McMoRan Exploration Co. Reports First-Quarter 2008 Results

  
    
  
  
    
      McMoRan Exploration Co. (NYSE:MMR):
    
    
      HIGHLIGHTS
    
    
      
        First-quarter 2008 net income of $32.0 million, $0.46 per fully 
        diluted share, compared with a net loss of $14.9 million, $0.53 per 
        share, in the first quarter of 2007. First quarter 2008 results 
        included a mark-to-market unrealized loss of $41.6 million, $0.49 per 
        fully diluted share, on open oil and gas derivative contracts.
      
      
        First-quarter 2008 production averaged 294 million cubic feet of 
        natural gas equivalents per day (MMcfe/d) net to McMoRan, compared 
        with first-quarter 2007 average production of 70 MMcfe/d and 295 
        MMcfe/d in the fourth quarter of 2007.
      
      
        Continued positive results from the Flatrock field at South Marsh 
        Island Block 212 in the OCS 310/Louisiana State Lease 340 area 
        indicate a major discovery:

        
          
            Flatrock No. 1 discovery well commenced production on January 
            28, 2008. Gross production currently approximates 50 MMcfe/d, 12 
            MMcfe/d net to McMoRan.
          
          
            Flatrock No. 2 encountered 8 pay sands totaling 289 net feet of 
            pay confirmed by wireline logs in January 2008. Successful 
            production test in April 2008 at a gross rate of 114 MMcfe/d, 21 
            MMcfe/d net to McMoRan. First production expected in mid-2008.
          
          
            Flatrock No. 3 encountered 3 pay sands totaling 126 net feet of 
            pay confirmed by wireline logs in February 2008. The well has been 
            sidetracked to 17,100 feet and has a proposed total depth of 
            18,800 feet.
          
          
            Flatrock No. 4 well commenced drilling on April 9, 2008 and is 
            currently drilling below 3,500 feet to proposed total depth of 
            18,500 feet.
          
          
            Additional wells are being planned in the Flatrock area.
          
        
      
      
        Mound Point East exploratory well on Louisiana State Lease 340 
        commenced drilling on March 31, 2008. Currently drilling below 7,800 
        feet to a proposed total depth of 18,050 feet.
      
      
        The ultra-deep exploratory well at South Timbalier Block 168 was 
        re-entered on March 18, 2008 and is currently drilling below 30,145 
        feet to evaluate potentially significant Miocene targets.
      
      
        First-quarter 2008 operating cash flows totaled $172.8 million. 
        Credit facility borrowings were reduced by $111 million during the 
        first quarter of 2008 and totaled $163 million at March 31, 2008.
      
      
        Completed privately negotiated transactions to induce conversion of 
        approximately $32 million, including $7 million in April 2008, of 6% 
        convertible senior notes into approximately 2.2 million shares of 
        common stock.
      
      
        Basic shares outstanding approximate 55.6 million and approximately 
        85.5 million shares assuming conversion of McMoRan’s 
        mandatory convertible preferred stock, outstanding convertible notes 
        and warrants.
      
      
        Average daily production for 2008 expected to approximate 285 
        MMcfe/d net to McMoRan, including 285 MMcfe/d in second quarter of 
        2008. Potential to increase production with further success at 
        Flatrock and other exploration prospects.
      
      
        Continuing active drilling program on 150,000 gross acreage 
        position on OCS 310/Louisiana State Lease 340 area, including 
        additional wells at Flatrock in 2008.
      
    
    
      
        Capital expenditures for 2008 estimated to approximate $250 million.
      
    
    
      McMoRan Exploration Co. (NYSE: MMR) today reported net income applicable 
      to common stock of $32.0 million, $0.46 per fully diluted share, for the 
      first quarter of 2008 compared with a net loss applicable to common 
      stock of $14.9 million, $0.53 per share, for the first quarter of 2007. 
      McMoRan's net income from its continuing operations for the first 
      quarter of 2008 totaled $37.2 million, including a loss of $41.6 
      million, $0.49 per fully diluted share, for non cash mark-to-market 
      charges on McMoRan’s open oil and gas 
      derivative contracts. During the first quarter of 2007, McMoRan’s 
      net loss from continuing operations totaled $16.8 million, including 
      $9.8 million of exploration expense and $2.7 million of start-up costs 
      associated with the Main Pass Energy Hub™ 
      (MPEH™).
    
    
      
        
           
        
      
      
        
          
            SUMMARY FINANCIAL TABLE(1)
          
        
      
      
        
        
        
           
        
        
          First Quarter
        
      
      
        
        
        
        
        
          2008
        
        
           
        
        
           
        
        
           
        
        
          2007
        
      
      
        
           
        
        
        
        
          
            (In Thousands, Except Per
          
          
            Share Amounts)
          
        
      
      
        
          Revenues
        
        
        
        
          $
        
        
          295,476
        
        
        
        
        
        
           
        
        
           
        
        
          $
        
        
          51,697
        
        
        
      
      
        
          Operating income (loss)
        
        
        
        
        
        
          
            55,825
          
        
        
        
        
          
            a
          
        
        
        
        
        
        
        
        
          (11,923
        
        
          )
        
      
      
        
          Operating cash flow
        
        
        
        
        
        
          172,816
        
        
        
        
        
        
        
        
        
        
        
        
          8,478
        
        
        
      
      
        
          Net income (loss) from continuing operations
        
        
        
        
        
        
          
            37,231
          
        
        
        
        
          
            a
          
        
        
        
        
        
        
        
        
          (16,829
        
        
          )
        
      
      
        
          Net income (loss) from discontinued operations
        
        
        
        
        
        
          (856
        
        
          )
        
        
        
        
        
        
        
        
        
        
          2,331
        
        
        
      
      
        
          
            Net income (loss) applicable to common stockb
          
        
        
        
        
        
        
          
            32,009
          
        
        
        
        
          
            a
          
        
        
        
        
        
        
        
        
          (14,903
        
        
          )
        
      
      
        
          
            Diluted net income (loss) per share:
          
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Continuing operations
        
        
        
        
          
            $
          
        
        
          
            0.47
          
        
        
        
        
          
            a
          
        
        
        
        
        
        
          $
        
        
          (0.61
        
        
          )
        
      
      
        
          Discontinued operations
        
        
        
        
        
        
          (0.01
        
        
          )
        
        
        
        
        
        
        
        
        
        
          0.08
        
        
        
      
      
        
          
            Applicable to common stockb
          
        
        
        
        
        
        
          
            0.46
          
        
        
        
        
          
            a
          
        
        
        
        
        
        
        
        
          (0.53
        
        
          )
        
      
      
        
          
            Diluted average common shares outstandingc
          
        
        
           
        
        
           
        
        
          
            85,154
          
        
        
           
        
        
          
            d
          
        
        
           
        
        
           
        
        
           
        
        
          28,358
        
        
           
        
      
    
    
      
        
          
            a.
          
        
        
           
        
        
          Includes McMoRan's loss on its oil and gas derivative contracts 
          totaling $45.2 million, $0.53 per share, reflecting $41.6 million, 
          $0.49 per share, of mark-to-market accounting adjustments on open 
          contracts and $3.6 million, $0.04 per share, in losses realized on 
          settled contracts during the first quarter of 2008.
        
      
      
        
        
        
        
        
           
        
      
      
        
          
            b.
          
        
        
        
        
          After preferred dividends.
        
      
      
        
        
        
        
        
           
        
      
      
        
          
            c.
          
        
        
        
        
          See Note c on page I.
        
      
      
        
        
        
        
        
           
        
      
      
        
          
            d.
          
        
        
        
        
          Assumes full conversion of McMoRan's 6% Convertible Senior Notes, 5 
          1/4% Convertible Senior Notes, 6.75% Mandatory Convertible Preferred 
          Stock, and the dilutive effect of outstanding stock options and 
          warrants into 31.2 million shares.
        
      
      
        
        
        
        
        
           
        
      
      
        
          
            (1)
          
        
        
        
        
          If any in-progress well or unproved property is determined to be 
          non-productive prior to the filing of McMoRan's first-quarter 2008 
          Form 10-Q, the related costs incurred through March 31, 2008 would 
          be charged to exploration expense in the first quarter 2008 
          financial statements. McMoRan's investment in its five in-progress 
          or unevaluated wells totaled $70.6 million at March 31, 2008.
        
      
      
        
        
        
        
        
           
        
      
    
    
      James R. Moffett and Richard C. Adkerson, Co-Chairmen of McMoRan, 
      said, “Our first quarter 2008 results 
      reflect strong performance from our producing properties and continued 
      positive drilling results in the Flatrock field. Strong cash 
      flows are enabling us to invest aggressively in our future growth, 
      including commencing drilling at the potentially significant ultra-deep 
      South Timbalier Block 168 No. 1 well, and to strengthen our balance 
      sheet through debt reductions. We are pleased with the results of 
      our deep drilling activities and look forward to advancing this program 
      to build values for shareholders. The theme of our annual report ‘Preparation 
      Meets Opportunity’ reflects our view that we 
      are well-positioned to take advantage of our lease position and 
      significant inventory of high potential prospects.”
    
    
      EXPLORATION ACTIVITIES
    
    
      Since 2004, McMoRan has participated in 17 discoveries on 32 prospects 
      drilled and evaluated, including the Flatrock discovery in the third 
      quarter of 2007. Five additional prospects are either in progress or not 
      fully evaluated.
    
    
      Following the initial discovery at Flatrock on South Marsh Island Block 
      212 in the OCS 310/Louisiana State Lease 340 area in approximately 10 
      feet of water, McMoRan continues to pursue opportunities in the area 
      aggressively. Recent results include the commencement of production at 
      Flatrock No. 1 (location “A”) 
      on January 28, 2008, successful delineation wells at Flatrock No. 2 and 
      No. 3 (location “B” 
      and “D”) and a 
      production test of the Flatrock No. 2 well at a gross rate of 114 
      MMcfe/d. Production can be brought on line quickly using the Tiger Shoal 
      facilities in the immediate area.
    
    
      The Flatrock No. 3 well, which is targeting additional Operc sands 
      below 17,100 feet, has been sidetracked to 17,100 feet. The well has a 
      proposed total depth of 18,800 feet. The Flatrock No. 4 well (location “C”) 
      commenced drilling on April 9, 2008 at a location 2,750 feet north of 
      the Flatrock No. 1 well and 3,200 feet south-southeast of the Flatrock 
      No. 2 well and is drilling below 3,500 feet to a proposed total depth of 
      18,500 targeting Rob-L and Operc sands seen in the area.
    
    
      
        
           
        
      
      
        
          
            Following is a status report on activities in the Flatrock area:
          
        
      
      
        
           
        
      
      
        
          Flatrock Wells
        
        
           
        
        
          
            Total Pay
          
          
            Intervals
          
        
        
           
        
        
          
            Net Feet
          
          
            of Pay(1)
          
        
        
           
        
        
          Status
        
      
      
        
          
            No. 1 – “A” 
            location
          
          
            Discovery Well
          
        
        
        
        
          8
        
        
        
        
          260
        
        
        
        
          Gross production currently approximates 50 MMcfe/d,~12 MMcfe/d net 
          to McMoRan
        
      
      
        
          
            No. 2 – “B” 
            location
          
          
            Delineation Well
          
        
        
        
        
          8
        
        
        
        
          289
        
        
        
        
          Tested 103 MMcf/d and 1,890 bbls/d gross, 21.4 MMcfe/d net: first 
          production expected mid-2008
        
      
      
        
          
            No. 3 – “D” 
            location
          
          
            Delineation Well
          
        
        
        
        
          3
        
        
        
        
          126
        
        
        
        
          
            Spud November 6, 2007: drilled to 17,100’ 
            with a proposed total depth of 18,800’
          
        
      
      
        
          
            No. 4 – “C” 
            location
          
          
            Development Well
          
        
        
           
        
        
          n/a
        
        
           
        
        
          n/a
        
        
           
        
        
          Spud April 9, 2008: drilling below 3,500’ 
          with a proposed total depth of 18,500’
        
      
      
        
          
            (1) Confirmed with wireline 
            logs.
          
        
      
      
        
           
        
      
    
    
      McMoRan controls approximately 150,000 gross acres in the Tiger 
      Shoal/Mound Point area (OCS 310/Louisiana State Lease 340) and has 
      multiple additional exploration opportunities with significant potential 
      on this large acreage position. McMoRan has a 25.0 percent working 
      interest and an 18.8 percent net revenue interest in Flatrock.
    
    
      The Mound Point East exploratory well on Louisiana State Lease 
      340 commenced drilling on March 31, 2008 and is drilling below 7,800 
      feet. The well has a proposed total depth of 18,050 feet and will target Operc 
      sands in the middle-Miocene. Mound Point East is located in less than 10 
      feet of water approximately 10 miles east of the Flatrock field. McMoRan 
      is targeting deep geologic features in the Mound Point area similar to 
      those discovered in the Flatrock field. McMoRan holds a 32.5 percent 
      working interest and a 23.2 percent net revenue interest in the well. 
      Plains Exploration & Production Company (NYSE: PXP) holds a 43.4 percent 
      working interest. McMoRan’s investment in 
      Mound Point East totaled $2.2 million at March 31, 2008.
    
    
      McMoRan re-entered the South Timbalier Block 168 No. 1 wellbore, 
      formerly known as the Blackbeard West No. 1 ultra-deep exploratory well, 
      on March 18, 2008. The Rowan Gorilla IV rig has drilled through cement 
      plugs set by the previous operator. This well is currently being 
      deepened below 30,145 feet to a proposed total depth of 31,267 feet to 
      evaluate potentially significant Miocene targets. McMoRan operates the 
      well and owns a 32.3 percent working interest. McMoRan’s 
      partners, Plains Exploration & Production Company and Energy XXI 
      (NASDAQ: EXXI), hold a 35 percent working interest and 20 percent 
      working interest, respectively. McMoRan’s 
      investment in South Timbalier Block 168 No. 1 well totaled $0.5 million 
      at March 31, 2008.
    
    
      Subject to certain preferential rights held by third parties, McMoRan 
      has also agreed to assign a proportional share of its interest in 
      approximately 425,000 gross acres associated with the ultra-deep trend 
      to PXP and EXXI. In addition to their working interest share of well 
      costs, PXP and EXXI will pay up to $9.7 million and $5.5 million, 
      respectively, for the right to participate in the re-entry of the South 
      Timbalier Block 168 No. 1 well and in the assigned acreage. The 
      Blackbeard West No. 1 well, located in 70 feet of water, was drilled to 
      30,067 feet by the original operator and its partners but was 
      temporarily abandoned in August 2006 prior to reaching the objective 
      depth.
    
    
      McMoRan currently has rights to approximately 1.5 million gross acres 
      and is developing plans to participate in the drilling of additional 
      exploratory wells in 2008, including the Tom Sauk and Gladstone 
      prospects on Louisiana State Lease 340, which lie below the significant 
      historical shallow production at Mound Point.
    
    
      McMoRan was high bidder on seven leases for a total of $1.2 million at 
      the March 2008 Minerals Management Service Outer Continental Shelf Sale 
      206 for leases in the Central Gulf of Mexico. The leases are South Marsh 
      Island Blocks 21 and 125, Eugene Island Blocks 134 and 155, and Ship 
      Shoal Blocks 212, 184 and 192.
    
    
      PRODUCTION AND DEVELOPMENT ACTIVITIES
    
    
      First-quarter 2008 production averaged 294 MMcfe/d net to McMoRan, 
      compared with 70 MMcfe/d in the first quarter of 2007. First-quarter 
      2008 average production was higher than our previously reported estimate 
      on January 18, 2008 of 270 MMcfe/d because of stronger performance from 
      the properties acquired in August 2007 and from the Flatrock No. 1 well. 
      First production is expected to commence at the Flatrock No. 2 and 
      Cottonwood Point wells in mid-2008. Average daily production for 2008 is 
      expected to approximate 285 MMcfe/day net to McMoRan, including 285 
      MMcfe/day in the second quarter of 2008. Production estimates for 2008 
      have increased from previous estimates because of improved performance 
      in the first quarter and recent drilling success in the Flatrock field. 
      Additional success at Flatrock and other exploration prospects could 
      increase future production further.
    
    
      REVENUES
    
    
      McMoRan’s first-quarter 2008 oil and gas 
      revenues totaled $291.9 million, compared to $51.4 million during the 
      first quarter of 2007. During the first quarter of 2008, McMoRan’s 
      sales volumes totaled 17.9 Bcf of gas, 1.1 million barrels of oil and 
      condensate and 2.5 Bcfe of plant products, compared to 3.9 Bcf of gas, 
      344,400 barrels of oil and condensate and 0.4 Bcfe of plant products in 
      the first quarter of 2007. McMoRan’s 
      first-quarter comparable average realizations for gas were $9.06 per 
      thousand cubic feet (Mcf) in 2008 and $7.59 per Mcf in 2007; for oil and 
      condensate McMoRan received an average of $97.40 per barrel in 
      first-quarter 2008 compared to $54.24 per barrel in first-quarter 2007.
    
    
      FINANCING TRANSACTIONS
    
    
      Since the beginning of 2008, McMoRan has privately negotiated 
      transactions to induce conversion of $32 million, including $7 million 
      in April 2008, of its 6% Convertible Senior Notes due July 2, 2008 into 
      approximately 2.2 million shares of its common stock based on the $14.25 
      conversion price for the convertible notes. McMoRan paid an aggregate 
      $0.8 million in the transactions, which will be reflected as non 
      operating expense in McMoRan’s statement of 
      operations ($0.7 million was recorded in the first quarter of 2008). 
      After giving effect to these conversions, the remaining principal amount 
      outstanding on McMoRan’s 6% Convertible 
      Senior Notes approximates $69 million and its common shares outstanding 
      total approximately 55.6 million shares. Assuming conversion of McMoRan’s 
      outstanding mandatory convertible preferred stock, convertible notes and 
      warrants, McMoRan would have approximately 85.5 million shares 
      outstanding.
    
    
      CASH FLOWS, CAPITAL EXPENDITURES AND REVOLVER BORROWINGS
    
    
      First-quarter 2008 operating cash flows totaled $172.8 million, 
      including $28.7 million in working capital uses. Capital expenditures 
      totaled $51.4 million for the first quarter of 2008. Capital 
      expenditures for 2008 are expected to approximate $250 million, 
      including approximately $90 million in exploration associated with 
      Flatrock and other opportunities and $160 million in development costs. 
      Capital spending may change as additional opportunities become available 
      and to fund additional development capital expenditures on successful 
      wells.
    
    
      On March 31, 2008, McMoRan had unrestricted cash and cash equivalents of 
      $6.4 million and $163 million in borrowings under its revolving bank 
      credit facility, a reduction of $111 million from December 31, 2007. On 
      March 31, 2008, availability under McMoRan’s 
      revolving bank credit facility was $317 million, after taking into 
      account borrowings and $100 million in letters of credit for abandonment 
      obligations associated with the acquired properties.
    
    
      DERIVATIVE CONTRACTS
    
    
      In connection with McMoRan’s oil and gas 
      property acquisition in 2007 McMoRan entered into derivative contracts 
      to hedge a portion of its production during 2008 - 2010 for the periods 
      covering January-June and November-December through a combination of 
      swaps and puts. Following is a schedule of open swap positions:
    
    
      
        
        
        
           
        
        
           
        
        
           
        
        
           
        
        
           
        
        
           
        
        
        
        
           
        
        
           
        
        
           
        
        
           
        
        
           
        
        
           
        
        
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          
            Natural Gas Positions
          
          
            (million MMbtu)
          
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          
            Oil Positions
          
          
            (thousand bbls)
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          
             
          
        
        
           
        
        
           
        
        
          
             
          
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          
             
          
        
        
           
        
        
           
        
        
          
             
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          
            Annual
          
          
            Volumes
          
        
        
        
        
        
        
          
            Average
          
          
            Swap Price
          
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          
            Annual
          
          
            Volumes
          
        
        
        
        
        
        
          
            Average
          
          
            Swap Price
          
        
      
      
        
          2008
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          8.8
        
        
        
        
        
        
          $
        
        
          8.68
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          379
        
        
        
        
        
        
          $
        
        
          73.29
        
      
      
        
          2009
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          7.3
        
        
        
        
        
        
          $
        
        
          8.97
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          322
        
        
        
        
        
        
          $
        
        
          71.82
        
      
      
        
          2010
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          2.6
        
        
        
        
        
        
          $
        
        
          8.63
        
        
        
        
        
        
        
        
        
        
        
        
        
        
          118
        
        
        
        
        
        
          $
        
        
          70.89
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
    
    
      These derivative contracts have not been designated as hedges for 
      accounting purposes. Accordingly, our derivative contracts are subject 
      to mark-to-market fair value adjustments and unrealized gains and losses 
      are recognized immediately in our operating results. McMoRan’s 
      first-quarter 2008 results included a realized cash loss of $3.6 million 
      and an unrealized loss of $41.6 million for mark-to-market accounting 
      adjustments associated with open derivative contracts based on changes 
      in their respective fair market values through March 31, 2008. McMoRan’s 
      fair value net liability after mark-to-market adjustments was $42.2 
      million at March 31, 2008. We may consider future opportunities to hedge 
      other portions of our production.
    
    
      MAIN PASS ENERGY HUB™ UPDATE
    
    
      McMoRan is continuing discussions with potential energy suppliers to 
      develop commercial arrangements for the MPEH™ 
      facilities. As previously reported, MARAD approved McMoRan’s 
      license application for its MPEH™ project in 
      January 2007.
    
    
      The project’s location near large and liquid 
      U.S. gas markets and the significant potential of the onsite cavern 
      storage provide attractive commercial opportunities for LNG suppliers, 
      natural gas consumers and marketers. The MPEH™ 
      facility, as approved, is expected to be capable of storing 28 Bcf of 
      gas in underground storage caverns, producing natural gas liquids and 
      regasifying LNG at a peak rate of 1.6 Bcf per day.
    
    
      Prior to commencing construction of the facility, McMoRan expects to 
      enter into commercial arrangements that would enable McMoRan to finance 
      the construction costs of the project.
    
    
      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. McMoRan is 
      also pursuing plans for the development of a multifaceted energy 
      facility at the MEPH™, including the 
      potential development of a facility to receive and process liquefied 
      natural gas and store and distribute natural gas. Additional information 
      about McMoRan and the MPEH™ project is 
      available on its internet website “www.mcmoran.com” 
      and at “www.mpeh.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, 
      anticipated and potential production and flow rates; anticipated 
      revenues; the economic potential of properties; estimated exploration 
      and development costs; and the potential Main Pass Energy HubTM 
      Project. 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, except to the extent required by applicable law, does not 
      intend to update or otherwise revise 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 2007 Annual 
      Report on Form 10-K on file with the Securities and Exchange Commission.
    
    
      A copy of this release is available on our web site at www.mcmoran.com. 
      A conference call with securities analysts about the first-quarter 
      2008 results is scheduled for today at 10:00 AM Eastern Time. The 
      conference call will be broadcast on the Internet. Interested 
      parties may listen to the conference call live by accessing the call on “www.mcmoran.com.” 
      A replay of the call will be available through Friday, May 9, 2008.
    
    
      
        
           
        
      
      
        
          
            McMoRan EXPLORATION CO.
          
          
            STATEMENTS OF OPERATIONS (Unaudited)
          
        
      
      
        
           
        
      
      
        
        
        
           
        
        
          
            Three Months Ended
          
          
            March 31,
          
        
      
      
        
        
        
        
        
          
            2008a
          
        
        
        
        
           
        
        
           
        
        
          2007
        
      
      
        
        
        
        
        
          
            (In Thousands, Except
          
          
            Per Share Amounts)
          
        
      
      
        
          Revenues:
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Oil & natural gas
        
        
        
        
          $
        
        
          291,946
        
        
        
        
        
        
        
        
        
        
          $
        
        
          51,375
        
        
        
      
      
        
          Service
        
        
        
        
           
        
        
          3,530
        
        
           
        
        
        
        
        
        
        
        
           
        
        
          322
        
        
           
        
      
      
        
          Total revenues
        
        
        
        
        
        
          295,476
        
        
        
        
        
        
        
        
        
        
        
        
          51,697
        
        
        
      
      
        
          Costs and expenses:
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Production and delivery costs
        
        
        
        
        
        
          55,646
        
        
        
        
        
        
        
        
        
        
        
        
          17,728
        
        
        
      
      
        
          Depletion, depreciation and amortization
        
        
        
        
        
        
          121,332
        
        
        
        
        
        
        
        
        
        
        
        
          27,035
        
        
        
      
      
        
          Exploration expenses
        
        
        
        
        
        
          6,813
        
        
        
        
        
        
        
        
        
        
        
        
          9,755
        
        
        
      
      
        
          
            Loss on oil and gas derivative contractsb
          
        
        
        
        
        
        
          45,231
        
        
        
        
        
        
        
        
        
        
        
        
          -
        
        
        
      
      
        
          General and administrative expenses
        
        
        
        
        
        
          9,012
        
        
        
        
        
        
        
        
        
        
        
        
          6,397
        
        
        
      
      
        
          Start-up costs for Main Pass Energy Hub™
        
        
        
        
           
        
        
          1,617
        
        
           
        
        
        
        
        
        
        
        
           
        
        
          2,705
        
        
           
        
      
      
        
          Total costs and expenses
        
        
        
        
           
        
        
          239,651
        
        
           
        
        
        
        
        
        
        
        
           
        
        
          63,620
        
        
           
        
      
      
        
          Operating income (loss)
        
        
        
        
        
        
          55,825
        
        
        
        
        
        
        
        
        
        
        
        
          (11,923
        
        
          )
        
      
      
        
          Interest expense
        
        
        
        
        
        
          (17,111
        
        
          )
        
        
        
        
        
        
        
        
        
        
          (5,654
        
        
          )
        
      
      
        
          Other income (expense), net
        
        
        
        
           
        
        
          (627
        
        
          )
        
        
        
        
        
        
        
        
           
        
        
          748
        
        
           
        
      
      
        
          Income (loss) from continuing operations before income taxes
        
        
        
        
        
        
          38,087
        
        
        
        
        
        
        
        
        
        
        
        
          (16,829
        
        
          )
        
      
      
        
          Provision for income taxes
        
        
        
        
           
        
        
          (856
        
        
          )
        
        
        
        
        
        
        
        
           
        
        
          -
        
        
           
        
      
      
        
          Income (loss) from continuing operations
        
        
        
        
        
        
          37,231
        
        
        
        
        
        
        
        
        
        
        
        
          (16,829
        
        
          )
        
      
      
        
          Income (loss) from discontinued operations
        
        
        
        
           
        
        
          (856
        
        
          )
        
        
        
        
        
        
        
        
           
        
        
          2,331
        
        
           
        
      
      
        
          Net income (loss)
        
        
        
        
        
        
          36,375
        
        
        
        
        
        
        
        
        
        
        
        
          (14,498
        
        
          )
        
      
      
        
          
            Preferred dividends and amortization of convertible preferred 
            stock issuance costs
          
        
        
        
        
           
        
        
          (4,366
        
        
          )
        
        
        
        
        
        
        
        
           
        
        
          (405
        
        
          )
        
      
      
        
          Net income (loss) applicable to common stock
        
        
        
        
          $
        
        
          32,009
        
        
           
        
        
        
        
        
        
        
        
          $
        
        
          (14,903
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Basic net income (loss) per share of common stock:
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Continuing operations
        
        
        
        
          $
        
        
          0.61
        
        
        
        
        
        
        
        
        
        
          $
        
        
          (0.61
        
        
          )
        
      
      
        
          Discontinued operations
        
        
        
        
           
        
        
          (0.02
        
        
          )
        
        
        
        
        
        
        
        
           
        
        
          0.08
        
        
           
        
      
      
        
          Net income (loss) per share of common stock
        
        
        
        
          $
        
        
          0.59
        
        
           
        
        
        
        
        
        
        
        
          $
        
        
          (0.53
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Diluted net income (loss) per share of common stock:
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Continuing operations
        
        
        
        
          $
        
        
          0.47
        
        
        
        
        
        
        
        
        
        
          $
        
        
          (0.61
        
        
          )
        
      
      
        
          Discontinued operations
        
        
        
        
           
        
        
          (0.01
        
        
          )
        
        
        
        
        
        
        
        
           
        
        
          0.08
        
        
           
        
      
      
        
          Net income (loss) per share of common stock
        
        
        
        
          $
        
        
          0.46
        
        
           
        
        
        
        
        
        
        
        
          $
        
        
          (0.53
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Average shares outstanding:
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
           
        
        
          
            53,95
          
        
        
           
        
        
          
            c
          
        
        
        
        
        
        
           
        
        
          28,358
        
        
           
        
      
      
        
          Diluted
        
        
        
        
           
        
        
          
            85,154
          
        
        
           
        
        
          
            d
          
        
        
        
        
        
        
           
        
        
          28,358
        
        
           
        
      
    
    
      
        
          
            a.
          
        
        
           
        
        
          Selected amounts associated with the properties acquired in August 
          2007 include $216.9 million of revenues, $34.5 million of production 
          and delivery costs and $91.8 million of depreciation, depletion and 
          amortization.
        
      
      
        
           
        
      
      
        
          
            b.
          
        
        
        
        
          Primarily represents the mark-to-market adjustment to record oil and 
          gas derivative contracts at their period end fair value. Also 
          includes $3.6 million of realized losses resulting from the 
          settlement of contracts in the first quarter of 2008.
        
      
      
        
           
        
      
      
        
          
            c.
          
        
        
        
        
          Amount includes the issuance of 6.2 million shares of common stock 
          associated with conversion of the remaining shares of McMoRan's 5% 
          convertible preferred stock, 16.9 million shares of common stock 
          sold in November 2007 equity offering, 1.7 million shares of common 
          stock associated with the conversion of a portion of McMoRan's 6% 
          convertible senior notes and the exercise of stock warrants for 1.74 
          million shares in mid December 2007.
        
      
      
        
           
        
      
      
        
          
            d.
          
        
        
        
        
          
            The approximate 31.2 million share increase from basic shares 
            outstanding reflects the assumed conversion of McMoRan's 6 3/4% 
            mandatorily convertible preferred stock (17.4 million shares) and 
            convertible senior notes (12.3 million shares), together with the 
            effect of the assumed exercise of stock options and stock warrants 
            whose exercise prices were less than McMoRan's average stock price 
            for the period (1.5 million shares).
          
        
      
    
    
      
        
           
        
      
      
        
          
            McMoRan EXPLORATION CO.
          
          
            OPERATING DATA (Unaudited)
          
        
      
      
        
           
        
      
      
        
        
        
           
        
        
          Three Months Ended
        
      
      
        
        
        
        
        
          March 31,
        
      
      
        
        
        
        
        
          
            2008a
          
        
        
           
        
        
           
        
        
          2007
        
      
      
        
          Sales volumes:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Gas (thousand cubic feet, or Mcf)
        
        
        
        
        
        
          17,875,400
        
        
        
        
        
        
        
        
          3,849,100
        
      
      
        
          Oil (barrels)
        
        
        
        
        
        
          1,089,100
        
        
        
        
        
        
        
        
          344,400
        
      
      
        
          
            Plant products (per Mcf equivalent)b
          
        
        
        
        
        
        
          2,486,300
        
        
        
        
        
        
        
        
          435,500
        
      
      
        
          Average realizations:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Gas (per Mcf)
        
        
        
        
          $
        
        
          9.06
        
        
        
        
        
        
          $
        
        
          7.59
        
      
      
        
          Oil (per barrel)
        
        
        
        
        
        
          97.40
        
        
        
        
        
        
        
        
          54.24
        
      
    
    
      
        
          
            a.
          
        
        
           
        
        
          Sales volumes associated with the properties acquired in August 2007 
          totaled approximately 13.2 billion cubic feet (Bcf) of natural gas, 
          776,300 barrels of oil and condensate and 2.1 Bcf equivalent of 
          plant products for the three months ended March 31, 2008.
        
      
      
        
           
        
      
      
        
          
            b.
          
        
        
        
        
          Results include approximately $23.9 million and $3.4 million of 
          revenues associated with plant products (ethane, propane, butane, 
          etc.) during the first quarters of 2008 and 2007, respectively.
        
      
    
    
      
        
           
        
      
      
        
          
            McMoRan EXPLORATION CO.
          
          
            CONDENSED BALANCE SHEETS (Unaudited)
          
        
      
      
        
           
        
      
      
        
        
        
           
        
        
          
            March 31,
          
        
        
        
        
           
        
        
           
        
        
          
            December 31,
          
        
      
      
        
        
        
        
        
          2008
        
        
        
        
        
        
        
        
          2007
        
      
      
        
        
        
        
        
          (In Thousands)
        
      
      
        
          ASSETS
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Cash and cash equivalents
        
        
        
        
          $
        
        
          6,379
        
        
        
        
        
        
        
        
          $
        
        
          4,830
        
      
      
        
          Accounts receivable
        
        
        
        
        
        
          154,675
        
        
        
        
        
        
        
        
        
        
          128,690
        
      
      
        
          Inventories
        
        
        
        
        
        
          9,773
        
        
        
        
        
        
        
        
        
        
          11,507
        
      
      
        
          Prepaid expenses
        
        
        
        
        
        
          5,861
        
        
        
        
        
        
        
        
        
        
          14,331
        
      
      
        
          Fair value of oil and gas derivative contracts
        
        
        
        
        
        
          87
        
        
        
        
        
        
        
        
        
        
          16,623
        
      
      
        
          
            Current assets from discontinued operations, including restricted 
            cash of $0.5 million
          
        
        
        
        
           
        
        
          3,097
        
        
        
        
        
        
        
        
           
        
        
          3,029
        
      
      
        
          Total current assets
        
        
        
        
        
        
          179,872
        
        
        
        
        
        
        
        
        
        
          179,010
        
      
      
        
          Property, plant and equipment, net
        
        
        
        
          
            1,441,544
          
        
        
          
            a
          
        
        
        
        
        
        
        
        
          1,503,359
        
      
      
        
          Sulphur business assets, net
        
        
        
        
        
        
          345
        
        
        
        
        
        
        
        
        
        
          349
        
      
      
        
          Restricted investments and cash
        
        
        
        
        
        
          10,818
        
        
        
        
        
        
        
        
        
        
          7,036
        
      
      
        
          Fair value of oil and gas derivative contracts
        
        
        
        
        
        
          961
        
        
        
        
        
        
        
        
        
        
          4,317
        
      
      
        
          Deferred financing costs
        
        
        
        
           
        
        
          20,189
        
        
        
        
        
        
        
        
           
        
        
          21,217
        
      
      
        
          Total assets
        
        
        
        
          $
        
        
          1,653,729
        
        
        
        
        
        
        
        
          $
        
        
          1,715,288
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          LIABILITIES AND STOCKHOLDERS’ EQUITY
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Accounts payable
        
        
        
        
          $
        
        
          74,003
        
        
        
        
        
        
        
        
          $
        
        
          97,821
        
      
      
        
          Accrued liabilities
        
        
        
        
        
        
          77,531
        
        
        
        
        
        
        
        
        
        
          68,292
        
      
      
        
          6% convertible senior notes
        
        
        
        
          
            76,363
          
        
        
          
            b
          
        
        
        
        
        
        
        
        
          100,870
        
      
      
        
          Other short term borrowings
        
        
        
        
        
        
          2,666
        
        
        
        
        
        
        
        
        
        
          10,665
        
      
      
        
          Accrued interest and dividends payable
        
        
        
        
        
        
          21,150
        
        
        
        
        
        
        
        
        
        
          13,055
        
      
      
        
          Current portion of accrued oil and gas reclamation costs
        
        
        
        
        
        
          72,453
        
        
        
        
        
        
        
        
        
        
          80,839
        
      
      
        
          Current portion of sulphur reclamation costs
        
        
        
        
        
        
          11,131
        
        
        
        
        
        
        
        
        
        
          12,145
        
      
      
        
          Fair value of oil and gas derivative contracts
        
        
        
        
        
        
          33,751
        
        
        
        
        
        
        
        
        
        
          14,001
        
      
      
        
          Accrued income taxes
        
        
        
        
        
        
          856
        
        
        
        
        
        
        
        
        
        
          -
        
      
      
        
          Current liabilities from discontinued operations
        
        
        
        
           
        
        
          2,211
        
        
        
        
        
        
        
        
           
        
        
          2,624
        
      
      
        
          Total current liabilities
        
        
        
        
        
        
          372,115
        
        
        
        
        
        
        
        
        
        
          400,312
        
      
      
        
          Senior secured revolving credit facility
        
        
        
        
        
        
          163,000
        
        
        
        
        
        
        
        
        
        
          274,000
        
      
      
        
          5¼% convertible senior notes
        
        
        
        
        
        
          115,000
        
        
        
        
        
        
        
        
        
        
          115,000
        
      
      
        
          11.875% senior notes
        
        
        
        
        
        
          300,000
        
        
        
        
        
        
        
        
        
        
          300,000
        
      
      
        
          Accrued oil and gas reclamation costs
        
        
        
        
        
        
          231,621
        
        
        
        
        
        
        
        
        
        
          213,898
        
      
      
        
          Accrued sulphur reclamation costs
        
        
        
        
        
        
          9,327
        
        
        
        
        
        
        
        
        
        
          9,155
        
      
      
        
          Contractual postretirement obligation
        
        
        
        
        
        
          5,651
        
        
        
        
        
        
        
        
        
        
          6,216
        
      
      
        
          Fair value of oil and gas derivative contracts
        
        
        
        
        
        
          9,464
        
        
        
        
        
        
        
        
        
        
          7,516
        
      
      
        
          Other long-term liabilities
        
        
        
        
           
        
        
          16,891
        
        
        
        
        
        
        
        
           
        
        
          16,962
        
      
      
        
          Total liabilities
        
        
        
        
           
        
        
          1,223,069
        
        
        
        
        
        
        
        
           
        
        
          1,343,059
        
      
      
        
          Stockholders' equity
        
        
        
        
           
        
        
          430,660
        
        
        
        
        
        
        
        
           
        
        
          372,229
        
      
      
        
          Total liabilities and stockholders' equity
        
        
        
        
          $
        
        
          1,653,729
        
        
        
        
        
        
        
        
          $
        
        
          1,715,288
        
      
    
    
      
        
          
            a.
          
        
        
           
        
        
          Includes a total of $70.6 million of exploratory drilling and 
          related costs associated with five unevaluated wells at March 31, 
          2008.
        
      
      
        
           
        
      
      
        
          
            b.
          
        
        
        
        
          McMoRan has privately negotiated $7.3 million of additional debt to 
          equity inducement transactions in April 2008. The amount outstanding 
          on the 6% convertible notes, as of April 17, 2008, totals $69.1 
          million.
        
      
    
    
      
        
           
        
      
      
        
          
            McMoRan EXPLORATION CO.
          
          
            STATEMENTS OF CASH FLOWS (Unaudited)
          
        
      
      
        
           
        
      
      
        
        
        
           
        
        
          Three Months Ended
        
      
      
        
        
        
        
        
          March 31,
        
      
      
        
        
        
        
        
          2008
        
        
           
        
        
           
        
        
          2007
        
      
      
        
        
        
        
        
          (In Thousands)
        
      
      
        
          Cash flow from operating activities:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Net income (loss)
        
        
        
        
          $
        
        
          36,375
        
        
        
        
        
        
        
        
          $
        
        
          (14,498
        
        
          )
        
      
      
        
          Adjustments to reconcile net income (loss) to net cash provided by 
          operating activities:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          (Income) loss from discontinued operations
        
        
        
        
        
        
          856
        
        
        
        
        
        
        
        
        
        
          (2,331
        
        
          )
        
      
      
        
          Depreciation, depletion and amortization
        
        
        
        
        
        
          121,332
        
        
        
        
        
        
        
        
        
        
          27,035
        
        
        
      
      
        
          Exploration drilling and related expenditures
        
        
        
        
        
        
          (735
        
        
          )
        
        
        
        
        
        
        
        
          1,124
        
        
        
      
      
        
          Compensation expense associated with stock-based awards
        
        
        
        
        
        
          1,941
        
        
        
        
        
        
        
        
        
        
          6,507
        
        
        
      
      
        
          Amortization of deferred financing costs
        
        
        
        
        
        
          1,256
        
        
        
        
        
        
        
        
        
        
          604
        
        
        
      
      
        
          Unrealized loss on oil and gas derivative contracts
        
        
        
        
        
        
          41,591
        
        
        
        
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Loss on induced conversion of convertible senior notes
        
        
        
        
        
        
          699
        
        
        
        
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Reclamation expenditures
        
        
        
        
        
        
          (912
        
        
          )
        
        
        
        
        
        
        
        
          (721
        
        
          )
        
      
      
        
          Prepayment of reclamation expenditures by third-party owners
        
        
        
        
        
        
          4,146
        
        
        
        
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Increase in restricted cash
        
        
        
        
        
        
          (3,783
        
        
          )
        
        
        
        
        
        
        
        
          (6
        
        
          )
        
      
      
        
          Other
        
        
        
        
        
        
          (320
        
        
          )
        
        
        
        
        
        
        
        
          (524
        
        
          )
        
      
      
        
          (Increase) decrease in working capital:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Accounts receivable
        
        
        
        
        
        
          (38,924
        
        
          )
        
        
        
        
        
        
        
        
          (7,613
        
        
          )
        
      
      
        
          Accounts payable and accrued liabilities
        
        
        
        
        
        
          8,004
        
        
        
        
        
        
        
        
        
        
          (8,810
        
        
          )
        
      
      
        
          Prepaid expenses and inventories
        
        
        
        
           
        
        
          2,204
        
        
           
        
        
        
        
        
        
           
        
        
          10,140
        
        
           
        
      
      
        
          Net cash provided by continuing operations
        
        
        
        
        
        
          173,730
        
        
        
        
        
        
        
        
        
        
          10,907
        
        
        
      
      
        
          Net cash used in discontinued operations
        
        
        
        
           
        
        
          (914
        
        
          )
        
        
        
        
        
        
           
        
        
          (2,429
        
        
          )
        
      
      
        
          Net cash provided by operating activities
        
        
        
        
           
        
        
          172,816
        
        
           
        
        
        
        
        
        
           
        
        
          8,478
        
        
           
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cash flow from investing activities:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Exploration, development and other capital expenditures
        
        
        
        
        
        
          (51,379
        
        
          )
        
        
        
        
        
        
        
        
          (38,379
        
        
          )
        
      
      
        
          Acquisition of oil and gas properties
        
        
        
        
        
        
          (3,500
        
        
          )
        
        
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Increase in restricted investments
        
        
        
        
           
        
        
          -
        
        
           
        
        
        
        
        
        
           
        
        
          (54
        
        
          )
        
      
      
        
          Net cash used in continuing operations
        
        
        
        
        
        
          (54,879
        
        
          )
        
        
        
        
        
        
        
        
          (38,433
        
        
          )
        
      
      
        
          Net cash activity from discontinued operations
        
        
        
        
           
        
        
          -
        
        
           
        
        
        
        
        
        
           
        
        
          -
        
        
           
        
      
      
        
          Net cash used in investing activities
        
        
        
        
           
        
        
          (54,879
        
        
          )
        
        
        
        
        
        
           
        
        
          (38,433
        
        
          )
        
      
      
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cash flow from financing activities:
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Payments under senior secured revolving credit facility, net
        
        
        
        
        
        
          (111,000
        
        
          )
        
        
        
        
        
        
        
        
          (28,750
        
        
          )
        
      
      
        
          Proceeds from senior secured term loan
        
        
        
        
        
        
          -
        
        
        
        
        
        
        
        
        
        
          100,000
        
        
        
      
      
        
          Financing costs
        
        
        
        
        
        
          -
        
        
        
        
        
        
        
        
        
        
          (2,177
        
        
          )
        
      
      
        
          Dividends paid on convertible preferred stock
        
        
        
        
        
        
          (4,755
        
        
          )
        
        
        
        
        
        
        
        
          (374
        
        
          )
        
      
      
        
          Payments for induced conversion of convertible senior notes
        
        
        
        
        
        
          (699
        
        
          )
        
        
        
        
        
        
        
        
          -
        
        
        
      
      
        
          Proceeds from exercise of stock options and other
        
        
        
        
           
        
        
          66
        
        
           
        
        
        
        
        
        
           
        
        
          1,109
        
        
           
        
      
      
        
          Net cash (used in) provided by continuing operations
        
        
        
        
        
        
          (116,388
        
        
          )
        
        
        
        
        
        
        
        
          69,808
        
        
        
      
      
        
          Net cash activity from discontinued operations
        
        
        
        
           
        
        
          -
        
        
           
        
        
        
        
        
        
           
        
        
          -
        
        
           
        
      
      
        
          Net cash (used in) provided by financing activities
        
        
        
        
           
        
        
          (116,388
        
        
          )
        
        
        
        
        
        
           
        
        
          69,808
        
        
           
        
      
      
        
          Net increase in cash and cash equivalents
        
        
        
        
        
        
          1,549
        
        
        
        
        
        
        
        
        
        
          39,853
        
        
        
      
      
        
          Cash and cash equivalents at beginning of year
        
        
        
        
           
        
        
          4,830
        
        
           
        
        
        
        
        
        
           
        
        
          17,830
        
        
           
        
      
      
        
          Cash and cash equivalents at end of period
        
        
        
        
          $
        
        
          6,379
        
        
           
        
        
        
        
        
        
          $
        
        
          57,683