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McMoRan Exploration Co. Reports Third-Quarter/Nine-Month 2012 Results

The project would utilize existing offshore structures of the McMoRan owned MPEH™ Deepwater Port, which was approved by the U.S. Maritime Administration in 2007 as a Deepwater Port for the importation and regasification of LNG, conditioning of natural gas to produce NGLs, and storage of natural gas in salt caverns. Modification of the Main Pass facilities to accommodate use as an LNG export facility would require additional permit approvals.

On September 11, 2012, the parties filed an application with the Department of Energy (DOE) for long-term, multi-contract authorization to export domestically-produced liquefied natural gas (LNG). The DOE application seeks approval to export up to 24 million tonnes of LNG per annum (3.2 bcf per day) to countries with free trade agreements with the United States. Preparation of a non-free trade agreement application is in progress. MPEH™ is located close to significant Gulf Coast natural gas production and numerous interstate pipelines and offshore gathering systems.

McMoRan and United LNG are engaged in studies to define the project and related permitting requirements and are developing commercial arrangements required to support the significant capital investments involved in the project.

WEBCAST INFORMATION

A conference call with securities analysts to discuss McMoRan’s third-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, November 16, 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 potential oil and gas discoveries, oil and gas exploration, development and production activities and costs, amounts and timing of capital expenditures, reclamation, indemnification and environmental obligations and costs, the potential for or expectation of successful flow tests, potential quarterly and annual production and flow rates, reserve estimates, projected operating cash flows and liquidity, the potential Main Pass Energy Hub TM project 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, access to capital to fund drilling activities, the ability to obtain regulatory approvals and significant project financing for the potential Main Pass Energy Hub TM project, as well as other general exploration and development risks and hazards and other factors described 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, as updated by McMoRan’s subsequent filings.

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

 

Nine Months Ended

 

September 30,

 

 

September 30,

 

2012

    2011

 

 

2012

  2011  

 

(In Thousands, Except Per Share Amounts)

Revenues:
Oil and natural gas $ 88,097 $ 134,548 $ 282,387 $ 423,729
Service   3,679     3,635     10,331     9,766  
Total revenues 91,776 138,183 292,718 433,495
Costs and expenses:
Production and delivery costs a 47,925 61,182 118,734 161,050
Depletion, depreciation and amortization expense b 29,926 66,730 116,649 248,738
Exploration expenses c 48,895 18,158 122,763 78,832
General and administrative expenses 12,111 11,877 38,760 39,052
Main Pass Energy Hub™ costs 114 49

 

210 562

Insurance recoveries

-

(22,649

) d

(1,229

)

(52,018

) d

Gain on sale of oil and gas properties   -    

-

    (799 )   (900 )
Total costs and expenses   138,971     135,347     395,088     475,316  
Operating income (loss) (47,195 ) 2,836 (102,370 ) (41,821 )
Interest expense, net e - (629 ) - (8,782 )
Loss on debt exchange f (5,955 ) - (5,955 ) -
Other income, net   88     204     525     614  
Income (loss) from continuing operations before income taxes (53,062 ) 2,411 (107,800 ) (49,989 )
Income tax expense   -     -     -     -  
Income (loss) from continuing operations (53,062 ) 2,411 (107,800 ) (49,989 )
Loss from discontinued operations   (645 )   (1,489 )   (5,573 )   (4,722 )
Net income (loss) (53,707 ) 922 (113,373 ) (54,711 )

Preferred dividends and inducement payments for early conversion of convertible preferred stock

  (10,306 )   (10,342 )   (30,990 )  

(32,457

) g

Net loss applicable to common stock $ (64,013 ) $ (9,420 ) $ (144,363 ) $ (87,168 )
 
Basic and diluted net loss per share of common stock:
Continuing operations h $(0.39 ) $(0.05 ) $(0.86 ) $(0.52 )
Discontinued operations   (0.01 )   (0.01 )   (0.03 )   (0.03 )
Net loss per share of common stock   $(0.40 )   $(0.06 )   $(0.89 )   $(0.55 )
Average common shares outstanding:
Basic and diluted   161,812     159,195     161,627     158,505  
a.   Includes approximately $7.6 million in the third quarter and nine months ended September 30, 2012 for an unproductive workover drilling project. Also includes approximately $15.3 million in the third quarter and nine months ended September 30, 2011 for an unproductive workover drilling project.
b.

Includes no impairment charges in the third quarter ended September 30, 2012 and impairment charges totaling $11.7 million in the nine months ended September 30, 2012, and $11.3 million and $62.0 million in the third quarter and nine months ended September 30, 2011, respectively. Also includes reclamation accrual adjustments for asset retirement obligations associated with certain oil and gas properties totaling approximately $3.1 million and $16.3 million in the third quarter and nine months ended September 30, 2012, respectively and approximately $10.4 million and $46.0 million in the third quarter and nine months ended September 30, 2011, respectively.

c. Includes charges for non-productive well costs and unproven leasehold cost impairments of $37.2 million and $93.5 million in the third quarter and nine months ended September 30, 2012, respectively, and $3.1 million and $42.0 million in the third quarter and nine months ended September 30, 2011, respectively.
d. Represents McMoRan’s share of insurance reimbursements related to losses incurred from hurricane events in 2008.
e. Net of interest capitalized to in-progress drilling projects of approximately $13.9 million and $42.4 million in the third quarter and nine months ended September 30, 2012, respectively, and $12.7 million and $33.2 million in the third quarter and nine months ended September 30, 2011, respectively.
f. Represents the debt extinguishment accounting loss recorded in September 2012 resulting from McMoRan’s exchange of $67.8 million of its 5¼% convertible senior notes due October 2012 for an equal principal amount of newly issued 5¼% convertible senior notes due October 2013.
g. 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 nine months ended September 30, 2011.
h. 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.

RECONCILATION 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; gain on sale of oil and gas properties; and loss on debt exchange. 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):

  Third Quarter   Nine Months
  2012     2011     2012   2011
Net loss applicable to common stock, as reported $ (64,013 ) $ (9,420 ) $ (144,363 ) $ (87,168 )

Preferred dividends and inducement payments for early conversion of convertible preferred stock

10,306 10,342 30,990 32,457
Loss from discontinued operations   645   1,489   5,573   4,722
Income (loss) from continuing operations, as reported (53,062 ) 2,411 (107,800 ) (49,989 )
 
Other income, net (88 ) (204 ) (525 ) (614 )
Interest expense, net - 629 - 8,782
Income tax expense - - - -
Main Pass Energy Hub TM costs 114 49 210 562
Exploration expenses 48,895 18,158 122,763 78,832
Depletion, depreciation and amortization expense 29,926 66,730 116,649 248,738

Stock-based compensation charged to general and administrative expenses

1,697 1,588 7,817 8,460
Insurance recoveries - (22,649 ) (1,229 ) (52,018 )
Gain on sale of oil and gas properties - - (799 ) (900 )
Loss on debt exchange 5,955 - 5,955 -
Other   -   (44 )   10   405
EBITDAX $ 33,437 $ 66,668 $ 143,051 $ 242,258

McMoRan EXPLORATION CO.

OPERATING DATA (Unaudited)

   
Third Quarter Nine Months
2012   2011 2012   2011
Sales volumes:
Gas (thousand cubic feet, or Mcf) 7,652,600 11,367,900 24,740,600 34,638,200
Oil (barrels) 534,800 674,700 1,650,800 2,139,800
Natural gas liquids (NGLs, in barrels) 241,500 292,700 772,400 856,300
Average realizations:
Gas (per Mcf) $ 3.12 $ 4.38 $ 2.70 $ 4.54
Oil (per barrel) $ 103.43 $ 100.94 $ 108.68 $ 102.56
NGLs (per barrel) $ 36.42 $ 56.35 $ 46.41 $ 54.04

McMoRan EXPLORATION  CO.

CONDENSED BALANCE SHEETS (Unaudited)

 

September 30,

December 31,

2012 2011
(In Thousands)
ASSETS
Cash and cash equivalents $ 191,934 $ 568,763
Accounts receivable 56,044 72,085
Inventories 35,551 36,274
Prepaid expenses 16,636 9,103

Current assets from discontinued operations, including restricted cash of $473

  797   682
Total current assets 300,962 686,907
Property, plant and equipment, net 2,378,285 2,181,926
Restricted cash and other 62,575 61,617
Deferred costs 9,023 8,325
Long-term assets from discontinued operations   439   439
Total assets $ 2,751,284 $ 2,939,214
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable $ 89,635 $ 115,832
Accrued liabilities 145,779 160,822
Accrued interest and dividends payable 20,704 14,448
Current portion of accrued oil and gas reclamation costs 64,571 58,810
5¼% convertible senior notes due October 2012 345 66,223
Other current liabilities 6,480 -
Current liabilities from discontinued operations, including sulphur reclamation costs 2,717 5,264
Total current liabilities 330,231 421,399
5¼% convertible senior notes due October 2013 67,832 -
11.875% senior notes 300,000 300,000
4% convertible senior notes 188,943 187,363
Accrued oil and gas reclamation costs 227,279 a 267,584
Other long-term liabilities 19,896 20,886
Other long-term liabilities from discontinued operations, including sulphur reclamation costs   18,624   19,018
Total liabilities   1,152,805   1,216,250
Stockholders' equity   1,598,479   1,722,964
Total liabilities and stockholders' equity $ 2,751,284 $ 2,939,214
a.   Includes an aggregate of $43.4 million of reclamation obligations assumed by purchasers related to one completed and one pending oil and gas property sale during the fourth quarter of 2012.

McMoRan EXPLORATION CO.

STATEMENTS OF CASH FLOW (Unaudited)

   
Nine Months Ended
September 30,
2012 2011
(In Thousands)
Cash flow from operating activities:
Net loss $ (113,373 ) $ (54,711 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss from discontinued operations 5,573 4,722
Depletion, depreciation and amortization expense 116,649 248,738
Exploration drilling and related expenditures 93,468 42,046
Loss on debt exchange 5,955 -
Compensation expense associated with stock-based awards 14,011 15,618
Reclamation expenditures, net (48,224 ) (93,411 )
Increase in restricted cash (3,754 ) (3,760 )
Gain on sale of oil and gas properties (799 ) (900 )
Amortization of deferred financing costs and other (498 ) 4,162
(Increase) decrease in working capital:
Accounts receivable 15,721 (47,648 )
Accounts payable and accrued liabilities (15,139 ) 68,058
Prepaid expenses, inventories and other   1,761   7,056
Net cash provided by continuing operations 71,351 189,970
Net cash used in discontinued operations   (8,823 )   (11,457 )
Net cash provided by operating activities   62,528   178,513
 
Cash flow from investing activities:
Exploration, development and other capital expenditures (415,627 ) (403,889 )
Acquisition of oil and gas properties - (10,000 )
Deposits received for pending divestitures 6,480 -
Proceeds from sale of oil and gas properties   745   900
Net cash used in continuing operations (408,402 ) (412,989 )
Net cash activity from discontinued operations   -   -
Net cash used in investing activities   (408,402 )   (412,989 )
 
Cash flow from financing activities:

Dividends paid and inducement payments on early conversion of convertible preferred stock

(30,990 ) (27,609 )
Credit facility refinancing fees - (1,712 )
Debt and equity issuance costs (59 ) (543 )
Proceeds from exercise of stock options and other   94   929
Net cash used in continuing operations (30,955 ) (28,935 )
Net cash activity from discontinued operations   -   -
Net cash used in financing activities   (30,955 )   (28,935 )
Net decrease in cash and cash equivalents (376,829 ) (263,411 )
Cash and cash equivalents at beginning of year   568,763   905,684
Cash and cash equivalents at end of period $ 191,934 $ 642,273
 
Supplemental non-cash investing & financing activities:
Issuance of 2.8 million shares of common stock and other non-cash purchase price consideration related to property acquisition $ - $ 39,198




Stock quotes in this article: MMR 

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