had to clean it out. Now the next step of -- is to install the production tubing, to remove the blow out preventer, which is used in drilling operations, install the production tree. And with the completion of these steps, we then can proceed to allow the well to flow and measure its flow. With success, we will be able to bring this property-owned production in a very quick feature because that's the characteristic of these prospects. In shallow water, there are wells that can be brought to production quickly once the drilling and testing has been done. This flow test would be the first from a shallow water, ultra-deep, sub-salt well in the Gulf of Mexico Shelf.

From an accounting standpoint back in March, in our initial attempts to perforate and test the well, these steps that we have before us took about 2 weeks. Timing, of course, is going to depend on what we see in these operations and other factors, but that gives you some kind of frame of reference for looking at it.

On Slide 7, after the completion of the Davy Jones No. 1 well, we will then be able to move for completion and testing and reviewing the results of the Davy Jones No. 2 well. And you'll recall we saw multiple Wilcox sands in this well, and we also have potential in the Tuscaloosa and Lower Cretaceous carbonate sections. So it's an important next step, and that's where we'll be moving to after we complete the activities at the No. 1 well.

You can see on the map the other wells, the Lafitte, Blackbeard East. We have submitted development plans to complete and test the Upper Miocene sands at Blackbeard East and sands in the Upper Eocene at Lafitte. And so we're moving forward with our permitting activities and plans for that. At the Blackbeard East, the pressure and temperature data indicate the completion in the Upper Miocene could be done on a conventional basis using conventional equipment and technologies. And we continue to evaluate potential development of deeper sands. A completion in the Upper Eocene section at the 30 -- below 33,000 feet at Lafitte will require development of equipment to handle 30,000-pound pressure, and so we're proceeding with plans for that. Then at the Blackbeard West No. 2 well, we're drilling below 23,600 feet towards -- with about 1,000 feet to go towards our targeted depth. We reported today that recent logging data indicate the presence of potential low-resistivity pay zones, one about 80 feet thick, requiring further evaluation. We encountered Middle Miocene sands below 22,500 feet with really high levels of porosity. Seeing this porosity in this drilling is good news for us in terms of our overall program because it indicates that sands in this environment can have positive characteristics, which, again, is important to us as we look more broadly at the program.

The Lineham Creek well is right on the shoreline in South Louisiana. We're drilling below 23,000 feet with a targeted 29,000-foot, very large area of potential closure targeting Eocene, Paleocene objectives below the salt weld. Chevron is the operator of this well with a 50% interest, and we're participating with a 36% interest. As I mentioned earlier, the opportunities onshore with this concept are really significant. And we have now spudded our first operated well, the second onshore following Lineham Creek, and this is located onshore in South Louisiana. We spudded in the middle of September, drilling now below 6,700 feet with a proposed 30,000-foot depth targeting multiple objectives below the salt weld that we had seen in the Davy Jones well. We have -- we expect to have a 72% working interest in this well. We've got multiple exploratory prospects in this Highlander -- area we're calling Highlander, where we control the right to approximately 80,000 gross acres in the area.

I mentioned the -- shown on Slide 8, that the BOEM has awarded us all the leases from the June sale where we had high bids. Six of the 14 bids were sole bids by our company. The remaining 8 bids were made jointly with Chevron. And what these blocks give us, it really enhances our exploration acreage around a whole series of our prospects. And these structures cover multiple blocks, large areas, very important for us to be able to get control of acreage so that we could, through our exploration area, have access to the potential from all the structures. This was an important step for us.

Page 9 summarizes the acreage for these prospects before and after the lease sale. In total, we acquired about 68,000 total acres. But the key to it is where we acquired them and what they did to upgrade the quality of the prospects that we've previously identified. Significance of these structures is very large, as all of you who have followed us know. You can see on Slide 10 exactly where our discoveries have been, where our current wells that we're drilling are, what our prospects are, how they relate to the different sand sections that we're testing, how they interrelate. We've identified gross unrisked potential on the shelf of 100 trillion cubic feet of equivalents and onshore of additional 30 trillion cubic feet of equivalents. This is just going to -- what this requires is drilling exploration analysis, successful production to have success.

To give some indication of potential of that success, we've put together an ultra-deep economic model on Slide 11. Emphasizes this is a model. This is not a forecast or prediction but to give an illustration of the significant value of our play. It shows the value for each 4 trillion cubic feet equivalent gross. Our interest would typically be half of that. Based on drilling and completion costs of $200 million for each well, we expect to gain efficiencies in drilling and completion activities as we go forward. Recovery rate of 200 bs of equivalents, including facility cost and finding and development cost of $1.50 per Mcf. So you can see at different gas prices what this model would show you, that the values -- how the values would be generated for our company and our shareholders.

I also want to report to you on recent activities we've had with our Main Pass Energy Hub. Many of you recall that previously, prior to 2007 or so, we were working, using our substantial facilities from our abandoned sulfur mine at Main Pass 299, in a permitting process to develop offshore regasification facilities. Of course, the world changed. At that point, the industry was focused towards importing gas into the U.S. We were able to get approval from the U.S. Maritime Administration to use this deepwater port for the import and regas of LNG. And since that time, with the major increase in gas resources in the U.S. and the industry looking towards exporting LNG gas from the United States, we've had continuous discussions on the potential of using the Main Pass facilities as an export facility. We have entered into a memorandum of understanding with the party that's working with us on the required permitting to qualify this facility as an export facility to work with potential interest from international purchasers of the gas. The concept would be using floating LNG ships with our facility used as a gathering point, conditioning facility and storage facility to load these floating LNG ships for export purposes. From our standpoint, it's potentially good business from a fee standpoint for providing these services and also down the road with a substantial potential for our company for natural gas production. It would allow us to have access to markets that could be attractive to us longer range from our own production.

Slide 13 gives the detail of these property package sales. As I said, we received good cash value. Importantly, we've transferred abandonment obligations to the purchasers, and it provided us some cash for our near-term liquidity. So we're going to continue looking for ability to do transactions like this, and we're pleased that we made progress this quarter in getting these advanced.

Slide 14 includes our updated outlook for our production for this year, our capital expenditures. Going forward into 2013, our spending is really going to be dependent on this. Our current activities, broadly based with the kind of success we anticipate, we'd be spending at roughly the same levels in 2012. So those are some of the details on our outlook.

We are -- I want to make the point about where we stand with our future financing. We are engaged in discussions regarding financing of our future exploration and development costs. These require a lot of capital, as you can see. Because there are a large number of prospects, a big opportunity for us. The positive explorations results to date have reduced the exploration risk of the play and clearly have established the potential for this as a development of a very large, new resource trend. Successful flow testing of discoveries will further reduce the development risk. We have developed technologies and proprietary processes. We've combined this with significant potential resources drilled today and our inventory and acreage position. These give us multiple financing options, which we are considering, and opportunities to advance value creation through joint ventures or other financing transactions. As I said, we may look to sell some other noncore assets.

Now these are going on, on many fronts. Because of that, we're not going to be able to give you a lot of specifics, exactly the directions we go. But we want to make the point, is that we're working on it. We've got a lot of experience in accessing financing in many different forms, and we have a lot of options here with the current situation at McMoRan.

So Slide 15 kind of brings all this together. About our ultra-deep play, we're very excited about it. We've set the table now to move forward with it. It is an important, new, exciting venture where a lot of new things are happening geologically from a development standpoint, production standpoint in the industry, and we couldn't be more pleased to be the leader in this area. With that, Mr. Chairman, I'll turn it over to you. Jim Bob?

James R. Moffett

Yes, I'm here. And good morning, everybody. Richard has done a good job giving you the big picture. And there's a couple of things here. So first of all, Davy Jones. What are some of the things that we saw when we had this unfortunate hurricane? We had a buildup of [indiscernible] Mud in the well and had to be cleaned out. We finally got away from these mud [indiscernible] By using the top drive, and we were able to rotate for the first time in its history. And as you guys understand, it's about 2 7/8 by 2 3/8, and that when you -- in a normal day, I suppose, but we had it cleaned up now.

Why don't I spend a minute on we had a clear [indiscernible] when the hurricane shut it down and hardened the mud, the [indiscernible] crushed opposite [ph] Perforations. Sure enough, when we drill with this new bit, we went to the C, D, F sand. And every time we got into the unperforated parts of the property, it just washed down. Now why is that important? The only way a crusher [indiscernible] dispersed is you have a very permeable sand that is literally sucking the water and mud opposite [ph] the perforations. Now I only point that out as another indication of the fact that these rocks, as we have every reason to believe, that the permiability will provide us some substantial flows. We'll see. And the other thing that we have on Slide 18, you'll remember when we flowed these sands before, which is in line with the information I gave you on the day [indiscernible] plugged, when we shut the well in, you see that it fluctuate up from 3,000 barrels to 9,000 barrels. It went just in a straight line. And you can only get that with a permit for the reservoir. So I think you'll be happy to know that everything we've seen so far continues to indicate a positive situation. As a matter of fact, we're out there right now. As I speak, we're getting ready to run the tubing. Every time we try to circulate zinc bromide, we get [indiscernible] of gas. And as well, as you know, it was designed -- originally, you have the tubing in place, you use a remote firing gun and we would perforate the sands only after having the tubing in place. But because of the failure of the remote sensor, as you'll recall, we had to start all over. And we perforated all 5 of these zones[ph] with a wireline casing gun to get enough penetration. That's why we've had Richard finish in time trying to run the tubing, because you have these valves [ph] of sands open. And if you're not careful in your swabbing [ph] manner, it's [indiscernible] why we're working with the tubing. But hopefully now, we've got all that kind of under our belt, and we will get the tubing in the ground here should start running and you'll enter the completion mode.

Obviously, Richard talked about our plays. So let me just talk about a couple of things.

In Lineham Creek well, which is in progress, we've gone to the depth now that we got indications that we're below the salt weld, and there's indications that this thing is starting to [indiscernible]. It's a 30,000- to 40,000-acre structure. Onshore, what you need, you need a development program with land-based rigs. So I can't overemphasize the fact that the Davy Jones structure, Blackbeard structure, Thunderhorse, Highlander, Lineham Creek, wherever you look in this basin, whether it's deepwater, shelf or now onshore, these are all one basin. And these are big structures that look like brothers and sisters. So we continue to have these targets looked at.

Then the next, #21, if you'll recall, and this is a Lineham Creek, you'll see we had the Wilcox. And possibly, we get deep. And [indiscernible] depending on the well information. And this cross-section I'm showing is almost a look-alike for prospects like Thunderhorse, Tahiti in the deepwater.

Same thing for our Lomond [ph] prospect. You see the cross-section on Page 23. We have this big Eocene Wilcox sand. We're after the salt in [indiscernible] depths in deep water.

I have this last slide, 24. When we mentioned our acreage that we got in the lease sale, it was very important for us to get delayed because we bid in June. And because of delays, that for lots of reasons, hurricane, et cetera, the government didn't release this to us until last Thursday. Now that's a very important point because as you can see from the numbers that Richard discussed, it filled in a lot of things that we had as proven structures. And whether you know it or not, when you bid a lease in June, you didn't know you're the high bidder. Until the government awards it to you, they own the lease. So that happened last Thursday. There is the opportunity now to go ahead in so far our thinking as to how we're going to [indiscernible] some more money into this deal. It's very important that we have all these prospects under control. You can't sell them, especially when you're looking to sell on a leveraged basis. It's something you don't own. Fortunately, all of that is behind us. And you'll remember the acreage was bought before. The Thunderhorse, we bought for nickels and dimes. And then after that, as you can see, in the right hand corner, commanded $50 million to $100 million bids. So huge opportunities to increase the value here.

The last slide is an interesting new development, which has basically just happened. We've had a tract that we've acquired from Newfield. It had one platform up in the northeast corner. It is called West Cameron 73. In 2010, we carved out a piece of the tract. What we carved out, as you can see in the bottom, is on the South [ph] half and the West half of 73. Now it's a little complicated because we own the North half of this 70% working interest. We own that. And we own it to 14,000 deep drilling depth. This East part of the southeast corner where you see the service location, this is going to be where exactly our acreage we've retained and we own again, our working interest from 14,000 deep drilling depth. The discovery well was drilled as a sidetrack. As you can see, we started a service location actually on our acreage. What is -- the reason why we are reporting it to you, it turns out to be a lot bigger prospect than we anticipated. And frankly, the people who drilled the well, the original prognosis is looking for sands on geophysics [indiscernible] at about 17,000 feet. Well, that sand turned out to be good. It's relatively thick sand. But the interesting thing is the 6 reservoirs above it started at 15,000 feet. So you have to go in -- to the east of us -- in Block -- West Cameron 72, you have a huge platform out there, old platform that is operated by Centurion. And this acreage appear to be with depths all of West Cam. There's obviously some stratigraphic structure separations to this discovery wellhead [ph] at 7 different horizons. And 400 [ph] feet of play in these depth of water is a huge discovery [indiscernible] feet of water. So we have an override under pieces of the block, all the working interest in the other. As you can see, because of the amount of pay [ph], there are some direct opportunities, and we're going to be reviewing that. So it could add some substantial reserves to our reserve base. And that because there's going to be water, they will basically go on production. And this is all above this salt weld, incidentally. And on that acreage we talked about, this is one of the blocks we have where we had the acreage above this -- above the salt weld prospect above them. So all 400 feet here are above the salt weld. We are going to be looking at a deeper section below 18,000. We'll be looking at all of our options to participate possibly and having direct offsets to some of these multiple plays.

From my standpoint, I hope what we may able to do today is to remind you we have an awful lot going on. We've got some great prospects. We were able -- we have a good core of producing properties, sold off a couple of properties. And by the way, you have to read those very carefully because not only they were able to get -- raise a substantial amount of cash, but when you sell these properties, you are able to abrogate a significant recognition expense, which the bar has to assume, in this case that we reported, it was about $45 million. So those 2 transactions, which were really non-core assets for us, represents a small part of our production between the cash and the recognition abrogation, it was over a $100 million deal. There's a lot of different values and this company has actual ways for us to continue to have ability to feed the cash as necessary for us to complete this ultra-deep play that we've been working on. So with that, Richard, I'll turn it back to you and Kathleen, let's see if we got some questions.

Richard C. Adkerson

Thanks, Jim Bob. Operator, let's open up the line for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question will come from the line of Lee Cooperman with Omega Advisors.

Leon G. Cooperman - Omega Advisors, Inc.

First, my first, thanks for the informative rundown. I suspect I understand the answer that I'm about to get from this question, but I can't resist asking it. We're a $3 billion equity market cap company playing in the land of the majors, in the Chevron, $224 billion; BP $137 billion; Exxon Mobil, $429 billion; and so on and so forth. And I guess the validation comes from how intelligent independent parties value what we have. And so the way I'd ask it, maybe I direct this question to Jim Bob, to you in your capacity as Chairman of Freeport. Back in August, Freeport invested, I believe, $500 million in MMR Paper [ph]. Given what has transpired since August of 2010, do you think what we've discovered makes Freeport's investment worth a lot more now than it was then? And I guess directly, you've mentioned you're working on also 2 different financing proposals. Is the next round of financing, in your opinion, going to be at a valuation level materially superior or higher than the valuation level that the financing was done in August of 2010? I hope you don't mind that question.

James R. Moffett

No, I don't mind the question. But the only thing I can tell you is, Lee, is we've made a substantial amount of progress and been getting big risks in this play. We didn't even know at the time we did the first financing that we had the onshore prospects for instance. And we didn't know that we were going to be joining Chevron on their onshore prospects. Obviously, the data from our wells is [indiscernible] means good to an operator like Chevron and just in general, drilling in the shale, this West Cameron 73 prospect that I talked about. And we had a nice surprise when we farmed out and we retained a lot of interest, ended up with a substantial well in 33 feet of water. So there's no question and if you're asking, we actually had success with the money we spent and invested to these properties obviously so. Obviously, the test, flow test at Davy, which will be only the second test in the whole Gulf of Mexico by the way, and the Wilcox will add substantial value. So assuming all of this, flow of the information continues to be positive. There's no question that we've added tremendous value, and we ought to be able to be smart enough either through investments or sell-in to the third-party industry partners on a leveraged basis the fact that these properties have been substantially derisked.

Operator

Your next question will come from the line of Noel Parks with Ladenburg Thalmann.

Noel A. Parks - Ladenburg Thalmann & Co. Inc., Research Division

I guess I wanted to ask mostly about Blackbeard West No. 2. I -- there was -- the mention that you had the one set of sands that you have logged and looked good, but then the other 80 feet of sands you said were in need of further evaluation. So just trying to get straight whether those were shallow or deeper. And also at Blackbeard West No. 2, just looking back, could you talk about the time period when you were getting below the salt weld? Because it seemed like that was sort of a longer, maybe difficult period. I just wanted to know if that was any indication of what you might see in future wells.

James R. Moffett

Thank you, Noel. I usually put it in this way. I start the -- actually, drilling out from salt, there's 2 things that can be the answers to your question. When we drilled below the salt, as we had suspected, we got this cupola. Remember, cupola is a roof at the top of the -- of this structure. And that really should have sealed pressure so that it could not vibrate beyond the salt weld. Salt weld, W-E-L-D. And this welded feature, actually a trap to everything, including gas and hydrocarbons. When we drilled through the salt, sure enough, we went from a 17,000-pound environment to 19,000 pounds. So at 163 feet, we saw a 2,000-pound jump in the pressure. And that's -- so that has to be this trapped pressure we've been looking for. And this is -- I'll talk about it at first is we're still not really sure how we're ever going to complete if we try to complete the sands at [indiscernible] because the sands at [indiscernible] appear to be so deep and unconsolidated. And that was -- and that well seen here at the formation kept trying to flow on us. Our drillers call it coffee ground. But it had more gas and more volatility anywhere we drilled out there. So what we do with that 300, 400-foot section is under the salt. And when you say it was a tough drilling, it was typical of some of these sub-salt level zones because it took us 19-pound mud to get it settle down, which is really unusual even at these depths. So there's a volatile bunch of gas right down under the salt and we finally had it drilled up, and I mean, we worked several months getting that ladder down to it and getting it heeled off so we can get on down deeper. And when we drilled out to see the Middle Miocene sands and Lower Miocene sands, we got into a couple of zones and one of them had a heck of a mudload. So when we logged it, what we found is a section, what we call laminated pay. It had that much resistivity. And we had found [indiscernible] out in the deepwater and wells that we drilled, in this particular case, the so-called Ram Powell field. So -- but it's lower resistivity than normal production. That's why Ram Powell was such an interesting discovery. Ram Powell, by the way, produced 260 million barrels of oil. But as we drill deeper, we continue to get some sands. Some might now show some of that. But what's important is the sands that we've seen, even if it's the thin gas on water, appear to have gas and water there. That could mean that we have got to go up deep somewhere in this whole [indiscernible]. It could also mean that we just haven't gotten into the real material part of this. So we are drilling deeper now. We've got a couple of sands in the wells that we have not evaluated [indiscernible] wireline. We hope to do that when we get down below 25,000 feet. But once again, those sands that we haven't logged by mud logger, it had tremendous gas associated with them. And we had to stop and circle it out of our system before we can drill deeper. So the cupola feature, like the East Blackbeard feature and like Barbosa to the West, they've got a tremendous feel on them and we just got to get lucky enough to get a straightforward well above sand. I think you heard Richard say it on his call. These sands, we carry a 20% to 24% porosity at 23,000 feet. With all this pressure that they're exhibiting that we've had to use, by the way, to haul back, these say they're going to be tremendous wells. So I hope, Noel, that, that answers both your questions.

Operator

Your next question will come from the line of Duane Grubert with Susquehanna.

Duane Grubert - Susquehanna Financial Group, LLLP, Research Division

Jim Bob, on the LNG prospectivity, can you talk to us about how you picked United LNG as a partner to group -- or a group to partner with? And also, if I'm an off-taker, what is going to appeal to me about the MMR export idea versus competitors?

James R. Moffett

Thank you, Duane, I appreciate it. First of all, the important thing to remember about this concept, when we were going to import and now we're going to export, we're sitting on top of a 2-mile salt dome that comes up to 1,100 feet below the surface. And this thing, like the -- this would be the only storage dome in the offshore with this energy sitting on top of that. There's multiple storage domes onshore Texas, and Louisiana. A matter of fact, the federal oil reserve, they use our security reserve is onshore. But this does in 200 feet of water, way offshore so you can get these big tankers in and out. This storage facility could be used to regas or, in this case, get a -- return back LNG so it can be transported. But we can store up to half a Tcf of gas in these portals because that is what these guys are really interested in that we're talking to. Because they want to have gas that they have in the ground that they buy and store. Because there've been so many ups and downs and it should be stabilized, everybody over there, and they want to get some predictable reserves. And that's why, along with our import facility, the sooner we get permits, with the amount of reserves we're exposing ourselves to, they'd love to sit down and try to make some sort of deal where we have a pricing mechanism to give them the benefit of the price to pay, spent a lot of money helping us find the stuff, and some of them with a good deal for us and a good deal for them, which is to buy some of these reserves on a long-term contract. That's difficult to do. But in this case, since you have got so much storage, you put 2 or 3 fields in this salt dome and [indiscernible]. So that's basically what we got out there Duane.

Duane Grubert - Susquehanna Financial Group, LLLP, Research Division

Okay. And specific to the partner, United LNG, how did you choose them?

James R. Moffett

Well, they had a very close contact because some of the people that they have on their team is the Chairman we're working with the Department of Energy in past administrations, they are now working for themselves. So they had some very close contacts, particularly Thailand, Indonesia, the typical places where we do business. So we just kept trying to conceptualize with them how we would make this project work. And about that time, we had a severe energy down on the coast that we've got to improve to export the gas from the U.S. And I think these people are turned on by the fact that we now have a terminal that they can get on the ground floor, but that we can get some potential reserves of gas that can be pumped in this dome. And remember, once again, I won't keep saying over and over, you can put oil in this dome, you can put in your gas, and at the same time, just put it in different compartments using compartmental breakdown.

Operator

Your next question will come from the line of Eric Anderson with Hartford Financial.

Eric B. Anderson - Hartford Financial Management, Inc.

I'd like to follow up a little bit on the plans that you submitted to BSEE concerning Blackbeard East. Assuming you're going to use the current wellbore to develop the sands that are above 25,000 feet, Will you -- how will you access these, the lower potential pay zones? Can you do it in the same wellbore down the road or is that going to require a new well at some point?

James R. Moffett

Great question, Eric. You are always on the ball. On the shallowest prospect we discussed with you at East Blackbeard, if we get to permitting with that, we probably will pop another well there so it can be a smaller borehole and it's 120,000 feet. Because that way, we can reserve this well to go back and get the 24-pound foot sands and test, as well as the Cretaceous business, to how we might be able to leverage ourself there.

Eric B. Anderson - Hartford Financial Management, Inc.

Okay. So then you're possibly then going to be drilling next year to satisfy the development plans that you've submitted then?

James R. Moffett

Yes, sir. To answer your question, yes, sir.

Operator

Your next question will come from the line of Joan Lappin with Gramercy Capital.

Joan E. Lappin - Gramercy Capital Management Corp.

I think my question is about the 30,000-pound BOP. I'm sorry, can you hear me?

James R. Moffett

Yes, ma'am.

Joan E. Lappin - Gramercy Capital Management Corp.

Okay. The 30,000-pound BOP, one of the slides says that you need it for that well. I wonder how many of these wells you're going to proceed with are going to need the 30. And do you have -- will you just stage them one after the other so you can use the same one or will you have to order another one? And sort of related to that Ship Shoal attractiveness was that you only needed standard off-the-shelf equipment. But we're almost at the target and we haven't found, I guess, what we're looking for. So if you have to go deeper, will that alter that?

James R. Moffett

Well, tell me the last part of your question again.

Joan E. Lappin - Gramercy Capital Management Corp.

I'm sorry. So the question is, will you stage each of your various wells so that you can use the same 30,000-pound blow out preventer? And if Ship Shoal 188 doesn't find its target at 24,500 and you have to go deeper, will you not able to use conventional equipment on that to pull a well?

James R. Moffett

Okay. And that's what I wanted to clarify. Obviously, on the 30,000-pound equipment, like your 25,000 pound, when we build the floor and set, that will be used multiple times, over and over again, and be moved from well to well. As we drill deeper, any of these prospects, once we get below 25,000 feet, you have the -- the pressures are going to be higher, obviously. And once we exceed that 25,000 pound, then we have to go to the 30,000 pound. But right now, the main thing we can see is down the -- past the 26,000 feet, we should be okay with standard equipment, which means the tubing, wellhead equipment, testing equipment, all the things that you have to have to drill, test and produce this well.

Joan E. Lappin - Gramercy Capital Management Corp.

Have you asked to go deeper yet at Ship Shoal [indiscernible]?

James R. Moffett

We are not permitting deeper because we still, as we speak, we still continue to get indications from the mud log which shows that there are [indiscernible] possibly productive and we'll just be looking. As I said, and Richard said in his remarks, we keep getting the right kind of indications. The sands we're seeing have 20% to 24% porosity. A couple of them have pay on water, and this 180-foot section looks like it has in there phenomenally and having good enough mud logs there, and it should be okay. But what I'm trying to do is to get the well down. If we can get a real nice pay sand that is straightforward, then these other ones will just be behind pipe and something we can deal with. So the prospect continues to look like it's trapping, and it's a big area like all these sub-salt plays, and we'll just -- we'll look at this depth and we'll be drilling deeper based on the next 1,500 feet of hole.

Operator

The next question will come from the line of Leo Mariani with RBC.

Leo P. Mariani - RBC Capital Markets, LLC, Research Division

You mentioned JV discussions, a couple occasions here. You guys also talked about lease sale. You recently got awarded some properties, so that made the entire sub-salt play more attractive, and you guys have blocked up some acreage and kind of, again, mentioned JVs. Can you just give us some more color? I mean, have you had discussions in the JV side with a number of different players at this point? And additionally, is that kind of your preferred method of funding as you look forward here?

James R. Moffett

We will prefer the funding that gives us the most value for the shareholders. And so that's a given. As far as the JV is concerned, we've had so many people that -- what our team has done, people, as you've heard us say, course pioneers. Well, that's me. I guess some people say pioneers end up with arrows in their back. But we've been pioneers before. And when you get out and control as much acreage or known structures that is so obvious, 20,000, 30,000 acres of closure, with multi-Tcf potential right here in the Gulf of Mexico, some people have a hard time believing it. But we've got a group of foreigners and in domestic, players are awaiting with baited breath just like you -- the investors are, to see if we can get this validation. And when we do, all hell is going to break loose because as good as the Gulf of Mexico has been and as good as the deepwater structures are, where billions of dollars are being committed out there in 5,000 to 10,000 feet of water, when you find this stuff in 20 feet of water onshore, the cost to produce it, complete it, measure up for everything in the economics. So it's taken us 5 years to develop the database but it's taken us 20 years to develop a concept of drilling deeper, the drilling technology, the geology, the interpreting of the seismic, the interpreting of the logs. So the common theme that you'll hear amongst industry is, "Yes, they were nice in depth to say." But in many of them publicly, in these investor conferences, these guys who pioneered the play, they figured out it'll take us 5 years to catch up with them. So the deck is dealt, and the question right now is if we can get continuous validation so that we get to the point that people are really playing. It's a question then of what's the best deal for our shareholders today, including the future, if we keep as much of this potential that we've identified from the beginning and still stay within our financial capabilities. And I'll say this, remember, Lee Cooperman said, "This ought to be a major company play." I hate to go back in history but that's what everybody said when we went to see -- do the Grasberg. The Grasberg was in the middle of New Guinea, 13,000 feet, all the big major mining companies ought to be doing this, and we found the Grasberg. Everywhere we went people say, "Well, it's just a matter of time before somebody comes in here and takes you over." And as you know in that case, we took the property, the largest natural resource mineral property ever found even though it was in the middle of nowhere, and we merged our company and took over Phelps Dodge one of the larger copper companies, and became the largest publicly traded copper company. So if we find something good in enough here, we can control our own destiny. And I've said before, Davy Jones was the Grasberg of the Gulf of Mexico. What people forget was when we drilled that well people said, "You guys will never get to the Wilcox, it's below 40,000 feet, we even went to deepwater, stabbed it and drilled. But we were right and they were wrong. And we changed the hole landscape of the Gulf of Mexico. We made the onshore, if Davy Jones had not been right, there wouldn't be any onshore prospects because the Wilcox, [indiscernible], but the answer is, we changed the hole subsurface and the hole subterrain of the shelf in the offshore and the onshore with the discovery of the Wilcox at 26,000 feet. And I emphasized that, because when you get all emotional about these operational problems and getting these phase on production, that's why when we got these leases awarded to us last Thursday, we were ecstatic, because that gave us the control and the prospect inventory that we've been spending the last 15 years to get to a point of being able to say that we have got this figured out and we can find them, we can drill them and that would fix the hole play, prove we can produce them. If we do that, then we don't have to accept any situation. We can control our own destiny and that's a destiny of the shareholders and it will just be a case of us making sure that we get the best value for the shareholders.

Leo P. Mariani - RBC Capital Markets, LLC, Research Division

That was very helpful. I guess, just jumping gears a little bit here. West Cameron 73, obviously you guys have a 5% override in that well, pretty substantial pay, call them you've got the sum of 400 feet of pay. It sounds like a pretty big discovery. Was just curious if that was oil pay, gas pay or both? And when do you think that could come on production?

James R. Moffett

Because it's above the salt weld, because the sands are started at 15,000 feet, most likely you'll be gas and gas condensate. Some of the wells will probably make 20, 30 barrels a million. The deeper sands might measure as much as 40 barrels a million. But the sands are thick, one of them is about 200 feet gross, 125 feet depth. And important thing is, we have to figure out what's the big trap. I don't want to get too technical here, but if you look at the old geology back in West Cameron 72 to the East, there's a big structure up there and you see a number of platforms, but you pull the North logs and there's 1 or 2 pays in those wells up there. This well, we did started getting sands about 15,000 feet and then 15,800, and then 16,000 and then 16,500, and 16,700, right on top of the thickest sand. There's got to be a major separation and it's probably a combination, as best as we can tell, looking at the outside seismic, stratigraphic and structurally, it opens up the hole west plank. It shows up in the north, however, seen in between those [indiscernible] platform. Well, that was a new field platform that we bought and had a well that had 2 pretty good-looking sands there. I think they produce 10 Bcf between them. But so we own 100% of the work interest , no other [indiscernible] 73 and that little piece with it several location in it. And with 400 feet of pay, you can do the numbers probably better than I can every 100 acres. If you figure, 400 feet of pay in 100 acres and 1.5 million per acre foot, you will come up with some pretty fancy reserves. So let's say the reserve, a 100 Bcf trapped, and interestingly, they drill those wells right down to 18,000 feet and they stop because they don't own the rights below 18,000 feet. We own those rights. So from 15,000 to 18,000 feet, there's an opportunity for us to see how we can make locations, to see how much of this ties together. So it's a big opportunity for -- congratulations to the guys that drilled the well and we held out -- a bunch of us back in 2010 and this also tell you, on these acres we hold bad production, like everybody goes, has bad production. There are some still hard to find oil and gas above the salt weld and below the salt weld. Remember when we found Flatrock, several years ago, which is still the biggest producing platform on the shelf, that was sitting right underneath some of the major companies' production in the field above and producing almost 3 Tcf. And we -- so all of our acreage, you got nice surprises from time to time. And this is one of them. Because instead of being a one well, one sand shot deal, now it looks like this should be a multiwell development and very, very cheap as much as working interest as we probably were.

Operator

Your next question will come from the line of Richard Tullis of Capital One Southcoast.

Richard M. Tullis - Capital One Southcoast, Inc., Research Division

Jim Bob, with the Davy Jones well -- wellbore cleaned out, it looks like you got a good shot of getting a good read from that 165 feet of net Wilcox pay, so it seems like the well is positioned to get a good indication of the potential. What are you looking for? What do you think the potential investors are looking for from the early read on that well, flow rate, permeability, pressure, et cetera?

James R. Moffett

Thank you, Richard. We said before that because of the wellbore -- because of the way we view the well, we may be limited by the equipment because of friction in the tubing, something like 70 million a day. It's possible it could go higher. As far as what it is going to flow, that's why we're spending the time to get this thing tested. Initially, we have to be prepared to evaluate a couple of things. First of all, what the does it flows and this is established already. Perhaps there's some shut ends and how much skin damage is there. What the hell is skin damage? Skin damage is the area immediately around this borehole and we drilled for 2 years and has been sitting there completely for 2 years and this hole mud that we've been using, like the mud that hardened during the hurricane, you got a lot of contaminated area around the borehole. Everybody does, especially if you use oil based mud, and with these pressures, once we open up the well. I mean just to drill it up, western side of the flow is out there. This latest today, with 18,300, 18,400 [indiscernible] But what would it do on a sustained basis? And if we find out that the calculation showed there is skin damage, we've got to service that well and let it flow and blow all this skin damage out of there. This is not just for Davy Jones, this is typical of any way you complete, that you use oil base mud in. So -- but to answer your question, that's the technical limitation [indiscernible] hole site. If the hole site was a little bigger, then we can say 100 million a day or more. Remember, we completed the Flatrock wells, which set up at 15,000 feet just North of us and 100 million a day and 3,000 barrels of condensate a day. And actually that was with -- and I think we had 16,000 pound bottom hole pressure. We're going to have 30,000 pounds here. So you're a good common sense guy, take a borehole and put a tainted area or a skin-damaged area, and it might go back 3 feet, it might go back 1 foot, and this is dependent on what the term build is, what the formation is. And you put atmospheric conditions on one side of that son of a gun, open up this well and getting all the fluid out of it, and have the gas trapped behind skin damage. What's that 30,000 pounds going to do? I guarantee you one thing, you don't want to have 30,000 pounds directed at you, because there isn’t going to be nothing left even the bones, it will blow everything off of there. So talk about a high-pressure water hose, it would be a high-pressure water hose. That is the 2 things I really had to say Richard, the initial flow rate and what kind of rate it flows at as it cleans itself up.

Operator

Your next question will come from the line of Brian Kuzma with Weiss Multi-Strategy.

Brian L. Kuzma - Weiss Multi-Strategy Advisers, LLC

I actually have a couple of questions on your liquefaction project. I wanted to understand what is a realistic timeline for securing some sort of contractual commitments. And also if you can just spend a little time just handicapping the odds of this project actually going forward relative to -- look, the regas facility, obviously, the market went away from you there. But just some of the other issues, maybe, surrounding the project?

James R. Moffett

Well, what I mean [indiscernible] but thank you for your question. You heard in the debate, are we going to be able to export gas out of this country. Obviously, with the shale gas anomaly and all the other things, including our play, people are looking at this gas supply situation. The paradigm has completely changed. And you'll recall for years about running African gas and you have some other places we still consider to be trapped gas. And what's trapped gas? Trapped gas is when you make a big discovery and you don't have any pipelines or industry around to utilize the gas. You've got to liquefy the damn thing and make it fungible. So that's how it is, a long story. This whole idea of LNG was to take trapped gas and find it in the middle of nowhere and bring it into the big industrialized nations all over the world. Well, again, with this phenomenon, a lot more gas, because shale gas had other successes in the Lower 48, there are buzz out there. Now you have got to decide what does all this all mean? So will the politicians let this thing go, we have to wait until after the election for sure, and then hopefully, they'll give us a permit. And you've got to remember, the difference between what we are talking about in the United States and what you're talking about in Asia, for instance. You're talking about people that are going to use nothing but natural gas, number one. The big deal was in Europe and many parts of Asia, their nuclear power plants, after what's happened, after the tsunami in Japan, you've got the China syndrome again, another Chernobyl, and they're cancelling every plant over there. And now that we're publicizing to the world, we've got 100 years natural gas supply EIP booked. In Asia, they have no indigenous hydrocarbons. They are paying $10, $12 for gas. So that's kind of the phenomenon of what's going on. Now the big question is how long is the fable of shale gas going to be accepted by the industrial and financial community. The fable being what it's going to cost to drill and complete a multistage frac well? Isn’t my business because I'm a driller, I'm a conventional driller. But we know from all the chatter that it is not $3.50, we know from all the chatter, that it probably is not $5. You've got a lot of rigs being shut in into Eagle Ford and the Bakken, Marcellus. The pure gas play, shale gas, we've got to define a breakeven talk and I've heard this as high as $5, $6, $7, not to -- you don't want to say where the breakeven point is. If people wanted them, can they afford to drill wells to breakeven? That's there in that same business. So all of these projects, like this offshore terminal, we've got -- they are coming to us because we're the only onshore [indiscernible]. We are the only 2-mile installed dome, we know how to use the installed dome storage within the salt excavation, and we're in the sulfur business, other platforms out there. So we've got the talent and the natural resource to do it. So what are the odds where the government approves the political side of it? We think so. We know the facility can be built, it's already been planned. And we know we can store up to half a Tcf of gas in the ground. The real answer is going to be, what I am hearing from this customer and from most everybody that is trying to look at this deal, they want to build the facility and they want to store gas and they want to buy the gas and pay for it on long-term contract. And that's going to take some negotiation. I don't know what today you negotiate to sell the natural gas from this facility. Obviously, if you're talking about $10, $11, $12 gas in Asia, and you can put a pretty good number on it, but we've got to define all that. We've got the facility, we've got the storage and by God we've got the gas and that's why this package with gas is so exciting, some of these people there, you can get -- their storage is selling and gasifying them and then this gas is down, we have to be smart enough and come up with a negotiated long-term price. I hope that helps you out.

Operator

Your next question will come from the line of Eric Anderson with Hartford Financial.

Eric B. Anderson - Hartford Financial Management, Inc.

Jim Bob, I wonder if you could just spend a couple of minutes back on the Highland area prospects. I understand that you've been able to make 6,700 feet of hole in 30 days, which seems like the drilling is going pretty quickly and I'm wondering if your reference to the first well of Lomond North indicates that you've got at least 2 separate areas of closure in this 80,000 acres?

James R. Moffett

Good question. Always on the ball. We actually have 3 areas in particular. The big one, of course, is the one we're drilling. And when you say big, Eric you and I have talked about it, is 30,000, 40,000 acre closing with mapping, just sort of blow you away because it’s so obvious. It's not a question of is the geology straightforward? But as you can see from the map that we have, showing the acreage that we bought before Thunderhorse and after Thunderhorse, the back of our sides, what you have is you have this big monster sitting there and then you have some secondary features, which we're not even looking at and now. Some of our acreage covers a -- as an example, if you look at Slide 24, and look back from a Mad Dog, I mean, those damn thing covers 1/3 of your map. But the smaller plays, like Heidelberg, [indiscernible], even Shenandoah, was fixed to $140 million in that deepwater. You can see Tahiti bought before Thunderhorse. Tahiti is in 1996, that lease cost $230,000. And now the lease in Shenandoah is $140 million. So but you're going to have -- first thing you're going to do is the big source that you're going to drill, onshore and on the shelf. And then these secondary features, which sits onshore will be more than likely to be drilled then they would have been deepwater. In the deepwater because of the expense of drilling completes, most of the lead time they just showed everybody. So the main and secondary features, they may have hydrocarbons but they're not big enough to be commercial in deepwater. We're now having the same problems onshore because we could be in onshore where you can take or complete without any closing platform or any of that, we'll be able to drill the secondary features.

Eric B. Anderson - Hartford Financial Management, Inc.

Well, on that point, Jim Bob, on Slide 10, you list Highlander and you also have a list of -- a call out box that's onshore prospect B. Are they separate areas or separate acreage packages? And if so, maybe you could explain a little bit about if prospect B is not related to Highlander?

James R. Moffett

It's not related to Highlander. It's another major feature. Unfortunately, we're still in the process of trying to control this acreage, so we have been a little cautious there with that conversation. But it's not part of Highlander.

Eric B. Anderson - Hartford Financial Management, Inc.

Okay. That's fair enough. Now with regards to the amount of hole you will be able to make per day, is it going quicker than, for an example, the Lineham Creek well is? Or in other words, can you make some comparison there or is it too early?

James R. Moffett

Well, I'd say it's too early because we haven't done [indiscernible] pressure point. We hope that with the seismic, we'll be able to pick our price point. But remember, Eric, even though we now have the Lineham Creek, picking that point [indiscernible] is going to be critical because you're on that pipings and you then get into geo-pressure. So [indiscernible] at Highlander and Lineham Creek, they just got it behind because of salt and then partly [indiscernible] and bam, here comes the geo-pressure. So to answer your question, we're going to have -- if this Lineham Creek and Highlander prospect work, there's going to be lots of plays that will be feasible, and secondary plays, secondary being smaller, a smaller 10,000-acre play, ho ho ho. From [indiscernible] drilled onshore, it might never get drilled in the deepwater.

Operator

Your final question will come from the line of Joan Lappin with Gramercy Capital.

Joan E. Lappin - Gramercy Capital Management Corp.

My question concerns Davy 1. And my question is, as you were working through this mud and concrete problem at the bottom of the hole and it took weeks and weeks and weeks to resolve, it's my understanding that you had to alter your theory as to what might be at the bottom of the hole and that maybe it isn't just that cast, so I just wondered if you could comment on what you -- what has been going on and that you were able to resolve by a new theory and what you think is might be coming up the hole when you get it going in the next few weeks?

James R. Moffett

To answer your question, the new theory that they were talking about, I tried to explain, the mud motor, which everybody really knows about mud motors now, was the deeper we got in the hole, there were temporary pressure. Once that bear out and dug as hard as it did, we couldn't put enough pressure on that mud motor. Because as we bared down on it the darned thing would stall out and burn up on us, so we've chipping in now the hole and we're going to do POPs [ph]. So it wasn't practical any more -- so the new theory was with these new rigs and the top [indiscernible], in the old days, when you rotated pipe, you were looking at this rotary, which is the rotary everybody sees when you see a commercial, people putting slips in the hole, all that stuff. This top drive, it is called a variable speed top drive, and when we put this spaghetti string, 2 7/8, 2 3/8, in the hole, the risk of doing it, you might be doing this before, is that you torque that thing up and you don't recognize it -- I mean, you're on the brake up there on that rig floor, that pipe just keeps twisting like a rubber band and snaps. The reason why we decided to try that is because it can't slip. Of all that OD examination, 2 3/8, but smaller that the IDE and turn diameter. indiscernible] had to switch it off. But we had 3 guys on the rig floor, we rotate that 28 [indiscernible] big pipe, with that standard bin on there and what had taken us 2 months to try to clean up. We wiped out in 30 hours. So that's what somebody must have been referring to when they said new theory. It was just making the decision to try to do something that's never been done before. That was rotate a spaghetti string of pipe at 28,000 feet we did it and that's how we got the thing cleaned out. Before the mud motor, which is standard, when you're inside the pipe, clean up mud. We were trying to shoot a bear with a BB gun and we just couldn't afford to do it. We had to get a bear gun to shoot that bear. That was the new concept that you must have heard about.

Joan E. Lappin - Gramercy Capital Management Corp.

Okay. But also that maybe what was down there was a little richer than we had originally hoped? Do you have any comment on that?

James R. Moffett

Yes, ma'am. I know no reason to say that there is any difference that the high temperature and high pressure is probably going to have cook this gas and then be clean gas with very low condensates. The only thing I said about them, the new experience of this, first in getting them cleaned up was as we theorize the we purse we have, they we're only offset [indiscernible] for the hole between the sands within that. And that's what we found out and we washed it out. I tried to explain a while ago that, that was the thing so in my years this mud specialist when you try to explain to me why the plug was so hard. He said if you have a very impermanent situation, you're supposed to disperse, suck that, penetrate that mud and dehydrate and that's why it's hard offset the perforations. So that would be music to my ears. Like I want to kick myself in the head for not doing the -- so I'm glad rotating that pipe. Sometimes you have to [indiscernible] like I said, plan the years in that with [indiscernible] their back and mother nature is stuck in here. But the that's the only thing that I can imagine somebody referring to, Joan.

Joan E. Lappin - Gramercy Capital Management Corp.

Okay, well, last year at this time, we were hoping for a happy Thanksgiving and we didn't get it. So I'm hoping this year, we get a very happy Thanksgiving.

James R. Moffett

I hope I can put a big turkey and a big fish -- and a big Fillet Mignon in all the Chairmans for all of us because we all went hungry last year. And I hope we have a big table this year that we can all share and celebrate.

Operator

I will now turn the conference back over to management for any closing remarks.

Richard C. Adkerson

Thanks, everyone, for your participation today on the call and we are available for any follow-ups.

Operator

Ladies and gentlemen, that concludes our call for today. Thank you for your participation, and you may now disconnect.

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