2. McMoRan's Monkey Business
Just when its high-profile Davy Jones well was turning into the second coming of Al Capone's vault -- loads of hype, lots of drilling, lack of treasure -- McMoRan Exploration (MMR) hit a gusher Wednesday when Freeport-McMoRan Copper & Gold (FCX) purchased the company for $14.75 per share, or $2.1 billion.
Don't ask JPMorgan (JPM) energy analyst Joseph Allman about the company's jackpot, though. He has zero to say on the matter. Literally.
Check this out: In the week prior to Freeport's purchase, shares of McMoRan had lost more than a third of their value, sinking below $8 a share, after the New Orleans-based E&P player revealed that it repeatedly failed in its efforts to test the Davy Jones well in the Gulf of Mexico. On Monday, the beleaguered driller said in a press release it had "limited success" using a solvent to dissolve the barite which has been blocking the natural gas well for months. McMoRan added that it may inject more solvent using a propellant stimulant gun to unclog the perforations and would "provide updates as flow-testing operations progress."In other words, after years of digging an ultra-deep well in super-shallow water, McMoRan had nothing to show for its efforts and nothing left to tell the press. Things got so bad, in fact, that some analysts, like JPMorgan's Joseph Allman, began questioning whether the wildcatter had sufficient cash to survive the Davy Jones debacle. "We estimate that the company needs to raise over $500 MM in 1Q13, based on NYMEX futures prices. The combination of valuation, operational uncertainty and apparent financial tightness causes us to maintain our 'underweight' rating," Allman wrote on Monday after the latest bad news came out. Allman added that his price target for the stock was $0 per share. Oh, brother Allman! Only two days before the company gets bought out for billions, you told your clients that McMoRan was worth zilch. Talk about bad timing! So what do you have to say for yourself now? "Due to JPMorgan's involvement in the transaction announced on Dec. 5, 2012, we are suspending our rating and price target for McMoRan Exploration Co. Our prior rating and price target should no longer be relied upon." How convenient! He buried (metaphorically and financially) investors in Davy Jones' locker and then completely vanished from the scene. Alas, if only Geraldo Rivera tried the same disappearing trick after his televised Capone vault humiliation, we can only imagine how wonderful the world would look today!
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