McMoRan Exploration Co. Reports Operating Results (10-Q)

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Nov 06, 2009
McMoRan Exploration Co. (MMR, Financial) filed Quarterly Report for the period ended 2009-09-30.

McMoRan Exploration Co. is engaged in the exploration development and production of oil and gas offshore in the Gulf of Mexico and onshore in the Gulf Coast region and in the mining purchasing transportingterminaling processing and marketing of sulfur. Mcmoran Exploration Co. has a market cap of $709.7 million; its shares were traded at around $8.25 with and P/S ratio of 0.6.

Highlight of Business Operations:

Implementing our business strategy will require significant expenditures during the remainder of 2009 and beyond. In June 2009, we completed $176 million in equity financings through the issuance of 15.5 million shares of common stock at a price of $5.75 per share and 86,250 shares of $1,000 par value 8% convertible perpetual preferred stock. These offerings generated approximately $168 million of net proceeds that will be used for general corporate purposes, including funding future capital expenditures. During the nine months ended September 30, 2009, we invested $113.4 million in various projects primarily associated with our exploration activities and the subsequent development of the related discoveries. Our exploration, development and other capital expenditures for 2009 are expected to approximate $155 million. Capital spending will continue to be driven by opportunities and will be prudently managed based on our available cash and cash flows. We may pursue additional partner arrangements in the future to further reduce capital expenditures.

Our current production volume is comprised of approximately 70 percent natural gas and 30 percent oil. As a result, our revenues are generally more sensitive to changes in the market price of natural gas than to changes in the market price of oil. Natural gas prices continue to be impacted by weak industrial demand and abundant supply. North American natural gas averaged $3.42 per MMbtu during the third quarter of 2009. The spot price for natural gas was $4.78 per MMbtu on November 5, 2009. The average oil price for the third quarter of 2009 was $68.24 per barrel and the spot price for oil was $79.62

Our operating loss for the nine months ended September 30, 2009 of $171.9 million includes (a) impairment charges of $64.8 million for certain fields to reduce their net carrying value to fair value; (b) $61.7 million in charges to exploration expense primarily relating to exploration wells which were determined to be non-productive; (c) an $18.7 million insurance recovery associated with our share of the initial receipt of insurance proceeds related to the September 2008 hurricanes; and (d) $16.6 million of net gains on oil and gas derivative contracts.

Our third quarter 2008 operating income of $18.1 million includes (a) $152.6 million of Hurricane Ike related charges; (b) $80.4 million of net gains on oil and gas derivative contracts; (c) $11.5 million of impairment charges not related to Hurricane Ike; and (d) $4.4 million in charges to exploration expense primarily related to exploration wells which were determined to be non-productive.

Our operating income for the nine months ended September 30, 2008 totaled $144.1 million, which includes (a) $152.6 million of Hurricane Ike related charges; (b) $35.6 million of net losses on oil and gas derivative contracts; (c) stock-based compensation expense primarily associated with immediately vested stock options totaling $25.5 million; (d) $18.9 million of impairment charges not related to Hurricane Ike; (e) $16.8 million in charges to exploration expense related to exploration wells which were determined to be non-productive; and (f) $3.4 million of insurance recovery related to the final settlement for inspection and repairs associated with underwater platform damage at Main Pass Block 299 from Hurricane Katrina.

Environment” above). Revenues from plant products totaled $19.8 million in the nine months ended September 30, 2009 compared with $73.6 million in the prior year period. Our service revenues totaled $8.5 million in the nine months ended September 30, 2009 and $9.3 million in the same period for 2008.

Read the The complete ReportMMR is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.