McMoRan Exploration Co. Reports Second-Quarter/Six-Month 2012 Results

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 Hub TM 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 Hub TM 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 EXPLORATION CO. 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

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