McMoRan Exploration Co. (NYSE: MMR): HIGHLIGHTS -- McMoRan
continued active exploration drilling under its $500 million
exploration venture with a potential significant discovery at Long
Point (Louisiana State Lease 18090). Four additional exploratory
wells in progress: -- JB Mountain Deep at South Marsh Island Block
224 -- Elizabeth at South Marsh Island Block 230 -- Cane Ridge at
Louisiana State Lease 18055 -- Cabin Creek at West Cameron Block 95
-- Development activities under way to establish new production at
Vermilion Blocks 16/17 (King Kong No. 1 & No. 2), South Marsh
Island Block 217 (Hurricane No. 2), West Cameron Block 43 (No. 3
& No. 4) and Long Point. -- McMoRan's share of production
averaged 41 Million cubic feet of natural gas equivalents per day
(Mmcfe/d) in the 2005 third quarter, including 1,800 barrels of oil
per day (bbls/d) (11 Mmcfe/d) from Main Pass Block 299, compared
with 7 Mmcfe/d in the year-ago quarter. -- Prior to Hurricane
Katrina on August 29, 2005, McMoRan's third quarter production
averaged approximately 55 Mmcfe/d, including 2,900 bbls/d (17
Mmcfe/d) from Main Pass Block 299. -- McMoRan's production, which
is currently approximating 14 Mmcfe/d, is being affected by damage
from Hurricanes Katrina and Rita. Pending repairs to Main Pass
Block 299 and Main Pass Block 86 (Shiner) and third party
downstream facilities, McMoRan expects production to increase to
60-70 Mmcfe/d, including 2,900 bbls/d (17 Mmcfe/d) from Main Pass
Block 299, by the end of 2005. -- Continuing activities to
establish a major new liquefied natural gas (LNG) port at Main Pass
Energy Hub(TM)(MPEH(TM)). -- On September 30, 2005, McMoRan had
$172 million in unrestricted cash. McMoRan Exploration Co. (NYSE:
MMR) today reported net income of $6.7 million, $0.21 per share,
for the 2005 third quarter compared with a net loss of $8.2
million, $0.48 per share, for the 2004 third quarter. McMoRan's net
income from its continuing operations for the 2005 third quarter
totaled $8.8 million, which included $2.7 million of start-up costs
associated with the MPEH(TM), $5.8 million of exploration expense
and $2.8 million of estimated damage repair costs associated with
Hurricanes Katrina and Rita, including $2.5 million for Main Pass
Block 299. During the third quarter of 2004, McMoRan's net loss
from continuing operations totaled $7.6 million, including $2.7
million of MPEH(TM) start-up costs and $3.2 million of exploration
expense. -0- *T SUMMARY FINANCIAL TABLE(a) Third Quarter Nine
Months ---------------------------------------- 2005 2004 2005 2004
---------------------------------------- (In thousands, except per
share amounts)
----------------------------------------------------------------------
Revenues $44,265 $ 7,301 $ 92,884 $ 20,846 Operating income (loss)
11,251 (5,639) (3,083) (22,311) Income (loss) from continuing
operations 8,772 (7,556) (10,423) (27,820) Loss from discontinued
operations (1,624) (267) (3,591) (3,676) Net income (loss)
applicable to common stock 6,746 (8,233) (15,231) (32,728) Diluted
net income (loss) per share: Continuing operations $ 0.25 $ (0.46)
$ (0.47) $ (1.70) Discontinued operations (0.04) (0.02) (0.15)
(0.21) Applicable to common stock $ 0.21(b) $ (0.48) $ (0.62) $
(1.91) Diluted average shares outstanding 43,178(b) 17,179 24,553
17,128
----------------------------------------------------------------------
a) If an in-progress well or unproved property is determined to be
nonproductive prior to the filing of McMoRan's third quarter 2005
Form 10-Q, the related drilling costs incurred through September
30, 2005 would also be charged to exploration expense in the third
quarter 2005 financial statements. McMoRan's investment in
unevaluated in-progress exploratory wells at September 30, 2005
totaled $13.7 million. b) Diluted net income per share for the
third quarter of 2005 reflects assumed conversion of McMoRan's 5%
convertible preferred stock and 6% convertible senior notes,
resulting in the exclusion of $0.4 million of preferred dividends
and $2.1 million of interest expense and the inclusion of 15.3
million shares. These instruments were excluded from the other
periods presented because they would decrease the reported net loss
per share. *T James R. Moffett and Richard C. Adkerson, Co-Chairmen
of McMoRan, said, "We are highly encouraged with our discovery at
Long Point and the continued confirmation of our views that
significant accumulations of commercially recoverable hydrocarbons
exist in the Deep Miocene trend in the Gulf of Mexico shelf and
Gulf Coast areas. With our large Deep Miocene prospect inventory,
and our recent exploration successes, we are well positioned to
build our production profile and pursue aggressively high potential
opportunities. We are also optimistic about our LNG project at the
Main Pass Energy Hub(TM). We look forward to completing our permit
process in the months ahead and to developing its highly attractive
commercial potential." GULF OF MEXICO EXPLORATION ACTIVITIES Since
inception in 2004 of a multi-year, $500 million exploration
venture, McMoRan and its private partner have participated in seven
discoveries on the fifteen prospects that have been drilled and
evaluated. Production has commenced on three discoveries and
development plans are under way for the others. Positive results
from the potential discovery at Blueberry Hill would bring
McMoRan's success rate to eight out of sixteen prospects. The
venture currently has four exploration wells in progress. As
previously reported, the Long Point exploratory well on Louisiana
State Lease 18090, located onshore in Vermilion Parish, Louisiana
was drilled to 19,000 feet. It has been evaluated with
log-while-drilling tools and wireline logs, indicating an interval
approximating 150 gross feet of hydrocarbon bearing sands, and
could potentially be a significant discovery. The wireline log
indicated excellent porosity. The information gained from this well
will be used to determine future drilling plans. McMoRan plans to
set a production liner and complete the well. Infrastructure near
this onshore location in inland waters would allow production to be
established quickly, currently expected in early 2006. McMoRan
acquired rights to 5,000 gross acres comprising the Long Point
prospect from El Paso Production Company, a subsidiary of El Paso
Corporation (NYSE: EP), in June of 2005 as part of a package of six
deep-gas exploratory prospects covering approximately 18,000 gross
acres onshore and in state waters in Vermilion Parish, Louisiana.
McMoRan owns a 37.5 percent working interest and a 26.8 percent net
revenue interest in the Long Point well. The JB Mountain Deep
exploratory well No. 224 at South Marsh Island Block 224 is located
on OCS 310 offshore Louisiana in 10 feet of water southeast of and
adjacent to the JB Mountain discovery at South Marsh Island Block
223. The well, which commenced drilling on July 14, 2005, is
currently drilling below 20,450 feet, with a planned total depth of
23,000 feet. McMoRan controls 5,200 gross acres in the area. This
acreage is not included in the JB Mountain/Mound Point program
described below. McMoRan operates the JB Mountain Deep prospect
and, if successful, would earn a 27.5 percent working interest and
a 19.4 percent net revenue interest. The South Marsh Island Block
224 lease is eligible for Deep Gas Royalty Relief. McMoRan's
investment in JB Mountain Deep totaled $8.9 million at September
30, 2005. The Cane Ridge exploratory well, which is located onshore
in Vermilion Parish at Louisiana State Lease 18055, commenced on
July 29, 2005 and has been drilled to approximately 10,000 feet,
with a planned total depth of 16,500 feet. McMoRan and its private
partner will fund 100 percent of the drilling costs to casing point
in the well. At casing point, El Paso can elect to participate for
a 25 percent working interest, and McMoRan and its private partner
would own a 75 percent working interest (37.5 percent each) and an
approximate 55 percent net revenue interest (27.5 percent each).
McMoRan's investment in Cane Ridge totaled $3.9 million at
September 30, 2005. McMoRan acquired rights to the Elizabeth
prospect at South Marsh Island Block 230 during the third quarter
of 2005. This exploration well commenced drilling on September 16,
2005, and is currently drilling below 10,000 feet, with a planned
total depth of 20,000 feet. The Elizabeth prospect is located
offshore Louisiana in 18 feet of water on OCS 310, six miles south
of McMoRan's Hurricane discovery. If successful, McMoRan would earn
a 15.0 percent working interest and an 11.3 percent net revenue
interest. The South Marsh Island Block 230 lease is eligible for
Deep Gas Royalty Relief. McMoRan's investment in Elizabeth totaled
$0.9 million at September 30, 2005. In addition to the rights on
six deep-gas exploration prospects acquired in June 2005 from El
Paso, McMoRan acquired rights to the Cabin Creek deep shelf
exploration prospect at West Cameron Block 95 from El Paso in the
third quarter of 2005. The Cabin Creek well commenced on October
15, 2005 and is currently drilling below 1,300 feet towards a
planned total depth of 19,000 feet. McMoRan and its private partner
will fund 100 percent of the drilling costs to casing point in the
well. At casing point, El Paso can elect to participate for a 25
percent working interest, and McMoRan and its private partner would
own a 75 percent working interest (37.5 percent each) and an
approximate 62 percent net revenue interest (approximately 31
percent each). McMoRan expects to commence drilling at least two
additional exploratory prospects by year-end 2005, including Point
Chevreuil on Louisiana State Lease 18350 and Liberty Canal onshore
Vermilion Parish, LA. McMoRan currently has rights to approximately
275,000 gross acres and continues efforts to identify prospects to
be drilled on this lease acreage position. McMoRan is also actively
pursuing opportunities through its exploration venture to acquire
additional acreage and prospects through farm-in or other
arrangements. -0- *T EXPLORATION DRILLING SCHEDULE Net Proposed
Working Revenue Current Total Spud Interest Interest Depth Depth
Date
----------------------------------------------------------------------
In-Progress
----------------------------------------------------------------------
Louisiana State Lease 18090 July 21, "Long Point" 37.5% 26.8%
19,000' 19,000' 2005
----------------------------------------------------------------------
South Marsh Island Block 224 July 14, "JB Mountain Deep"(1) 27.5%
19.4% 20,450' 23,000' 2005
----------------------------------------------------------------------
Louisiana State Lease 18055 July 29, "Cane Ridge" 37.5% 27.5%
10,000' 16,500' 2005
----------------------------------------------------------------------
South Marsh Island Block 230 Sept. 16, "Elizabeth"(1) 15.0% 11.3%
10,000' 20,000' 2005
----------------------------------------------------------------------
West Cameron Block 95 Oct. 15, "Cabin Creek"(1) 37.5% 31.0% 1,300'
19,000' 2005
----------------------------------------------------------------------
Near-Term Wells(2)
----------------------------------------------------------------------
Fourth- Louisiana State Lease 18350 Quarter "Point Chevreuil" 25.0%
17.5% n/a 17,000' 2005
----------------------------------------------------------------------
Fourth- Onshore Vermilion Parish, LA Quarter "Liberty Canal" 37.5%
27.7% n/a 16,000' 2005
----------------------------------------------------------------------
1) Depending upon applicability of the Deep Gas Royalty Relief
eligibility criteria, the leases on which these wells are located
could be eligible for royalty relief on up to 25 Bcf under current
Minerals Management Service guidelines subject to pricing
thresholds. McMoRan's net revenue interest would increase during
the royalty relief period for eligible leases. 2) Timing is subject
to change. *T GULF OF MEXICO PRODUCTION AND DEVELOPMENT ACTIVITIES
Third-quarter 2005 net production averaged 41 Mmcfe/d, including
oil production of approximately 1,800 bbls/d (11 Mmcfe/d) from Main
Pass Block 299. Prior to Hurricane Katrina on August 29, 2005,
McMoRan's third-quarter production averaged approximately 55
Mmcfe/d, including 2,900 bbls/d (17 Mmcfe/d) from Main Pass Block
299. All facilities have been inspected and are expected to return
to production in the fourth quarter of 2005, pending completion of
minor repairs to Main Pass Block 299 and Main Pass Block 86
(Shiner) and the availability of third party downstream facilities.
McMoRan's net production currently totals approximately 14 Mmcfe/d
and is expected to increase during the fourth quarter of 2005 as
repairs are completed and downstream facilities become available.
In addition, McMoRan expects to establish production from its King
Kong discovery during the quarter. Average production rates for the
quarter will depend on various factors, including the availability
of third party downstream facilities impacted by recent hurricanes.
McMoRan's current expectation is that net production rates will
average 30-40 Mmcfe/d during the fourth quarter, with full
restoration expected in December. Pending availability of
downstream facilities, McMoRan expects production to increase to
60-70 Mmcfe/d, including 2,900 bbls/d (17 Mmcfe/d) from Main Pass
Block 299, by the end of 2005. First-quarter 2006 production is
expected to benefit from full rates at McMoRan's producing fields
and new production from recent discoveries, including King Kong,
West Cameron Block 43 and Long Point. DEVELOPMENT ACTIVITIES The
King Kong No. 2 development well at Vermilion Blocks 16/17
commenced on August 12, 2005 and was drilled to a total depth of
13,680 feet and casing is being set to complete the well. As
previously reported, log-while-drilling tools indicated
approximately 100 feet of possible hydrocarbon bearing sands in the
well. King Kong No. 2 is a direct offset mapped updip to the King
Kong No. 1 discovery well. McMoRan expects to establish production
in the fourth quarter from the King Kong No. 1 and commence
production at the No. 2 well shortly thereafter. The King Kong No.
3 development well is being planned. As previously reported, a
successful production test on the King Kong No. 1 well in August
2005 indicated a gross flow rate of approximately 20.6 million
cubic feet of natural gas per day (Mmcf/d), approximately 3,600
bbls/d of condensate and zero barrels of water (total of
approximately 42 Mmcfe/d, 12 Mmcfe/d net to McMoRan) on a 28/64ths
choke from 34 net feet of perforations below 15,400 feet in the
well. McMoRan has a 40.0 percent working interest and a 29.2
percent net revenue interest in the King Kong prospect, which is
located in 12 feet of water. McMoRan is the operator and has rights
to approximately 2,500 gross acres in the area. The Hurricane No. 2
development well at South Marsh Island Block 217 commenced drilling
on August 21, 2005, and is drilling below 9,000 feet towards a
planned total depth of 16,000 feet. Hurricane No. 2 is located
northwest of the Hurricane discovery well, which was producing at a
reduced rate of approximately 23 Mmcf/d and 900 bbls/d (28 Mmcfe/d
gross, 5 Mmcfe/d net to McMoRan) prior to Hurricane Rita. After
expected restoration of production in the fourth quarter of 2005,
the operator expects to produce the well at a reduced rate until
certain mechanical issues are resolved. McMoRan holds a 27.5
percent working interest and 19.4 percent net revenue interest in
this well and has rights to approximately 7,700 gross acres in the
Hurricane area, which is located offshore Louisiana in 10 feet of
water. Production from Hurricane well uses the Tiger Shoal
facilities, which are also being used to produce the JB Mountain
and Mound Point discoveries in the OCS 310/State Lease 340 area.
The West Cameron Block 43 No. 4 development well was tested during
the third quarter of 2005. The well indicated a gross rate of 3.5
Mmcf/d and 800 bbls/day (8.3 Mmcfe/d gross, 2.7 Mmcfe/d net to
McMoRan) on a 14/64th choke with flowing tubing pressure of
approximately 4,100 pounds per square inch before being shut-in for
further evaluation. Production from the West Cameron Block 43 No. 3
and No. 4 wells is expected to commence in first quarter of 2006.
McMoRan holds a 23.4 percent working interest and an 18.0 percent
net revenue interest in the West Cameron Block 43 No. 3 well and a
41.7 percent working interest and a 32.3 percent net revenue
interest in the West Cameron Block 43 No. 4 well. The West Cameron
Block 43 lease, located in 30 feet of water, 8 miles offshore, is
eligible for Deep Gas Royalty Relief. The equipment for the
completion of the Blueberry Hill potential discovery at Louisiana
State Lease 340 has been ordered, with expected delivery in early
2006. As previously reported, the Blueberry Hill exploratory well
reached a total depth of 23,903 feet in the first quarter of 2005.
Wireline logs indicated four potentially productive hydrocarbon
bearing sands. A 4 1/2 inch production liner was installed and
cemented to protect the identified potential pay zones. The
drilling rig moved off location while the necessary 20,000-pound
per square inch completion equipment, tubulars and liners for the
anticipated high pressure well are procured. Completion and testing
of the well will determine future plans for this prospect. McMoRan
operates Blueberry Hill, located seven miles east of the JB
Mountain discovery and seven miles south southeast of the Mound
Point Offset discovery. McMoRan holds a 35.3 percent working
interest and a 24.2 percent net revenue interest in the Blueberry
Hill well. McMoRan's investment in Blueberry Hill totaled $10.6
million at September 30, 2005. The development plan for the Dawson
Deep discovery at Garden Banks Block 625 is being finalized by the
operator. Following completion activities, the well is expected to
be brought on production by mid-2006. As previously reported, the
well encountered hydrocarbon bearing sands as indicated by more
than 100 feet of total vertical thickness of resistivity in the
shallow zones. An additional 100 feet of hydrocarbons were logged
in the deepest zone. McMoRan owns a 30.0 percent working interest
and a 24.0 percent net revenue interest in the Dawson Deep
prospect. The Dawson Deep prospect is located on a 5,760 acre block
located approximately 150 miles offshore Texas. In the Raptor area
at Ship Shoal Block 296, the operator has proposed two additional
development wells with drilling expected to commence in late 2005.
McMoRan has committed to participate in these wells with a 49
percent working interest and 35 percent net revenue interest.
Depending upon drilling results, a third well may also be drilled.
JB MOUNTAIN/MOUND POINT AREA ACTIVITIES McMoRan is a participant in
a program that began in 2002 and includes the JB Mountain and Mound
Point Offset discoveries in the OCS 310 and Louisiana State Lease
340 areas, respectively. The program currently holds a 55 percent
working interest and a 38.8 percent net revenue interest in the JB
Mountain prospect and a 30.4 percent working interest and a 21.6
percent net revenue interest in the Mound Point Offset prospect.
Under terms of the program, the third party partner is funding all
of the costs attributable to McMoRan's interests in the properties,
and will own all of the program's interests until the program's
aggregate production totals 100 Bcfe attributable to the program's
net revenue interest, at which point 50 percent of the program's
interests would revert to McMoRan. All exploration and development
costs associated with the program's interest in any future wells is
to be funded by the third party partner during the period prior to
when McMoRan's potential reversion occurs. There are three
producing wells and approximately 13,000 gross acres on Louisiana
State Lease 340 and OCS 310 that remain subject to the 100 Bcfe
arrangement. McMoRan believes there are further exploration and
development opportunities on this acreage. The three producing
wells averaged an aggregate gross rate of 40 Mmcfe/d during the
third quarter of 2005. These wells were not damaged by Hurricane
Rita, but have been shut-in because of damage to third party
downstream processing facilities. Production is expected to be
restored on these wells during the fourth quarter of 2005. MAIN
PASS ENERGY MPEH(TM) UPDATE As previously reported, McMoRan
completed an initial assessment of its MPEH(TM) platforms following
Hurricane Katrina. Katrina's eye wall passed approximately 50 miles
west of the facility, with no apparent significant structural
damage to the platforms. A subsurface inspection will be completed.
McMoRan's MPEH(TM) platforms, located in the Eastern Gulf of
Mexico, were not significantly affected by Hurricane Rita. The
MPEH(TM) platforms were designed to withstand significant hurricane
events. McMoRan is working to establish a major new offshore LNG
import terminal at Main Pass Block 299 and has applied for a
license for the proposed project under the Deepwater Port Act. In
connection with the licensing process, the United States Coast
Guard (Coast Guard) and the Maritime Administration published a
Draft Environmental Impact Statement (EIS) for the MPEH(TM) license
application, and conducted public meetings in July 2005 to allow
public comments on the Draft EIS. The Draft EIS evaluated potential
environmental impacts associated with construction and operation of
MPEH(TM) and concluded that the project would not result in
significant adverse impacts. As part of the licensing process, the
Coast Guard receives comments on the Draft EIS for consideration in
preparation of the Final EIS. The Coast Guard is preparing the
Final EIS and on August 26, 2005, requested additional information
in response to comments received on the Draft EIS, primarily
related to fisheries, air quality and water quality. As previously
reported, the Coast Guard temporarily suspended the 330-day review
period on August 26, 2005, indicating that the suspension would be
of short duration, in order to accommodate the information request
and a scheduling adjustment. Following Hurricane Katrina, the Coast
Guard advised all Deepwater Port applicants, including MPEH(TM),
that it is currently unable to schedule the public hearings
necessary to resume the processing of the applications because of
the State of Emergency in the Gulf of Mexico. The Coast Guard
indicated that they recognize the importance of these projects and
will move forward as soon as practical. Substantial progress on
McMoRan's pending Deepwater Port License application has been
achieved. The remaining steps in the application process, once it
resumes, include publication of the Final EIS and conducting final
public hearings. Under the Deepwater Port Act, a Record of Decision
on a license application is required within 90 days of the final
public hearing. The MPEH(TM) terminal is located in 210 feet of
water and would be capable of regasifying LNG at a rate of 1
Billion cubic feet (Bcf) per day. The use of existing facilities
provides significant cost advantages and the proposed project's
offshore location near established shipping lanes is advantageous.
Additional investments are being considered to develop significant
on-site cavern storage for natural gas in the large salt dome
structure at this site and for pipeline connections to enhance gas
delivery from Main Pass to markets in the United States. The
proximity of the proposed project to major natural gas markets and
the availability of on-site salt dome cavern storage provide a
potential opportunity to expand the project beyond a typical LNG
receiving facility, creating opportunities for substantial
additional values. The proposed design includes 28 Bcf of initial
cavern storage availability and aggregate peak deliverability from
the proposed terminal, including deliveries from storage, of up to
2.5 Bcf per day. McMoRan is continuing discussions with potential
LNG suppliers in the Atlantic Basin and natural gas consumers in
the United States to develop commercial arrangements for the
facilities. REVENUES McMoRan's third-quarter 2005 oil and gas
revenues totaled $41.4 million, compared to $3.7 million during the
third quarter of 2004. During the third quarter of 2005, McMoRan's
sales volumes totaled approximately 2.0 Bcf of gas and 325,000
barrels of oil and condensate, including 235,000 barrels from Main
Pass Block 299 (15 Mmcfe/d), compared to 0.5 Bcf of gas and 13,700
barrels of oil and condensate in the third quarter of 2004.
McMoRan's third-quarter comparable average realizations for gas
were $10.31 per thousand cubic feet (Mcf) in 2005 and $5.65 per Mcf
in 2004; for oil and condensate, excluding Main Pass Block 299,
McMoRan received an average of $61.18 per barrel in third-quarter
2005 compared to $43.25 per barrel in third-quarter 2004. McMoRan
received an average of $55.64 per barrel for its sour crude oil
produced at Main Pass Block 299 during the third quarter of 2005.
CASH AND CASH EQUIVALENTS AND CAPITAL EXPENDITURES On September 30,
2005, McMoRan had unrestricted cash and cash equivalents of
approximately $172 million. Capital expenditures for the first nine
months of 2005 totaled $102.9 million and are expected to total
$175 million for the year. Capital expenditures for the remainder
of 2005 are expected to approximate $45 million for exploration
expenditures and approximately $25 million for currently identified
development costs, subject to changes because of timing and other
factors. Spending may be increased as additional opportunities
become available. McMoRan Exploration Co. is an independent public
company engaged in the exploration, development and production of
oil and natural gas offshore in the Gulf of Mexico and onshore in
the Gulf Coast area. McMoRan is also pursuing plans for the
development of the MPEH(TM) which will be used for the receipt and
processing of liquefied natural gas and the storage and
distribution of natural gas. Additional information about McMoRan
and the MPEH(TM) project is available on its internet website
"www.mcmoran.com" and at "www.mpeh.com". CAUTIONARY STATEMENT: This
press release contains certain forward-looking statements regarding
various oil and gas discoveries, oil and gas exploration,
development and production activities, anticipated and potential
production and flow rates; anticipated revenues; potential
reversionary interests; the economic potential of properties;
estimated exploration costs; the potential Main Pass Energy Hub(TM)
Project, the expected near-term funding of the related permitting
process and the estimated capital costs for developing the project.
Accuracy of the projections depends on assumptions about events
that change over time and is thus susceptible to periodic change
based on actual experience and new developments. McMoRan cautions
readers that it assumes no obligation to update or publicly release
any revisions to the projections in this press release and, except
to the extent required by applicable law, does not intend to update
or otherwise revise the projections more frequently than quarterly.
Important factors that might cause future results to differ from
these projections include: variations in the market prices of oil
and natural gas; drilling results; unanticipated fluctuations in
flow rates of producing wells; oil and natural gas reserves
expectations; the ability to satisfy future cash obligations and
environmental costs; general exploration and development risks and
hazards; availability of third party downstream facilities; the
feasibility of the potential Main Pass Energy Hub(TM) and the
ability to secure commercial contracts and obtain significant
project financing and regulatory approvals for such project. Such
factors and others are more fully described in more detail in
McMoRan's 2004 Annual Report on Form 10-K on file with the
Securities and Exchange Commission. A copy of this release is
available on our web site at www.mcmoran.com. A conference call
with securities analysts about the third-quarter 2005 results is
scheduled for today at 10:00 AM Eastern Time. The conference call
will be broadcast on the Internet. Interested parties may listen to
the conference call live by accessing the call on
"www.mcmoran.com". A replay of the call will be available through
Friday, November 11, 2005. -0- *T McMoRan EXPLORATION CO.
STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months
Ended September 30, September 30, -----------------
------------------- 2005 2004 2005 2004 -------- -------- ---------
--------- (In Thousands, Except Per Share Amounts) Revenues: Oil
& gas $41,411 $ 3,704 $ 83,666 $ 10,218 Service 2,854 3,597
9,218 10,628 -------- -------- --------- --------- Total revenues
44,265 7,301 92,884 20,846 -------- -------- --------- ---------
Costs and expenses: Production and delivery costs(a) 12,498 1,576
20,868 4,664 Depreciation and amortization 6,497 1,664 19,426 4,052
Exploration expenses 5,831 3,230 41,864 16,662 General and
administrative expenses 5,496 3,804 15,132 10,193 Start-up costs
for Main Pass Energy Hub(TM) 2,692 2,666 7,577 8,660 Insurance
recovery - - (8,900) (1,074) -------- -------- --------- ---------
Total costs and expenses 33,014 12,940 95,967 43,157 --------
-------- --------- --------- Operating income (loss) 11,251 (5,639)
(3,083) (22,311) Interest expense (4,006) (2,079) (11,887) (6,491)
Equity in K-Mc Venture I LLC's (loss) income - (125) - 318 Other
income, net 1,527 287 4,547 664 -------- -------- ---------
--------- Income (loss) from continuing operations 8,772 (7,556)
(10,423) (27,820) Loss from discontinued operations (1,624) (267)
(3,591) (3,676) -------- -------- --------- --------- Net income
(loss) 7,148 (7,823) (14,014) (31,496) Preferred dividends and
amortization of convertible preferred stock issuance costs (402)
(410) (1,217) (1,232) -------- -------- --------- --------- Net
income (loss) applicable to common stock $ 6,746 $(8,233) $(15,231)
$(32,728) ======== ======== ========= ========= Basic net income
(loss) per share of common stock: Continuing operations $0.34
$(0.46) $(0.47) $(1.70) Discontinued operations (0.07) (0.02)
(0.15) (0.21) -------- -------- -------- --------- Net income
(loss) per share of common stock $0.27 $(0.48) $(0.62) $(1.91)
======== ======== ========= ========= Diluted net income (loss) per
share of common stock: Continuing operations $0.25 $(0.46) $(0.47)
$(1.70) Discontinued operations (0.04) (0.02) (0.15) (0.21)
-------- -------- --------- --------- Net income (loss) per share
of common stock $0.21(b) $(0.48) $(0.62) $(1.91) ======== ========
========= ========= Weighted average shares outstanding: Basic
24,659 17,179 24,553 17,128 ======== ======== ========= =========
Diluted 43,178(b) 17,179 24,553 17,128 ======== ======== =========
========= (a) Production and delivery costs include estimated
damage repair costs associated with Hurricanes Katrina and Rita
during the third quarter of 2005 totaling $2.8 million, including
$2.5 million for Main Pass 299. (b) Diluted shares outstanding
reflects assumed conversion of McMoRan's 6% Mandatorily Redeemable
Preferred Stock and 6% Convertible Senior Notes, resulting in the
exclusion of $0.4 million of dividends and $2.1 million of interest
expense and the inclusion of 15.3 million equivalent common shares
in the third quarter of 2005. No instruments were dilutive in any
of the other periods presented given McMoRan's loss from continuing
operations. McMoRan EXPLORATION CO. OPERATING DATA (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30,
------------------- --------------------- 2005 2004 2005 2004
---------- -------- ---------- ---------- Sales volumes: Gas
(thousand cubic feet, or Mcf) 2,011,900 499,600 6,187,100 1,247,600
Oil, excluding Main Pass 299 (barrels) 89,400 13,700 186,200 51,200
Oil from Main Pass 299 (barrels)(a) 235,000 - 335,600 - Plant
products (equivalent barrels)(b) 42,500 5,400 78,000 17,200 Average
realizations: Gas (per Mcf) $10.31 $5.65 $8.26 $5.98 Oil, excluding
Main Pass 299 (per barrel) 61.18 43.25 56.16 37.96 Oil from Main
Pass 299 (per barrel) 55.64 - 52.90 - (a) Oil production from Main
Pass 299 has been shut-in for repair of damage caused by Hurricane
Katrina in late August 2005, but is expected to be restored in the
fourth quarter of 2005. (b) Results include revenues associated
with plant products (ethane, propane, butane, etc.), which totaled
approximately $1.8 million during the third quarter of 2005 and
$0.2 million during the third quarter of 2004. For the nine months
ended September 30, 2005 plant product revenue totaled $3.3 million
compared to $0.5 million for the nine month ending September 30,
2004. McMoRan EXPLORATION CO. CONDENSED BALANCE SHEETS (Unaudited)
Sept. 30, Dec. 31, 2005 2004 --------- --------- (In Thousands)
ASSETS Cash and cash equivalents: Continuing operations, includes
restricted cash of $2.0 million at September 30, 2005 and $3.7
million at December 31, 2004 $174,299 $203,035 Discontinued
operations, all restricted 997 980 Restricted investments 15,120
15,150 Accounts receivable 21,685 27,403 Inventories 4,528 854
Prepaid expenses 2,265 1,122 Current assets from discontinued
operations, excluding cash 2,550 2,563 --------- --------- Total
current assets 221,444 251,107 Property, plant and equipment, net
162,330(a) 97,262 Sulphur business assets 312 312 Restricted
investments and cash 14,042(b) 24,779 Other assets 8,832 10,460
--------- --------- Total assets $406,960 $383,920 =========
========= LIABILITIES AND STOCKHOLDERS' DEFICIT Accounts payable $
49,618 $ 33,997 Accrued liabilities and other 39,530 28,197 Accrued
interest 5,523 5,635 Current portion of accrued oil and gas
reclamation costs - 238 Current portion of accrued sulphur
reclamation cost 2,750 2,550 Current liabilities from discontinued
operations 6,056 4,601 --------- --------- Total current
liabilities 103,477 75,218 6% convertible senior notes 130,000
130,000 5 1/4% convertible senior notes 140,000 140,000 Accrued
sulphur reclamation costs 12,606 12,086 Accrued oil and gas
reclamation costs 22,402 14,191 Contractual postretirement
obligation 14,802 15,695 Other long-term liabilities 15,564 16,711
Mandatorily redeemable convertible preferred stock 28,932 29,565
Stockholders' deficit (60,823) (49,546) --------- --------- Total
liabilities and stockholders' deficit $406,960 $383,920 =========
========= (a) Includes $13.7 million of drilling and related costs
associated with unevaluated in-progress exploratory wells at
September 30, 2005 and $10.6 million of costs related to the
potential discovery at Blueberry Hill at Louisiana State Lease 340.
(b) Decrease reflects semi-annual payments made on January 2, 2005
and July 2, 2005 for McMoRan's 6% convertible senior notes and
payment made on April 6, 2005 for McMoRan's 5 1/4% convertible
senior notes. McMoRan EXPLORATION CO. STATEMENTS OF CASH FLOWS
(Unaudited) Nine Months Ended September 30, --------------------
2005 2004 ---------- --------- (In Thousands) Cash flow from
operating activities: Net loss $ (14,014) $(31,496) Adjustments to
reconcile net loss to net cash provided by (used in) operating
activities: Loss from discontinued sulphur operations 3,591 3,676
Depreciation and amortization 19,426 4,052 Exploration drilling and
related expenditures 31,634 9,439 Compensation expense associated
with stock-based awards 1,347 1,025 Reclamation and mine shutdown
expenditures (4) (283) Amortization of deferred financing costs
1,669 1,056 Equity in K-Mc Venture I LLC's income - (318) Other
(503) 219 (Increase) decrease in working capital: Accounts
receivable 5,760 (3,984) Accounts payable and accrued liabilities
20,634 (538) Inventories and prepaid expenses (4,816) 611
---------- --------- Net cash provided by (used in) continuing
operations 64,724 (16,541) Net cash used in discontinued operations
(2,532) (4,209) ---------- --------- Net cash provided by (used in)
operating activities 62,192 (20,750) ---------- --------- Cash flow
from investing activities: Exploration, development and other
capital expenditures (102,857) (25,135) Proceeds from restricted
investments 11,475 7,800 Increase in restricted investments (437)
(157) ---------- --------- Net cash used in continuing operations
(91,819) (17,492) Net cash used in discontinued operations -
(5,920) ---------- --------- Net cash used in investing activities
(91,819) (23,412) ---------- --------- Cash flow from financing
activities: Dividends paid on convertible preferred stock (1,130)
(1,148) Proceeds from exercise of stock options and other 2,038 367
---------- --------- Net cash provided by (used in) continuing
operations 908 (781) Net cash activity - discontinued operations -
- ---------- --------- Net cash provided by (used in) financing
activities 908 (781) ---------- --------- Net decrease in cash and
cash equivalents (28,719) (44,943) Cash and cash equivalents at
beginning of year 204,015 101,899 ---------- --------- Cash and
cash equivalents at end of period 175,296 56,956 Less restricted
cash from continuing operations (2,031) - Less restricted cash from
discontinued operations (997) (976) ---------- ---------
Unrestricted cash and cash equivalents at end of period $ 172,268 $
55,980 ---------- --------- *T
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