In June 2012, successfully perforated 165 feet of Wilcox sands in
the Davy Jones No.1 well with electric wireline casing guns.
Commenced operations on July 13 to run production tubing and
expect to conduct measurable flow test during the week of July 30.
Completion and testing of Davy Jones No. 2 expected to commence
following review of results from Davy Jones No. 1. As previously
reported, Davy Jones No. 2 confirmed 120 net feet of pay in
multiple Wilcox sands and also encountered 192 net feet of
potential hydrocarbons in the Tuscaloosa and Lower Cretaceous
carbonate sections. Davy Jones is located on a 20,000 acre
structure that has multiple follow on drilling opportunities.
Expect to submit development plans for Blackbeard East and Lafitte
with Bureau of Safety and Environmental Enforcement (BSEE) in the
third quarter of 2012. Positive drilling results on these
structures have identified formations in the Miocene, Oligocene
and Eocene.
Ultra-Deep Exploration Activities
Blackbeard West No. 2
Drilling below 21,100 feet with a proposed total depth of
24,500 feet.
Set liner after well encountered a high pressure gas flow
immediately below the salt weld in May 2012.
Targeting Miocene aged sands seen below the salt weld at
Blackbeard East.
If successful, completion could utilize conventional equipment
and technologies.
Lineham Creek onshore prospect
Drilling below 19,000 feet with a proposed total depth of
29,000 feet. Targeting Eocene/Paleocene objectives below the
salt weld.
Highlander onshore prospect
Acquired exploratory rights to 68,000 gross acre area located
in Iberia, St. Martin, Assumption and Iberville Parishes,
Louisiana.
Expect to commence drilling exploratory well in the second
half of 2012.
Well has a proposed total depth of 30,000 feet and will target
Eocene, Paleocene and Cretaceous objectives seen below the
salt weld in the Davy Jones wells.
Central Gulf of Mexico Lease Sale216/222 Results
Apparent high bidder on 14 leases, of which six were sole bids and
the remaining eight were made jointly with Chevron U.S.A. Inc.
This new acreage would enhance McMoRan's industry leading Shelf
sub-salt prospect inventory.
Second-quarter 2012 production averaged 140 MMcfe/d net to
McMoRan, compared with 197 MMcfe/d in the second quarter of 2011.
Average daily production for 2012 is expected to approximate
137 MMcfe/d net to McMoRan, including 135 MMcfe/d in third quarter
2012.
Operating cash flows totaled $11.7 million for the second
quarter of 2012, net of $9.1 million in working capital uses and $16.0
million in abandonment expenditures.
Capital expenditures totaled $147.2 million in the second
quarter of 2012.
Cash at June 30, 2012 totaled $287.1 million.
McMoRan Exploration Co. (NYSE: MMR) today reported a net loss applicable
to common stock of $75.5 million, $0.47 per share, for the second
quarter of 2012 compared with a net loss of $50.2 million, $0.32 per
share, for the second quarter of 2011.
James R. Moffett and Richard Adkerson, McMoRan's Co-Chairmen, said,
"Our activities to define the ultra-deep sub-salt trend have opened up
the potential for a major new resource play on the Shelf and onshore in
the Gulf Coast Area.We are pleased that the geologic data and
results gained to date from each of the five ultra-deep wells we have
drilled have validated our geologic model and reduced the exploration
risk of this exciting new play.We have also advanced new
technologies to drill and complete deep wells safely and efficiently,
and our experience to date will enable us to achieve meaningful cost
reductions on future operations.The results from the recent GOM
lease sale further validate the attractiveness of this new play.As
a recognized industry leader in the development of the ultra-deep trend,
we are well positioned as we seek to build meaningful reserves,
production and values for shareholders."
SUMMARY FINANCIAL TABLE*
Second Quarter
Six Months
2012
2011
2012
2011
(In thousands, except per share amounts)
Revenues
$
90,295
$
158,308
$
200,942
$
295,312
Operating loss
(63,542
)
(35,392
)
(55,175
)
(44,657
)
Loss from continuing operations
(63,333
)
(37,866
)
(54,738
)
(52,400
)
Loss from discontinued operations
(1,825
)
(1,989
)
(4,928
)
(3,233
)
Net loss applicable to common stock(a,b,c)
(75,500
)
(50,198
) d
(80,350
)
(77,748
) d
Diluted net loss per share:
Continuing operations
$
(0.46
)
$
(0.31
)
$
(0.47
)
$
(0.47
)
Discontinued operations
(0.01
)
(0.01
)
(0.03
)
(0.02
)
Applicable to common stock
$
(0.47
)
$
(0.32
)
$
(0.50
)
$
(0.49
)
Diluted average shares outstanding
161,577
158,454
161,532
158,154
Operating cash flows(e)
$
11,698
$
102,594
$
50,467
$
136,140
EBITDAX(f)
$
48,313
$
96,939
$
109,614
$
175,590
Capital Expenditures
$
147,192
$
162,352
$
312,272
$
258,894
*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 June 30, 2012 Form 10-Q,
the related costs incurred through June 30, 2012 would be charged to
expense in McMoRan's second-quarter 2012 financial statements.At
June 30, 2012 McMoRan's total drilling costs for its eight in-progress
or unproven wells totaled $1,585.6 million, including $685.5 million in
allocated purchase costs associated with property acquisitions.
a.After preferred dividends.
b.Includes impairment charges totaling $4.6
million in second-quarter 2012, $29.2 million in second-quarter 2011,
$11.7 million in the first six months of 2012 and $50.7 million in the
first six months of 2011 to reduce certain fields' net carrying value to
fair value.Also includes adjustments for asset retirement
obligations associated with certain of McMoRan's oil and gas properties
totaling approximately $11.2 million in the second-quarter 2012, $20.4
million in the second-quarter 2011, $13.2 million in the first six
months of 2012 and $35.1 million in the first six months of 2011.
c.Includes charges to exploration expense for
non-commercial well costs primarily associated with the lease expiration
on the Boudin well totaling $56.3 million in second-quarter and first
six months of 2012 and the Blueberry Hill #9 STK1 well totaling $36.8
million in second-quarter 2011 and $38.9 million in the first six months
of 2011.
d.Includes McMoRan's share of insurance
reimbursements related to losses incurred from the September 2008
hurricanes totaling $12.9 million in second-quarter 2011 and $29.4
million in the first six months of 2011.
e.Includes reclamation spending of $16.0 million
in second-quarter 2012, $20.0 million in second-quarter 2011, $27.6
million in the first six months of 2012 and $42.2 million in the first
six months of 2011.Also includes working capital sources (uses)
of $(9.1) million in second-quarter 2012, $28.4 million in second
quarter 2011, $(14.0) million in the first six months of 2012 and $5.7
million in the first six months of 2011.
f.See reconciliation of EBITDAX to net loss
applicable to common stock on page II.
PRODUCTION ACTIVITIES
Second-quarter 2012 production averaged 140 MMcfe/d net to McMoRan,
compared with 197 MMcfe/d in the second quarter of 2011. Production in
the second quarter of 2012 was below McMoRan's previously reported
estimate of 145 MMcfe/d in April 2012 because of unplanned downtime for
repairs to platforms and third party pipelines and weather related
shipping delays. Excluding potential production from Davy Jones,
production is expected to average approximately 137 MMcfe/d for the year
2012, including 135 MMcfe/d in the third quarter of 2012. McMoRan's
estimated production rates are dependent on the timing of planned
recompletions, production performance, weather and other factors.
Production from the Flatrock field averaged a gross rate of
approximately 121 MMcfe/d (50 MMcfe/d net to McMoRan) in the second
quarter of 2012, and as anticipated was lower than the year ago period
which averaged 172 MMcfe/d (70 MMcfe/d net to McMoRan). McMoRan owns a
55.0 percent working interest and a 41.3 percent net revenue interest in
the Flatrock field.
EXPLORATION AND DEVELOPMENT ACTIVITIES
Since 2008, McMoRan's drilling activities in the shallow waters of the
Gulf of Mexico (GOM) below the salt weld (i.e. listric fault) have
successfully confirmed McMoRan's geologic model and the highly
prospective nature of this emerging geologic trend. The data from five
wells drilled to date indicate the presence below the salt weld of
geologic formations including Upper/Middle/Lower Miocene, Frio,
Vicksburg, Upper Eocene, Sparta carbonate, Wilcox, Tuscaloosa and
Cretaceous carbonate, which have been prolific onshore, in the deepwater
GOM and in international locations. The results of these activities
indicate the potential for a major new geologic trend spanning 200 miles
in the shallow waters of the GOM and onshore in the Gulf Coast area.
Further drilling and flow testing will be required to determine the
ultimate potential of this new trend. Below is a summary of McMoRan's
geologic findings to date:
178' Miocene; First Frio Sand; 300' Sparta Carbonate
Lafitte
171' Miocene; 40' Frio;
65' U. Eocene;
300' Sparta Carbonate
MMR WI (2)
63.4%
63.4%
69.4%
72.0%
72.0%
MMR NRI (2)
50.2%
50.2%
56.5%
57.4%
58.3%
Miocene
Upper
*
Middle
*
*
*
Lower
*
*
Oligocene
*
Frio
Reached TD in
*
*
Vicksburg
Oligocene
*
Eocene
@ 32,997'
Upper Eocene
*
Sparta
*
*
Paleocene
Reached TD in
Reached TD in
Wilcox
*
*
Eocene
Eocene
Cretaceous
Reached TD in
@ 33,318'
@ 34,162'
Tuscaloosa
Paleocene
*
Lower Cretaceous
@ 29,000'
*
Reached TD in
Lower Cretaceous
@ 30,546'
NOTE: Flow testing will be required to confirm the potential
hydrocarbons and flow rates from these sandstone and limestone
formations.
(1) All pay counts above reflect net feet of sandstones, with the
exception of the Carbonate intervals which represent the gross thickness
of the limestone encountered.
(2) McMoRan's working interest partners in the ultra-deep play
include Energy XXI (NASDAQ: EXXI) and Moncrief Offshore LLC.JX
Nippon Oil Exploration (Gulf) Limited is also a working interest partner
in Davy Jones Nos. 1 and 2.
During June 2012, McMoRan successfully perforated 165 feet of Wilcox
sands in the Davy Jones No.1 discovery well with electric
wireline casing guns. On July 13, McMoRan commenced operations to run
production tubing and expects to conduct a measurable flow test during
the week of July 30 with commercial production expected shortly
thereafter. Completion and testing of the Davy Jones offset appraisal
well (Davy Jones No. 2) is expected to commence following review of
results from Davy Jones No. 1. Davy Jones is located on a 20,000 acre
structure that has multiple follow on drilling opportunities.
As previously reported, McMoRan has drilled two successful sub-salt
wells in the Davy Jones field. The Davy Jones No. 1 well logged 200 net
feet of pay in multiple Wilcox sands, which were all full to base. The
Davy Jones offset appraisal well (Davy Jones No. 2), which is located
two and a half miles southwest of Davy Jones No. 1, confirmed 120 net
feet of pay in multiple Wilcox sands, indicating continuity across the
major structural features of the Davy Jones prospect, and also
encountered 192 net feet of potential hydrocarbons in the Tuscaloosa and
Lower Cretaceous carbonate sections.
Davy Jones involves a large ultra-deep structure encompassing four OCS
lease blocks (20,000 acres). McMoRan is the operator and holds a 63.4
percent working interest and a 50.2 percent net revenue interest in Davy
Jones. Other working interest owners in Davy Jones include: Energy XXI
(NASDAQ: EXXI) (15.8%), JX Nippon Oil Exploration (Gulf) Limited (12%)
and Moncrief Offshore LLC (8.8%). McMoRan's total investment in Davy
Jones, which includes $474.8 million in allocated property acquisition
costs, totaled $905.5 million at June 30, 2012.
McMoRan expects to submit development plans for Blackbeard East
to BSEE during the third quarter of 2012. As previously reported, the
Blackbeard East ultra-deep exploration by-pass well was drilled to a
total depth of 33,318 feet in January 2012. Exploration results from the
well indicate the presence of hydrocarbons below the salt weld in
geologic formations including Upper/Middle Miocene, Frio, Vicksburg, and
Sparta carbonate. Pressure and temperature data below the salt weld in
the Miocene sands between 19,500 feet and 24,600 feet at Blackbeard East
indicate that a completion at these depths could utilize conventional
equipment and technologies. These exploration results enhance the
potential of McMoRan's other acreage in the Blackbeard strategic area,
including McMoRan's Blackbeard West No. 2, Barbosa and Queen Anne's
Revenge ultra-deep prospects.
Blackbeard East is located in 80 feet of water on South Timbalier Block
144. McMoRan holds a 72.0 percent working interest and a 57.4 percent
net revenue interest in the well. Other working interest owners in
Blackbeard East include EXXI (18.0%) and Moncrief Offshore LLC (10.0%).
McMoRan's total investment in Blackbeard East, which includes $130.5
million in allocated property acquisition costs, totaled $303.0 million
at June 30, 2012.
McMoRan expects to submit development plans for Lafitte to BSEE
during the third quarter of 2012. As previously reported, the Lafitte
ultra-deep exploration well, which is located on Eugene Island Block 223
in 140 feet of water, was drilled to a total depth of 34,162 feet in
March 2012. Exploration results from the well indicate the presence of
hydrocarbons below the salt weld in geologic formations including
Middle/Lower Miocene, Frio, Upper Eocene, and Sparta carbonate. The
Upper Eocene sands are the first hydrocarbon bearing Upper Eocene sands
encountered either on the GOM Shelf or in the deepwater offshore
Louisiana. These exploration results enhance the potential of McMoRan's
other acreage in the Lafitte strategic area, including McMoRan's
Barataria and Captain Blood ultra-deep prospects. Barataria (10,000
gross acres) is located west southwest of Lafitte and Captain Blood
(10,000 gross acres) is located immediately south of Lafitte.
McMoRan holds a 72.0 percent working interest and a 58.3 percent net
revenue interest in Lafitte. Other working interest owners in Lafitte
include EXXI (18.0%) and Moncrief Offshore LLC (10.0%). McMoRan's total
investment in Lafitte, which includes $35.8 million in allocated
property acquisition costs, totaled $192.3 million at June 30, 2012.
EXPLORATION UPDATE
On November 25, 2011, McMoRan commenced drilling the Blackbeard West
No. 2 ultra-deep exploration well on Ship Shoal Block 188. In May
2012, McMoRan set a liner after the well encountered a high pressure gas
flow immediately below the salt weld. The well is currently drilling
below 21,100 feet to evaluate this high pressure section and other
objectives below the salt weld. The well is targeting Miocene aged sands
seen below the salt weld approximately 13 miles east at Blackbeard East
and has a proposed total depth of 24,500 feet. McMoRan holds a 69.4
percent working interest and a 53.1 percent net revenue interest in Ship
Shoal Block 188. Other working interest owners include EXXI (22.9%) and
Moncrief Offshore LLC (7.7%). McMoRan's investment in Blackbeard West
No. 2 totaled $50.4 million at June 30, 2012.
The Lineham Creek exploration prospect, which is located onshore
in Cameron Parish, Louisiana commenced operations on December 31, 2011.
The well, which is targeting Eocene and Paleocene objectives below the
salt weld, is currently drilling below 19,000 feet towards a proposed
total depth of 29,000 feet. Chevron U.S.A Inc., as operator of the well,
holds a 50 percent working interest. McMoRan is participating for a 36.0
percent working interest. Other working interest owners include EXXI
(9.0%) and W. A. "Tex" Moncrief Jr. (5.0%). McMoRan's investment in
Lineham Creek totaled $28.1 million at June 30, 2012.
McMoRan has acquired exploratory rights to a 68,000 gross acre area
located in Iberia, St. Martin, Assumption and Iberville Parishes,
Louisiana and plans to commence drilling the Highlander
ultra-deep exploration prospect on this lease position in the second
half of 2012. The well has a proposed total depth of 30,000 feet and
will target Eocene, Paleocene and Cretaceous objectives below the salt
weld. McMoRan will operate the well and hold a 72.0 percent working
interest. Energy XXI and Moncrief Offshore are expected to participate.
CENTRAL GULF OF MEXICO LEASE SALE 216/222
In June 2012, McMoRan participated in Central Gulf of Mexico Lease
Sale 216/222 held by the BOEM in New Orleans, Louisiana. As
previously reported, McMoRan was the apparent high bidder on a total of
14 lease blocks on the outer Continental Shelf of the Gulf of Mexico.
Six of the 14 bids were sole bids by McMoRan and the remaining eight
bids were made jointly with Chevron U.S.A. Inc.
The lease blocks are located in the Vermilion, South Timbalier, South
Marsh Island and Eugene Island areas and are targeted in and around
McMoRan's current shallow water, ultra-deep exploration plays, including
Davy Jones West, England, Calico Jack, Barataria, Captain Blood and
Lafitte. Additionally, certain wells drilled on these lease blocks if
completed to depths exceeding 19,999 feet may receive royalty suspension
volumes of 35 billion cubic feet of natural gas.
All apparent high bids are subject to a review process by the BOEM
before they can be awarded. If awarded, these leases will add over
65,000 gross acres to McMoRan's leasehold inventory, which is
approximately 900,000 gross acres currently, including over 200,000
gross acres associated with the shallow water, ultra-deep plays.
REVENUES
McMoRan's second-quarter 2012 oil and gas revenues totaled $87.2
million, compared to $155.5 million during the second quarter of 2011.
During the second quarter of 2012, McMoRan's sales volumes totaled 8.3
Bcf of gas, 505,900 barrels of oil and condensate and 1.5 Bcfe of
natural gas liquids, compared to 11.6 Bcf of gas, 778,400 barrels of oil
and condensate and 1.6 Bcfe of natural gas liquids in the second quarter
of 2011. McMoRan's second-quarter comparable average realizations for
gas were $2.44 per thousand cubic feet (Mcf) in 2012 and $4.71 per Mcf
in 2011; for oil and condensate McMoRan received an average of $109.37
per barrel in second-quarter 2012 compared to $109.08 per barrel in
second-quarter 2011; for natural gas liquids McMoRan received an average
of $7.93 per Mcfe in second quarter 2012 compared to $9.64 per Mcfe in
second quarter 2011.
CASH, LIQUIDITY AND CAPITAL EXPENDITURES
At June 30, 2012, McMoRan had $287.1 million in cash. Total debt was
$555.9 million at June 30, 2012, including $255.9 million in convertible
securities. At June 30, 2012, McMoRan had no borrowings and $100 million
of letters of credit issued under its revolving credit facility. McMoRan
and its bank group are completing a semi-annual redetermination of the
borrowing base.
McMoRan has approximately 162 million shares of common stock
outstanding. Assuming conversion of McMoRan's remaining outstanding 8%
Convertible Perpetual Preferred Stock, 4% Convertible Senior Notes, 5¾%
Convertible Perpetual Preferred Stock and 5¼% Convertible Senior Notes,
McMoRan would have approximately 224 million common shares outstanding
on a fully converted basis.
Capital expenditures totaled $147.2 million for the second quarter of
2012 and $312.3 million for the six-months ended June 30, 2012. McMoRan
expects 2012 capital expenditures to approximate $500 million, including
approximately 50 percent on exploration and 50 percent on development.
Capital spending is subject to change depending on drilling results,
follow-on development activities and general market factors.
Net abandonment expenditures, which include scheduled conventional and
hurricane-related work, totaled $16.0 million for the second quarter of
2012 and $27.6 million for the six-months ended June 30, 2012.
Abandonment expenditures are expected to approximate $75 million in 2012.
WEBCAST INFORMATION
A conference call with securities analysts to discuss McMoRan's
second-quarter 2012 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, August 17,
2012.
McMoRan Exploration Co. is an independent public company engaged in the
exploration, development and production of natural gas and oil in the
shallow waters of the GOM Shelf 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
forward-looking statements that involve a number of assumptions, risks
and uncertainties that could cause actual results to differ materially
from those contained in the forward-looking statements. We caution
readers that forward-looking statements are not guarantees of future
performance or exploration and development success, and our actual
exploration experience and future financial results may differ
materially from those anticipated, projected or assumed in the
forward-looking statements. Such forward-looking statements include, but
are not limited to, statements regarding various oil and gas
discoveries, oil and gas exploration, development and production
activities and costs, capital expenditures, reclamation, indemnification
and environmental obligations and costs, the potential for or
expectation of successful flow tests, anticipated and potential
quarterly and annual production and flow rates, reserve estimates,
projected operating cash flows and liquidity and other statements that
are not historical facts. No assurance can be given that any of the
events anticipated by the forward-looking statements will transpire or
occur, or if any of them do so, what impact they may have on our results
of operations or financial condition. Important factors that may cause
actual results to differ materially from those anticipated by
forward-looking statements include, but are not limited to, those
associated with general economic and business conditions, failure to
realize expected value creation from acquired properties, variations in
the market demand for, and prices of, oil and natural gas, drilling
results, unanticipated fluctuations in flow rates of producing wells due
to mechanical or operational issues (including those experienced at
wells operated by third parties where we are a participant), changes in
oil and natural gas reserve expectations, the potential adoption of new
governmental regulations, unanticipated hazards for which we have
limited or no insurance coverage, failure of third party partners to
fulfill their capital and other commitments, the ability to satisfy
future cash obligations and environmental costs, adverse conditions,
such as high temperatures and pressure that could lead to mechanical
failures or increased costs, the ability to retain current or future
lease acreage rights, the ability to satisfy future cash obligations and
environmental costs, access to capital to fund drilling activities, as
well as other general exploration and development risks and hazards and
other factors described in more detail in Part I, Item 1A. "Risk
Factors" included in our Annual Report on Form 10-K for the year ended
December 31, 2011 filed with the SEC.
Investors are cautioned that many of the assumptions upon which our
forward-looking statements are based are likely to change after our
forward-looking statements are made, including for example the market
prices of oil and natural gas, which we cannot control, and production
volumes and costs, some aspects of which we may or may not be able to
control. Further, we may make changes to our business plans that could
or will affect our results. We caution investors that we do not intend
to update our forward-looking statements more frequently than quarterly,
notwithstanding any changes in our assumptions, changes in our business
plans, our actual experience, or other changes, and we undertake no
obligation to update any forward-looking statements.
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
recognized under GAAP. As required by SEC Regulation G, reconciliations
of this measure to amounts reported in our consolidated financial
statements are included in the supplemental schedules of this press
release.
McMoRan EXPLORATION CO. STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
Six Months Ended
June 30,
June 30,
2012
2011
2012
2011
(In Thousands, Except Per Share Amounts)
Revenues:
Oil and natural gas
$
87,206
$
155,469
$
194,290
$
289,181
Service
3,089
2,839
6,652
6,131
Total revenues
90,295
158,308
200,942
295,312
Costs and expenses:
Production and delivery costs
32,147
51,911
70,809
99,868
Depletion, depreciation and amortization expense a
44,894
95,338
86,723
182,008
Exploration expenses b
65,849
47,896
73,868
60,674
General and administrative expenses
11,716
11,223
26,649
27,175
Main Pass Energy Hub? costs
30
278
96
513
Insurance recoveries
-
(12,946
) c
(1,229
)
(29,369
) c
Gain on sale of oil and gas properties
(799
)
-
(799
)
(900
)
Total costs and expenses
153,837
193,700
256,117
339,969
Operating loss
(63,542
)
(35,392
)
(55,175
)
(44,657
)
Interest expense, net d
-
(2,704
)
-
(8,153
)
Other income, net
209
230
437
410
Loss from continuing operations before income taxes
(63,333
)
(37,866
)
(54,738
)
(52,400
)
Income tax expense
-
-
-
-
Loss from continuing operations
(63,333
)
(37,866
)
(54,738
)
(52,400
)
Loss from discontinued operations
(1,825
)
(1,989
)
(4,928
)
(3,233
)
Net loss
(65,158
)
(39,855
)
(59,666
)
(55,633
)
Preferred dividends and inducement payments for early conversion
of convertible preferred stock
(10,342
)
(10,343
)
(20,684
)
(22,115
) e
Net loss applicable to common stock
$
(75,500
)
$
(50,198
)
$
(80,350
)
$
(77,748
)
Basic and diluted net loss per share of common stock:
Continuing operations f
$(0.46
)
$(0.31
)
$(0.47
)
$(0.47
)
Discontinued operations
(0.01
)
(0.01
)
(0.03
)
(0.02
)
Net loss per share of common stock
$(0.47
)
$(0.32
)
$(0.50
)
$(0.49
)
Average common shares outstanding:
Basic and diluted
161,577
158,454
161,532
158,154
a.
Includes impairment charges totaling $4.6 million and $11.7
million in the second quarter and six months ended June 30, 2012,
respectively, and $29.2 million and $50.7 million in the second
quarter and six months ended June 30, 2011, respectively. Also
includes reclamation accrual adjustments for asset retirement
obligations associated with certain oil and gas properties
totaling approximately $11.2 million and $13.2 million in the
second quarter and six months ended June 30, 2012, respectively
and approximately $20.4 million and $35.1 million in the second
quarter and six months ended June 30, 2011, respectively.
b.
Includes charges for non-productive well costs and unproven
leasehold cost impairments of $56.3 million in the second quarter
and six months ended June 30, 2012, and $36.8 million and $38.9
million in the second quarter and six months ended June 30, 2011,
respectively.
c.
Represents McMoRan's share of insurance reimbursements related to
losses incurred from the September 2008 hurricanes.
d.
Net of interest capitalized to in-progress drilling projects of
approximately $14.3 million and $28.5 million in the second
quarter and six months ended June 30, 2012, respectively, and
$11.6 million and $20.5 million in the second quarter and six
months ended June 30, 2011, respectively.
e.
Includes payments of $1.5 million to induce the conversion of
approximately 8,100 shares of McMoRan's 8% convertible perpetual
preferred stock (8% preferred stock) into approximately 1.2
million shares of its common stock in the six months ended June
30, 2011.
f.
For purposes of the earnings per share computations, the net loss
applicable to continuing operations includes preferred stock
dividends and conversion inducement payments.
McMoRan EXPLORATION CO.
RECONCILIATION OF REPORTED AMOUNTS TO NON-GAAP ITEMS (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 loss. EBITDAX is derived
from net loss from continuing operations before other income, net;
interest expense, net; income tax expense; Main Pass Energy HubTM
costs; exploration expenses; depletion, depreciation and
amortization expense; stock-based compensation charged to general
and administrative expenses; insurance recoveries; and gain on
sale of oil and gas properties. EBITDAX should not be considered
by itself or as a substitute for net loss, operating 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 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 loss applicable to common stock to EBITDAX (in thousands):
Second Quarter
Six Months
2012
2011
2012
2011
Net loss applicable to common stock, as reported
$
(75,500
)
$
(50,198
)
$
(80,350
)
$
(77,748
)
Preferred dividends and inducement payments for early conversion
of convertible preferred stock
10,342
10,343
20,684
22,115
Loss from discontinued operations
1,825
1,989
4,928
3,233
Loss from continuing operations, as reported
(63,333
)
(37,866
)
(54,738
)
(52,400
)
Other income, net
(209
)
(230
)
(437
)
(410
)
Interest expense, net
-
2,704
-
8,153
Income tax expense
-
-
-
-
Main Pass Energy HubTM costs
30
278
96
513
Exploration expenses
65,849
47,896
73,868
60,674
Depletion, depreciation and amortization expense
44,894
95,338
86,723
182,008
Stock-based compensation charged to general and administrative
expenses
1,891
1,639
6,120
6,872
Insurance recoveries
-
(12,946
)
(1,229
)
(29,369
)
Gain on sale of oil and gas properties
(799
)
-
(799
)
(900
)
Other
(10
)
126
10
449
EBITDAX
$
48,313
$
96,939
$
109,614
$
175,590
McMoRan EXPLORATION CO.
OPERATING DATA (Unaudited)
Second Quarter
Six Months
2012
2011
2012
2011
Sales volumes:
Gas (thousand cubic feet, or Mcf)
8,292,900
11,600,800
17,088,000
23,270,300
Oil (barrels)
505,900
778,400
1,116,000
1,465,100
Natural gas liquids (NGLs, Mcf equivalent) a
1,453,900
1,642,800
3,185,700
3,381,300
Average realizations:
Gas (per Mcf)
$ 2.44
$ 4.71
$ 2.52
$ 4.62
Oil (per barrel)
109.37
109.08
111.19
103.31
NGLs (per Mcf equivalent) a
7.93
9.64
8.49
8.81
a.
One Mcf equivalent is determined using an estimated energy content
differential ratio of six Mcf of natural gas to one barrel of
crude oil, condensate or natural gas liquids.
McMoRan EXPLORATIONCO.
CONDENSED BALANCE SHEETS (Unaudited)
June 30,
December 31,
2012
2011
(In Thousands)
ASSETS
Cash and cash equivalents
$
287,144
$
568,763
Accounts receivable
55,303
72,085
Inventories
39,230
36,274
Prepaid expenses
11,052
9,103
Current assets from discontinued operations, including restricted
cash of $473
735
682
Total current assets
393,464
686,907
Property, plant and equipment, net
2,321,708
2,181,926
Restricted cash and other
61,322
61,617
Deferred costs
9,736
8,325
Long-term assets from discontinued operations
439
439
Total assets
$
2,786,669
$
2,939,214
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable
$
95,562
$
115,832
Accrued liabilities
105,205
160,822
Accrued interest and dividends payable
14,440
14,448
Current portion of accrued oil and gas reclamation costs
56,557
58,810
5¼% convertible senior notes
67,498
66,223
Current liabilities from discontinued operations, including sulphur
reclamation costs
3,448
5,264
Total current liabilities
342,710
421,399
11.875% senior notes
300,000
300,000
4% convertible senior notes
188,416
187,363
Accrued oil and gas reclamation costs
262,680
267,584
Other long-term liabilities
19,973
20,886
Other long-term liabilities from discontinued operations, including
sulphur reclamation costs
18,805
19,018
Total liabilities
1,132,584
1,216,250
Stockholders' equity
1,654,085
1,722,964
Total liabilities and stockholders' equity
$
2,786,669
$
2,939,214
McMoRan EXPLORATION CO. STATEMENTS OF CASH FLOW
(Unaudited)
Six Months Ended
June 30,
2012
2011
(In Thousands)
Cash flow from operating activities:
Net loss
$
(59,666
)
$
(55,633
)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Loss from discontinued operations
4,928
3,233
Depletion, depreciation and amortization expense
86,723
182,008
Exploration drilling and related expenditures
56,268
38,886
Compensation expense associated with stock-based awards
11,381
12,814
Amortization of deferred financing costs
3,427
3,030
Reclamation expenditures, net
(27,648
)
(42,235
)
Increase in restricted cash
(2,502
)
(2,508
)
Gain on sale of oil and gas properties
(799
)
(900
)
Other
(662
)
(313
)
(Increase) decrease in working capital:
Accounts receivable
15,623
(42,594
)
Accounts payable and accrued liabilities
(24,670
)
30,600
Prepaid expenses, inventories and other
(4,905
)
17,675
Net cash provided by continuing operations
57,498
144,063
Net cash used in discontinued operations
(7,031
)
(7,923
)
Net cash provided by operating activities
50,467
136,140
Cash flow from investing activities:
Exploration, development and other capital expenditures
(312,272
)
(258,894
)
Proceeds from sale of oil and gas properties
745
900
Net cash used in continuing operations
(311,527
)
(257,994
)
Net cash activity from discontinued operations
-
-
Net cash used in investing activities
(311,527
)
(257,994
)
Cash flow from financing activities:
Dividends paid and inducement payments on early conversion of
convertible preferred stock
(20,685
)
(17,267
)
Credit facility refinancing fees
-
(1,609
)
Debt and equity issuance costs
-
(543
)
Proceeds from exercise of stock options and other
126
909
Net cash used in continuing operations
(20,559
)
(18,510
)
Net cash activity from discontinued operations
-
-
Net cash used in financing activities
(20,559
)
(18,510
)
Net decrease in cash and cash equivalents
(281,619
)
(140,364
)
Cash and cash equivalents at beginning of year
568,763
905,684
Cash and cash equivalents at end of period
$
287,144
$
765,320
McMoRan Exploration Co. Financial & Media Contact: David
P. Joint, 504-582-4203
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