These are the lucky few, the most outspoken or accomplished ones. Oil and gas men whose first names have become household words in this industry: Boone. Aubrey. Larry. Rex. Jim Bob.

The latter is James R. Moffett, to be exact, the sometimes salty, always risk-taking co-chairman and chief executive of McMoRan Exploration Co. This geologist is synonymous with wildcatting around the world for oil and gas, gold, copper, sulfur and other minerals, although his current company is focused on very deep targets in the Gulf of Mexico shelf’s shallow waters.

And his most recent strike, the marvelous Davy Jones discovery on shallow-water South Marsh Island Block 230, has earned Oil and Gas Investor’s Best Discovery 2009-2010 award. The company hit high-quality Paleocene Wilcox sands at depths below 27,000 feet, opening a new trend in the ever-surprising Gulf. Davy Jones sits approximately 80 miles south of any control in the onshore Wilcox, and 180-plus miles north of the deepwater Wilcox, also known as the world-class Lower Tertiary play.

Decades of Exploration

Moffett’s original company was founded in 1969 as McMoRan Oil & Gas, and it merged with Freeport Minerals in 1981 to become Freeport-McMoRan Inc. Later, it morphed into McMoRan Exploration.

Through the years and in various iterations since then, McMoRan’s predecessor company saw some dramatic successes through exploration, asset buys and corporate mergers. It held leases across the country—from offshore California to offshore the Atlantic coast—and in Canada in the early 1980s, and in geothermal wells in California. But by the late ’80s, it had refocused and sold those assets.

Freeport-McMoRan is best known for finding some of the largest natural-resource deposits offshore, including on Main Pass 299 in 1988. The dual oil and gas and sulfur discovery ended up being the largest sulfur find ever in the Gulf. Halfway around the globe in Indonesia, also in 1988, it found Grasberg, the largest gold and copper deposit in the world at the time. After significant production, the find still ranks first in terms of recoverable reserves. In the 1980s, the company grew from $3 billion to $18 billion in proved reserve value.

Moffett told Oil and Gas Investor in 1991, “When exploration works, the leverage is mind-boggling. As an explorationist, I’ve convinced people not to be afraid to pioneer or to make mistakes.” (See the interview with Moffett in the July 1991 issue.)

Born in Houma, Louisiana, and raised in Texas (and now living in Austin), Moffett has a bachelor’s degree in geology from the University of Texas and a master’s degree in geology from Tulane University.

Above the Salt

Today’s version of McMoRan has a 2010 budget of about $240 million, with $170 million of that earmarked for exploration, all to be managed within cash flow and including potential cash from industry partners.

The company’s specialty is deep-gas plays on the Outer Continental Shelf in shallow waters. Initially, McMoRan targeted multipay Miocene sections above the salt weld in the Gulf of Mexico, with wells going from 15,000 to 25,000 feet deep—below most previous production on these blocks. Estimated finds were on the order of several hundred billion to as much as 1 trillion cubic feet equivalent (Tcfe).

In this arena, McMoRan has already had success, finding Flatrock Field in South Marsh Island 212 and 217 in 10 feet of water. With six wells productive so far, this field has produced 144 billion cubic feet equivalent (Bcfe) from the Rob-L and Operc zones in the middle Miocene since coming onstream in 2008. Proved reserves total an estimated 258 Bcfe, as of year-end 2009, according to engineering consulting firm Ryder Scott & Co.

Just south, at Hurricane and Hurricane Deep fields, McMoRan has a 2007 discovery that could have 350 Bcfe of gross unrisked potential. This year, the firm plans to redrill Hurricane Deep on South Marsh Island 217, among other above-salt ventures.

Ultra-deep Exploration

But however grand these discoveries are, it is the second major play that Moffett is targeting that has generated out-sized excitement. Reservoirs below salt in the Miocene and Paleocene have now been confirmed, at depths accessible with today’s technology. Deeply buried structures, similar to some of the Gulf’s biggest ultra-deepwater discoveries, hold potentials starting at a Tcfe each.

McMoRan has drilled two high-profile shallow-water wells to sediments below the salt. The first was Blackbeard West, a prospect originated by EEX Corp., pursued by Newfield Exploration Co. and drilled with ExxonMobil, until McMoRan bought the acreage in 2007 and deepened the well in 2008.

The second was Davy Jones, its own prospect. The idea was derived from Moffett’s deeper-pool model and contributions from geoscientists Randol Haworth, Jay Menard and Glen Denyer (Moffett calls them his “Three Musketeers”), who joined McMoRan following the Newfield property acquisition in 2007. The Three Musketeers have been proponents of the ultra-deep geologic model for more than a decade and generated the Blackbeard West prospect.

Both holes were the first tests into the unexplored section below salt, out of the some 50,000 wells drilled during the past 50-plus years on the shelf. Blackbeard encountered Middle and Lower Miocene rocks, and Davy Jones went farther into the Eocene/Paleocene section.

Blackbeard was a glimmer, but Davy Jones is the treasure. The discovery cut more than 200 net feet of pay on a 20,000-acre structure.

The well, drilled in 20 feet of water, was a reentry of a previously abandoned wellbore. It reached a total depth of 29,000 feet in February 2010, and 5-inch production liner was set. It is now temporarily abandoned awaiting completion equipment. McMoRan operates Davy Jones and holds a 32.7% working interest. Partners are Plains Exploration & Production Co., Energy XXI, Nippon Oil, W.A. Moncrief Jr. and a private investor.

“We have a huge province totally unexplored at these depths,” says Moffett. “Davy Jones shows us there is a new trend. The Wilcox and Lower Miocene are so much shallower than we thought 10 years ago. Truly, a decade ago, explorationists believed the Eocene/Paleocene below the salt would be found at unreachable depths of 40,000 to 50,000 feet.

“We’ve pulled the basement structures up 25,000 feet, so now we know these structures can be drilled at producible depths,” he says.

Moreover, the deep-shelf structures are gargantuan, and appear to be covered with multiple sands. Davy Jones alone sprawls beneath most of four offshore blocks. More wells will be needed to fully ascertain the extent of Miocene, Wilcox and possibly Tuscaloosa sections on these features, of course, but the existence of many huge prospects is verified by seismic.

Another ground-breaking aspect of Davy Jones is the apparent quality of the Wilcox section in the Paleocene. Logs indicate the Wilcox sands have good porosities, far higher than people originally thought possible.

Indeed, the entire fabric of thought about deep reservoirs has been ripped apart and is now being sewn back together in new patterns. “The geology of the rocks below the salt is quite different from that of above-salt sediments,” says Moffett. “We suspect the environment of deposition was such that the shelf sands were better sorted than they were onshore.”

Furthermore, high temperatures and pressures below the salt likely created acidic gas, which dissolved certain constituents of the reservoir such as feldspars and clays. The result: primary and secondary porosity made even better by diagenetic processes.

“We won’t know until we flow-test Davy Jones just how good it is, but the gamma ray and resistivity curves in the Wilcox look so clean and blocky it could be a Miocene sand.”

Additionally, Davy Jones and Blackbeard proved to the industry that sub-salt pressures on the shelf were manageable. This was another revision of preconceived notions. “Pressures below the salt weld are actually much lower than we would have expected 10 years ago,” says Moffett. “We drilled Davy Jones and Blackbeard with 18-pounds-per-gallon mud.”

Certainly, the bottomhole environments are challenging in the extreme, but they do lie within accepted parameters for production. Reservoir temperatures are in the 430-degree-Farenheit range at Davy Jones, similar to temperatures the industry already grapples with in the Norphlet in Mobile Bay, and actually lower than those seen in Fandango Field in South Texas.

“We don’t feel we have any issue with hydrocarbon mobility or rock quality at Davy Jones,” says Moffett.

2010 Program

Davy Jones gives all appearances of holding many Tcfe of gas in place. McMoRan had 272 Bcfe of proved reserves at year-end 2009, but if this new field can be developed economically, the company’s size could mushroom. It holds a 26% net revenue interest in the discovery.

“Nothing gets an E&P analyst more excited than the discussion of 20,000-acre structures draped with porous clean sands, filled from base to the top with what appears to be natural gas, and no faults or trapdoors to let the pesky hydrocarbons escape,” wrote analyst Nicholas Pope, of Dahlman Rose & Co., when Davy Jones was unveiled in January.

“But, with all the excitement, it’s still important to understand the remaining risks involved in this well that should be answered with a production test,” Pope said. The ability of the formation to produce and the exact composition of the hydrocarbons are still key questions.

“At the pressures and depths we’re dealing with, there are few certainties and few comparables. But, we acknowledge the risks and think that the Davy Jones discovery is likely on the order of 2.5 Tcf (gross), and we estimate it’s worth roughly $7.50 per share (risked).”

McMoRan is working diligently to complete and production-test the discovery. If it can secure properly robust equipment, it hopes to kick that effort off in the coming 12 to 18 months.

“We have all kinds of things to sort out here,” Moffett says. “This reminds me of the Grasberg deposit that we discovered in Indonesia in 1988, and the challenge of being able to produce it. People said, ‘Hell, you’ll never be able to produce it.’ Sound familiar?

“The only scorecard at the end of the day is reserves. That is something shareholders can understand.”

To enhance its position, McMoRan submitted apparent high bids on 17 of 19 blocks during the Minerals Management Service’s Central Gulf Lease Sale 213 held in New Orleans in March. If granted, the lease acquisitions would add approximately 75,000 gross acres to McMoRan’s inventory, which currently is about 1 million gross acres, including 150,000 gross acres associated with the ultra-deep shelf play.

Next up for the company is an offset to Davy Jones, already in progress. It hopes to core reservoir sands that correlate to the discovery well, to nail down petrography and mobility of hydrocarbons. It hopes to be able to test the Cretaceous section as well. McMoRan is also drilling a 29,950-foot test at Blackbeard East, on South Timbalier 144.

Later this year, it plans to drill its sub-salt Lafitte prospect in Eugene Island 223. Altogether, the company has generated 15 prospects on large structures on the shelf and calculates unrisked potential for its ultra-deep focus area at an amazing 30 Tcfe.

“It keeps me awake at night. That’s why I’m still doing it,” says Moffett.