McMoRan Exploration Co. Announces Third-Quarter/Nine-Month 2009 Results
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NEW ORLEANS--(BUSINESS WIRE)-- McMoRan Exploration Co. (NYSE: MMR):
HIGHLIGHTS
-- Third-quarter 2009 production averaged 215 Million cubic feet of natural
gas equivalents per day (MMcfe/d) net to McMoRan and 200 MMcfe/d for the
nine-month period ended September 30, 2009. Average daily production for
2009 is expected to approximate 204 MMcfe/d net to McMoRan, including
215 MMcfe/d in fourth quarter.
-- Production from six wells at the Flatrock field averaged a gross rate of
approximately 280 MMcfe/d (52 MMcfe/d net to McMoRan) in the third
quarter of 2009.
-- Exploratory Activities:
o Positive drilling results at the Blueberry Hill deep gas prospect on
Louisiana State Lease 340 have identified an approximate 190 foot
vertical column of hydrocarbons. Drilling continues to determine an
optimum production take point.
o Davy Jones ultra-deep prospect on South Marsh Island Block 230 is
drilling below 25,000 feet towards a proposed total depth of 28,000
feet.
o Hurricane Deep sidetrack operations expected to commence in the fourth
quarter of 2009.
o Evaluation and planning for additional deep gas and ultra-deep
opportunities continues.
-- Operating cash flows totaled $31.9 million for the third quarter of 2009
and $85.5 million for the nine months ended September 30, 2009.
-- Capital expenditures totaled $29.0 million in the third quarter of 2009
and $113.4 million for the nine months ended September 30, 2009. McMoRan
expects capital expenditures to approximate $155 million for the year.
-- Cash at September 30, 2009 totaled $225 million.
McMoRan Exploration Co. (NYSE: MMR) today reported a net loss applicable to common stock of $51.9 million, $0.60 per share, for the third quarter of 2009 compared with a net loss applicable to common stock of $6.1 million, $0.10 per share, for the third quarter of 2008. For the nine months ended September 30, 2009, McMoRan reported a net loss applicable to common stock of $215.8 million, $2.83 per share, compared with net income applicable to common stock of $75.6 million, $1.14 per share, in the 2008 period.
James R. Moffett and Richard Adkerson, McMoRan's Co-Chairmen, said, "The data and geologic information gained from our deep drilling and production activities, and correlation analysis with deepwater reservoirs support our view that there are large structures with significant potential for hydrocarbon accumulation on the Shelf of the Gulf of Mexico. The Blueberry Hill results are positive and we look forward to defining the potential in the area. We expect to have results from our high potential Davy Jones ultra-deep well in the fourth quarter and are excited about future activities on our ultra-deep program which we believe have the potential to create significant values for shareholders."
SUMMARY FINANCIAL TABLE*
Third Quarter Nine Months
2009 2008 2009 2008
(In thousands, except per share amounts)
Revenues $ 109,535 $ 285,245 $ 303,463 $ 956,229
Operating income (35,514 ) 18,057 (171,911 ) 144,138
(loss)(a)
Income (loss) from
continuing operations (45,969 ) 6,105 (200,168 ) 98,166
(a)
Loss from
discontinued (1,575 ) (1,356 ) (5,692 ) (2,960 )
operations
Net income (loss)
applicable to common (51,932 ) (6,132 ) (215,785 ) 75,602
stock(a,b)
Diluted net income
(loss) per share:
Continuing operations $ (0.58 ) $ (0.08 ) $ (2.76 ) $ 1.17 (c)
Discontinued (0.02 ) (0.02 ) (0.07 ) (0.03 )
operations
Applicable to common $ (0.60 ) $ (0.10 ) $ (2.83 ) $ 1.14 (c)
stock
Diluted average 86,038 64,446 76,152 87,718 (c)
shares outstanding
Operating cash flows $ 31,926 $ 253,936 $ 85,458 $ 636,163
EBITDAX(d) $ 57,142 $ 211,381 $ 183,976 $ 708,883
Capital Expenditures $ 29,044 $ 75,845 $ 113,375 $ 186,904
If any in-progress well or unproved property is determined to be
non-productive or no longer meets the capitalization requirements under
applicable accounting rules after the date of this release but prior to the
filing of McMoRan's September 30, 2009 Form 10-Q, the related costs incurred
* through September 30, 2009 would be charged to expense in McMoRan's
third-quarter 2009 financial statements. McMoRan's investment in its three
in-progress or unproved wells, including the Blueberry Hill exploration well
where McMoRan encountered positive drilling results, totaled $62.1 million
at September 30, 2009.
a. Notable items impacting financial results for the 2009 and 2008 periods are
included in the following table:
Third Quarter Nine Months
2009 2008 2009 2008
(In thousands)
Non-productive $ 7,338 (1) $ 4,402 $ 61,707 $ 16,814
exploration well charges
Impairment charges(2) $ 11,224 $ 33,389 $ 64,769 $ 40,812
Gain (loss) on oil and
gas derivative contracts $ 738 $ 80,399 $ 16,624 $ (35,607 )
(3)
Insurance Proceeds $ - $ - $ 18,742 (4) $ 3,391
(1) Primarily relating to the Sherwood exploration well which was
determined to be non-commercial in the third quarter of 2009.
(2) Reduction of certain fields' net carrying value to fair value.
(3) See details of gains (losses) on oil and gas derivative contracts on
page II (e).
(4) Initial payment for insured losses related to the September 2008
hurricanes in the Gulf of Mexico.
b. After preferred dividends.
Reflects assumed conversion of McMoRan's 6% and 51/4% Convertible Senior
Notes, 6.75% Mandatory Convertible Preferred Stock, and the dilutive effect
c. of outstanding stock options and warrants into 29.1 million shares for the
nine-month period, resulting in the exclusion of $5.0 million in interest
expense and $19.6 million in dividends and inducement payments for the 2008
nine-month period.
d. See reconciliation of EBITDAX to net income (loss) applicable to common
stock on page III.
PRODUCTION AND DEVELOPMENT ACTIVITIES
Third-quarter 2009 production averaged 215 MMcfe/d net to McMoRan, compared with 187 MMcfe/d in the second quarter of 2009 and 225 MMcfe/d in the third quarter of 2008. McMoRan's third quarter production includes the restoration of most of the remaining production shut-in as a result of the September 2008 hurricanes in the Gulf of Mexico. Production is expected to average approximately 215 MMcfe/d in the fourth quarter of 2009 and 204 MMcfe/d for the year. McMoRan's estimated production rates are dependent on the timing of planned recompletions, production performance and other factors.
Following the Flatrock discovery in OCS 310 on South Marsh Island Block 212 in July 2007, McMoRan has drilled five additional successful wells in the field. The Flatrock No. 5 well (#232) was recompleted in the primary Rob-L zone in September 2009. Production from the six wells in the field averaged a gross rate of approximately 280 MMcfe/d (52 MMcfe/d net to McMoRan) in the third quarter of 2009. The Flatrock No. 3 (#230) well is currently offline and will be recompleted in the fourth quarter of 2009. McMoRan has a 25.0 percent working interest in Flatrock and Plains Exploration & Production Company (NYSE: PXP) holds a 30.0 percent working interest.
As previously reported, the Flatrock No. 4 (#231) well was shut in in August 2009 because of a mechanical issue associated with the well bore (not reservoir related). The Flatrock No. 4 well produced at a rate of approximately 100 MMcfe/d (18 MMcfe/d net to McMoRan) for over six months prior to being shut in. Remedial activities are under way and the No. 4 well is expected to recommence production by year-end 2009.
EXPLORATION ACTIVITIES
McMoRan's exploration strategy is focused on the "deep gas play," drilling to depths of 15,000 to 25,000 feet in the shallow waters of the Gulf of Mexico and Gulf Coast area to target large structures in the Deep Miocene, and on the "ultra-deep gas play" below 25,000 feet. McMoRan is one of the largest acreage holders on the Shelf of the Gulf of Mexico and onshore in the Gulf Coast area with rights to approximately 1 million gross acres including 0.2 million gross acres associated with the ultra-deep trend.
Deep Gas Activities
On March 29, 2009, McMoRan re-entered a previously existing well bore and commenced sidetracking operations at the Blueberry Hill deep gas prospect located on Louisiana State Lease 340. As previously reported, McMoRan encountered mechanical problems during the third quarter in the original sidetrack (ST#1) well (drilled to true vertical depth (TVD) of 21,900 feet) and in the subsequent by-pass (BP) well (drilled to TVD of 22,778 feet). Based on information from log-while-drilling tools from the ST#1 well and wireline logs from the by-pass well, McMoRan has identified an approximate 190 foot vertical column of hydrocarbons at Blueberry Hill.
A second sidetrack (ST#2) well is being drilled to target the reservoir sand structurally high to the ST#1 and by-pass wells in order to pursue an optimum production take point in the hydrocarbon column. The ST#2 well, which is drilling below 21,500 feet towards a proposed TVD of 21,777 feet, is located approximately 1,000 feet to the southeast of the ST#1 and subsequent by-pass wells. McMoRan is in the planning stages for additional offset wells to further evaluate the Blueberry Hill area, including the deeper potential.
Blueberry Hill is located in approximately 10 feet of water approximately 11 miles southeast of Flatrock. McMoRan owns a 42.9 percent working interest and a 29.7 percent net revenue interest in the Blueberry Hill well. PXP holds a 47.9 percent working interest. McMoRan's investment in Blueberry Hill totaled $42.2 million at September 30, 2009, $18.9 million of which was incurred on the sidetrack and by-pass wells and $23.3 million on the original well drilled in 2005.
McMoRan plans to commence sidetrack operations on the Hurricane Deep well in the fourth quarter of 2009. The Hurricane Deep sidetrack has a proposed total depth of 21,750 feet and is located on the southern flank of the Flatrock structure on South Marsh Island Block 217. This up dip test will target the significant Gyro sand encountered in the Hurricane Deep well (No. 226) and deeper potential. As previously reported, the No. 226 well was drilled to a TVD of 20,712 feet in the first quarter of 2007 and logs indicated an exceptionally thick upper Gyro sand totaling 900 gross feet, the top 40 feet of which was hydrocarbon bearing. McMoRan believes an up dip well has the potential to contain a thicker hydrocarbon column. McMoRan owns a 25.0 percent working interest and 17.7 percent net revenue interest in the well. PXP holds a 30.0 percent working interest.
Third-quarter 2009 exploration expense includes $6.3 million in costs associated with the previously reported non-productive well at the Sherwood prospect.
Ultra-Deep Activities
McMoRan expects to maintain an active ultra-deep drilling program in 2010. McMoRan's ultra-deep prospects on the Shelf below the salt weld are targeting similar geologic features present in recent deepwater discoveries by other industry participants.
On June 28, 2009, McMoRan re-entered a well bore located on South Marsh Island Block 230 to evaluate the Davy Jones prospect, which involves a large ultra-deep structure encompassing four OCS lease blocks located in 20 feet of water on the Shelf of the Gulf of Mexico. The well is drilling below 25,000 feet to a proposed total depth of 28,000 feet. This exploratory well will test Eocene (Wilcox), Paleocene and possibly the Cretaceous (Tuscaloosa) sections below the salt weld (i.e. listric fault).
McMoRan operates the Davy Jones prospect and will fund 25.7 percent of the exploratory costs for a 32.7 percent working interest and 25.9 percent net revenue interest. Other working interest owners in the drilling of the Davy Jones well include: PXP (27.7%), Energy XXI (NASDAQ: EXXI) (15.8%), Nippon Oil Exploration USA Limited (12%), and W.A. "Tex" Moncrief, Jr. (Moncrief) (8.8%). McMoRan's investment in Davy Jones totaled $11.5 million at September 30, 2009.
Drilling results at Davy Jones are expected to provide additional information about other ultra-deep structures on the Shelf of the Gulf of Mexico, including Blackbeard West on South Timbalier Block 168. This information will allow McMoRan to evaluate various options, including deepening the Blackbeard West well, drilling an offset location or complete the well to test the existing zones. McMoRan is operator and owns a 32.3 percent working interest in the Blackbeard West well and PXP and EXXI hold a 35 percent working interest and 20 percent working interest, respectively. McMoRan's investment in Blackbeard West totaled $31.7 million at September 30, 2009.
In September 2009, McMoRan announced that it entered into an agreement with Moncrief to participate in McMoRan's ultra-deep drilling program. Moncrief has agreed to fund drilling and production operations on a promoted basis to explore and develop ultra-deep prospects. McMoRan and two of its partners, PXP and EXXI, assigned 10 percent of their collective working interests in Davy Jones to Moncrief. Moncrief may also participate for 10 percent of the collective interests of these parties in future ultra-deep wells.
REVENUES
McMoRan's third-quarter 2009 oil and gas revenues totaled $105.8 million, compared to $282.7 million during the third quarter of 2008. During the third quarter of 2009, McMoRan's sales volumes totaled 13.6 Bcf of gas, 761,600 barrels of oil and condensate and 1.6 Bcfe of plant products, compared to 13.5 Bcf of gas, 811,900 barrels of oil and condensate and 2.3 Bcfe of plant products in the third quarter of 2008. McMoRan's third-quarter comparable average realizations for gas (before hedging) were $3.39 per thousand cubic feet (Mcf) in 2009 and $10.67 per Mcf in 2008; for oil and condensate McMoRan received an average of $66.81 per barrel in third-quarter 2009 compared to $124.05 per barrel in third-quarter 2008.
CASH, LIQUIDITY AND CAPITAL EXPENDITURES
At September 30, 2009, McMoRan had $225 million in cash, the same level of cash on hand at June 30, 2009. Total debt was $375 million at September 30, 2009, including $75 million in convertible senior notes due in 2011 with a conversion price of $16.575 per share. McMoRan currently has no borrowings outstanding on its $235 million revolving credit facility and $135 million in availability after considering $100 million in outstanding letters of credit. McMoRan's bank group is currently completing its semi-annual redetermination of its borrowing base. The review is expected to be completed in the fourth quarter of 2009. McMoRan expects the borrowing base will be reduced from the current level, reflecting the impact of year-to-date production and lower natural gas prices assumptions used by the bank group in the assessments. McMoRan does not expect the redetermination to impact its future plans or operations.
Capital expenditures totaled $29.0 million for the third quarter of 2009 and $113.4 million for the nine-months ended September 30, 2009. Capital expenditures are expected to approximate $155 million for the year ended 2009. Capital expenditures are lower than previous estimates of $180 million because of partner arrangements and the timing of expenditures. In addition, net abandonment expenditures, which include scheduled conventional and hurricane related work, totaled $40 million for the nine-months ended September 30, 2009 and are expected to approximate $60 million in for the year.
DERIVATIVE CONTRACTS
During the third quarter of 2009, McMoRan financially settled 2.5 Bcf of natural gas put options with an average strike price of $6.00 per Mcf. McMoRan received $6.3 million in cash for these positions. Put options totaling 96,000 barrels of oil expired with no benefit during the quarter. At September 30, 2009, McMoRan had a total of 3.7 Bcf of natural gas and 163,000 barrels of oil hedged through 2010 through open swap positions and 1.9 Bcf of natural gas and 79,000 barrels of oil hedged through 2010 through puts. Following is a summary of open swap and put positions at September 30, 2009:
Natural Gas Positions (million MMbtu)
Open Swap Positions(1) Put Options(2)
Annual Average Annual Average Total
Volumes Swap Price Volumes Floor Volumes
2009 1.1 $ 8.97 0.7 $ 6.00 1.8
2010 2.6 $ 8.63 1.2 $ 6.00 3.8
Oil Positions (thousand bbls)
Open Swap Positions(1) Put Options(2)
Annual Average Annual Average Total
Volumes Swap Price Volumes Floor Volumes
2009 45 $ 71.16 29 $ 50.00 74
2010 118 $ 70.89 50 $ 50.00 168
(1) Remaining 2009 swaps cover periods November-December; 2010
swaps cover periods January-June and November-December
(2) Covering October 2009 and July-October for 2010
These derivative contracts have not been designated as hedges for accounting purposes. Accordingly, these contracts are subject to mark-to-market fair value adjustments and unrealized gains and losses are recognized in our operating results. McMoRan's third-quarter 2009 results included a net gain of $0.7 million associated with our oil and gas derivative contracts, which include mark-to-market accounting adjustments associated with these contracts based on changes in their respective fair market values through September 30, 2009. McMoRan's derivative contracts' fair value was $12.9 million at September 30, 2009. McMoRan may consider additional derivative contracts for a portion of its future production.
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. Additional information about McMoRan is available on its internet website "www.mcmoran.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, capital expenditures, reclamation costs and anticipated and potential production and flow rates. Accuracy of these forward-looking statements 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 forward-looking statements in this press release and does not intend to update these statements more frequently than quarterly. Important factors that might cause future results to differ from these forward-looking statements include: adverse conditions such as high temperature and pressure that could lead to mechanical failures or increased costs; 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; as well as other general exploration and development risks and hazards. These and other factors are more fully described in McMoRan's 2008 Annual Report on Form 10-K on file with the Securities and Exchange Commission (SEC), as updated by our subsequent filings with the SEC.
This press release contains a financial measure, Earnings before interest, taxes, depreciation, amortization and exploration expenses (EBITDAX), commonly used in the oil and natural gas industry but not defined under GAAP. As required by SEC Regulation G, reconciliations of this measure to amounts reported in McMoRan's consolidated financial statements are included in the supplemental schedules of this press release.
A copy of this release is available on McMoRan's web site at www.mcmoran.com. A conference call with securities analysts about third-quarter 2009 results is scheduled for today at 10:00 a.m. Eastern Time. The conference call will be broadcast on the Internet along with slides. Interested parties may listen to the conference call live and view the slides by accessing "www.mcmoran.com." A replay of the webcast will be available through Friday, November 13, 2009.
McMoRan EXPLORATION CO.
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(In Thousands, Except Per Share Amounts)
Revenues:
Oil and gas $ 105,822 $ 282,688 $ 294,969 $ 946,955
Service 3,713 2,557 8,494 9,274
Total revenues 109,535 285,245 303,463 956,229
Costs and expenses:
Production and 49,087 69,923 146,933 195,074
delivery costsa
Depletion,
depreciation and 75,980 250,124 243,347 492,457
amortization b
Exploration expenses 10,802 15,092 86,064 49,385
c, d
(Gain) loss on oil and
gas derivative (738 ) (80,399 ) (16,624 ) 35,607
contracts e
General and
administrative 9,621 10,720 32,983 37,969
expenses c
Main Pass Energy Hub 297 1,728 1,413 4,990
(TM) costs c
Insurance recoveries - - (18,742 )f (3,391 )
Total costs and 145,049 267,188 475,374 812,091
expenses
Operating income (35,514 ) 18,057 (171,911 ) 144,138
(loss)
Interest expense, net (10,930 ) (10,870 ) (31,871 ) (40,501 )
Other income 298 202 3,470 (2,322 )
(expense), net
Income (loss) from
continuing operations (46,146 ) 7,389 (200,312 ) 101,315
before income taxes
Income tax benefit 177 (1,284 ) 144 (3,149 )
(expense)
Income (loss) from (45,969 ) 6,105 (200,168 ) 98,166
continuing operations
Loss from discontinued (1,575 ) (1,356 ) (5,692 ) (2,960 )
operations
Net income (loss) (47,544 ) 4,749 (205,860 ) 95,206
Preferred dividends
and inducement
payments for early (4,388 ) (10,881 ) (9,925 ) (19,604 )
conversion of
preferred stock
Net income (loss)
applicable to common $ (51,932 ) $ (6,132 ) $ (215,785 ) $ 75,602
stock
Basic net income
(loss) per share of
common stock:
Continuing operations $ (0.58 ) $ (0.08 ) $ (2.76 ) $ 1.34
Discontinued (0.02 ) (0.02 ) (0.07 ) (0.05 )
operations
Net income (loss) per $ (0.60 ) $ (0.10 ) $ (2.83 ) $ 1.29
share of common stock
Diluted net income
(loss) per share of
common stock:
Continuing operations $ (0.58 ) $ (0.08 ) $ (2.76 ) $ 1.17
Discontinued (0.02 ) (0.02 ) (0.07 ) (0.03 )
operations
Net income (loss) per $ (0.60 ) $ (0.10 ) $ (2.83 ) $ 1.14
share of common stock
Average common shares
outstanding:
Basic 86,038 64,446 76,152 58,617
Diluted 86,038 64,446 76,152 87,718
McMoRan EXPLORATION CO.
FOOTNOTES TO STATEMENTS OF OPERATIONS (Unaudited)
Includes hurricane damage assessment and repair charges (credits) totaling $
a. (0.5) million and $14.2 million in the third quarter and nine months ended
September 30, 2009, respectively, and $6.3 million in the third quarter and
nine months ended September 30, 2008.
Includes impairment charges totaling $11.2 million and $64.8 million in the
b. third quarter and nine months ended September 30, 2009, respectively, and
$33.4 million and $40.8 million in the third quarter and nine months ended
September 30, 2008, respectively.
c. Non-cash stock-based compensation of the following amounts is included in
the respective expense categories shown below (in thousands):
Third Quarter Nine Months
2009 2008 2009 2008
General and administrative expenses $ 1,432 $ 2,359 $ 5,998 $ 12,480
Exploration expenses 1,278 2,151 5,633 12,198
Main Pass Energy Hub(TM) costs 76 161 335 868
Total stock-based compensation cost $ 2,786 $ 4,671 $ 11,966 $ 25,546
Includes non-productive well costs of $7.3 million and $61.7 million in the
d. third quarter and nine months ended September 30, 2009, respectively, and
$4.4 million and $16.8 million in the third quarter and nine months ended
September 30, 2008, respectively.
e. McMoRan's (gains) losses on its oil and gas derivative contracts include the
following (in thousands):
Third Quarter Nine Months
2009 2008 2009 2008
(Gain) loss on settled $ (5,338 ) $ 1,856 $ (40,210 ) $ 33,059
contracts
Mark-to-market (gain) loss 4,600 (82,255 ) 23,586 2,548
(Gain) loss on oil and gas $ (738 ) $ (80,399 ) $ (16,624 ) $ 35,607
derivative contracts
f. Represents McMoRan's share of the initial payment of insurance proceeds
related to losses incurred from the September 2008 hurricanes.
McMoRan EXPLORATION CO.
RECONCILIATION OF REPORTED AMOUNTS TO NON-GAAP ITEMS (SEE NOTE) (Unaudited)
EBITDAX is a financial measure commonly used in the oil and natural gas industry
but is not a recognized accounting term under accounting principles generally
accepted in the United States of America ("GAAP"). As defined by McMoRan,
EBITDAX reflects the company's adjusted oil and gas operating income. "EBITDAX"
is derived from net income (loss) from continuing operations before other
(income) expense, interest expense (net), income tax (benefit) expense, Main
Pass Energy HubTMcosts, exploration expenses, depletion, depreciation and
amortization, stock-based compensation charged to general and administrative
expense, change in fair value of oil and gas derivative contracts,
hurricane-related charges (credits), and insurance recoveries. EBITDAX should
not be considered by itself or as a substitute for net income (loss), operating
income (loss), cash flows from operating activities or any other measure of
financial performance presented in accordance with GAAP, or as a measure of
McMoRan's profitability or liquidity. Because EBITDAX excludes some, but not
all, items that affect net income (loss), the computation of this non-GAAP
financial measure may be different from similar presentations of other companies
including oil and gas companies in our industry. As a result, the EBITDAX data
presented below may not be comparable to similarly titled measures of other
companies.
McMoRan's management utilizes both the GAAP and non-GAAP results presented in
this news release to evaluate McMoRan's performance and believes that
comparative analysis of results are useful to investors and other internal and
external users of our financial statements in evaluating our operating
performance, and such analysis can be enhanced by excluding the impact of these
items to help investors meaningfully compare our results from period to period.
The following is a reconciliation of reported amounts from net income (loss)
applicable to common stock to EBITDAX (in thousands):
Third Quarter Nine Months
2009 2008 2009 2008
Net income (loss)
applicable to common $ (51,932 ) $ (6,132 ) $ (215,785 ) $ 75,602
stock, as reported
Preferred dividends and
inducement payments for 4,388 10,881 9,925 19,604
early conversion of
preferred stock
Loss from discontinued 1,575 1,356 5,692 2,960
operations
Income (loss) from
continuing operations, (45,969 ) 6,105 (200,168 ) 98,166
as reported
Other (income) expense, (298 ) (202 ) (3,470 ) 2,322
net
Interest expense, net 10,930 10,870 31,871 40,501
Income tax (benefit) (177 ) 1,284 (144 ) 3,149
expense
Main Pass Energy 297 1,728 1,413 4,990
HubTMcosts
Exploration expenses 10,802 15,092 86,064 49,385
Depletion, depreciation 75,980 250,124 243,347 492,457
and amortization
Hurricane-related
charges (credits) (455 ) 6,276 14,221 6,276
included in production
and delivery costs
Stock-based
compensation charged to 1,432 2,359 5,998 12,480
general and
administrative expenses
Insurance recoveries - - (18,742 ) (3,391 )
Change in fair value of
oil and gas derivative 4,600 (82,255 ) 23,586 2,548
contracts
EBITDAX $ 57,142 $ 211,381 $ 183,976 $ 708,883
McMoRan EXPLORATION CO.
OPERATING DATA (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Sales volumes:
Gas (thousand cubic 13,619,300 13,537,100 36,990,900 49,637,500
feet, or Mcf)
Oil (barrels) 761,600 811,900 2,262,300 3,027,800
Plant products (per 1,568,300 2,288,100 3,988,100 6,959,300
Mcf equivalent) a
Average
realizations:
Gas (per Mcf) $ 3.39 $ 10.67 $ 4.04 $ 10.62
Oil (per barrel) 66.81 124.05 55.39 114.07
Results include approximately $8.6 million and $19.8 million of revenues
associated with plant products (ethane, propane, butane, etc.) during the
third quarter and nine months ended September 30, 2009, respectively. Plant
a. product revenues for the comparable prior year periods totaled $27.8 million
and $73.6 million, respectively. One Mcf equivalent is determined using the
ratio of six Mcf of natural gas to one barrel of crude oil, condensate or
natural gas liquids.
McMoRan EXPLORATION CO.
CONDENSED BALANCE SHEETS (Unaudited)
September 30, December 31,
2009 2008
(In Thousands)
ASSETS
Cash and cash equivalents $ 224,664 $ 93,486
Accounts receivable 77,652 112,684
Inventories 48,820 31,284
Prepaid expenses 18,147 13,819
Fair value of oil and gas derivative contracts 11,995 31,624
Current assets from discontinued operations, 1,008 516
including restricted cash of $0.5 million
Total current assets 382,286 283,413
Property, plant and equipment, net 821,288 992,563
Restricted cash 41,083 29,789
Deferred financing costs and other assets 12,963 15,658
Fair value of oil and gas derivative contracts 1,201 5,847
Sulphur business assets 3,002 3,012
Total assets $ 1,261,823 $ 1,330,282
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 66,370 $ 77,009
Accrued liabilities 64,082 89,565
Accrued interest and dividends payable 18,428 7,586
Current portion of accrued oil and gas 108,609 103,550
reclamation costs
Current portion of accrued sulphur reclamation 5,000 785
costs
Fair value of oil and gas derivative contracts 221 -
Current liabilities from discontinued operations 1,891 1,317
Total current liabilities 264,601 279,812
51/4% convertible senior notes 74,720 74,720
11.875% senior notes 300,000 300,000
Accrued oil and gas reclamation costs 303,050 317,651
Accrued sulphur reclamation costs 19,022 22,218
Fair value of oil and gas derivative contracts 98 -
Other long-term liabilities 20,047 20,023
Other long-term liabilities from discontinued 6,964 6,835
operations
Total liabilities 988,502 1,021,259
Stockholders' equity 273,321 309,023
Total liabilities and stockholders' equity $ 1,261,823 $ 1,330,282
McMoRan EXPLORATION CO.
STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended
September 30,
2009 2008
(In Thousands)
Cash flow from operating activities:
Net income (loss) $ (205,860 ) $ 95,206
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Loss from discontinued operations 5,692 2,960
Depletion, depreciation and amortization 243,347 492,457
Exploration drilling and related expenditures, net 61,707 15,692
Compensation expense associated with stock-based 11,966 25,546
awards
Amortization of deferred financing costs 2,793 3,675
Change in fair value of oil and gas derivative 23,586 2,548
contracts
Loss on induced conversions of convertible senior - 2,663
notes
Reclamation expenditures, net of prepayment by (39,625 ) (6,500 )
third parties
Increase in restricted cash (11,293 ) (11,364 )
Payment to fund terminated pension plan - (2,291 )
Other (316 ) 83
(Increase) decrease in working capital:
Accounts receivable 32,914 18,229
Accounts payable and accrued liabilities (14,219 ) 37,702
Prepaid expenses and inventories (20,861 ) (35,299 )
Net cash provided by continuing operations 89,831 641,307
Net cash used in discontinued operations (4,373 ) (5,144 )
Net cash provided by operating activities 85,458 636,163
Cash flow from investing activities:
Exploration, development and other capital (113,375 ) (186,904 )
expenditures
Other - (613 )
Net cash used in continuing operations (113,375 ) (187,517 )
Net cash from discontinued operations - -
Net cash used in investing activities (113,375 ) (187,517 )
Cash flow from financing activities:
Net proceeds from the sale of common stock 84,929 -
Net proceeds from the sale of 8% convertible 83,228 -
perpetual preferred stock
Payments under senior secured revolving credit - (274,000 )
facility, net
Dividends and inducement payments on preferred (9,062 ) (20,883 )
stock
Payments for induced conversion of convertible - (2,663 )
senior notes
Proceeds from exercise of stock options and other - 4,705
Net cash provided by (used in) continuing 159,095 (292,841 )
operations
Net cash from discontinued operations - -
Net cash provided by (used in) financing 159,095 (292,841 )
activities
Net increase in cash and cash equivalents 131,178 155,805
Cash and cash equivalents at beginning of year 93,486 4,830
Cash and cash equivalents at end of period $ 224,664 $ 160,635
Source: McMoRan Exploration Co.
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