UPDATE 2-McMoRan Q3 loss widens; shares up on drilling update

* Finds possible hydrocarbon-bearing sand in Blueberry Hill

* Q3 shr loss $0.60 vs loss of $0.10 yr-ago

* Sees Q4 average production at 215 mmfe/d

* Shares recover from early fall, rise 8 pct (Adds conference call details, updates share movement)

BANGALORE, Oct 19 (Reuters) - McMoRan Exploration Co (MMR.N) posted a wider third-quarter loss, but shares of the oil and natural gas company jumped on the discovery of potential hydrocarbon-bearing sands at one of its wells.

On a conference call with analysts, the company said it found the possible gas in a secondary well at its Blueberry Hill project in Louisiana.

"It may be hydrocarbon bearing. It would be probably the first 25 feet of the sand. And it is in the full thickness of almost 200 feet growth," company co-Chairman Jim Bob Moffett said on the call.

There were two more wells with possible gas-bearing sands in Blueberry Hill project, which came in at a depth of 150 feet to 200 feet, he added.

McMoRan holds a 42.9 working interest in the Blueberry Hill project with Plains Exploration and Production Co (PXP.N) holding the rest.

Earlier, McMoRan posted a net loss applicable to common stock of $51.9 million, or 60 cents a share, compared with a loss of $6.1 million, or 10 cents a share, last year.

Revenue dropped about 62 percent to $109.5 million.

Analysts on average had expected the company to post a third-quarter loss of 56 cents a share, excluding items, on revenue of $112.3 million, according to Thomson Reuters I/B/E/S.

Third-quarter production averaged 215 million cubic feet of natural gas equivalent per day (mmcfe/d), down about 4 percent over last year.

The New Orleans-based company said average production for the fourth quarter is expected to be about 215 mmcfe/d and for 2009 about 204 mmcfe/d.

Shares of the company were recovered from early fall and were up 5 percent at $8.60 in afternoon trade Monday on the New York Stock Exchange. They had fallen 6 percent in early morning trade. (Reporting by Thyagaraju Adinarayan; Editing by Anil D'Silva and Gopakumar Warrier)