McMoRan EXPLORATION CO. REPORTS FIRST-QUARTER 2000 RESULTS
NEW ORLEANS--(BUSINESS WIRE)--April 20, 2000--McMoRan Exploration
Co. (NYSE:MMR)
HIGHLIGHTS
-- As previously announced, in January 2000 McMoRan Exploration
Co. (NYSE: MMR) acquired exploration rights from both Texaco
Exploration and Production Inc. and Shell Offshore Inc. in a
substantial acreage position on the Gulf of Mexico shelf.
These properties and our existing inventory of exploration
prospects, combined with our technical expertise and seismic
database, provide the foundation for an aggressive,
broad-based exploration program.
-- Preliminary evaluations of these properties have resulted in
our plan to drill exploration wells on eleven prospects during
2000, two of which are currently in progress. Additional
prospects may be added pending our continuing evaluations.
-- On February 28, 2000, we commenced exploratory drilling at the
Grand Isle Block 41 No. 8 well. The well is planned to
reach a total depth of 16,500 feet during the second quarter
of 2000.
-- On March 16, 2000, we commenced exploratory drilling at the
Vermilion Block 144 No. 3 well. The well is planned to
reach a total depth of approximately 17,500 feet. We have
temporarily suspended drilling activities at the well and will
set protective casing to a depth of 15,000 feet.
-- As previously announced, in March 2000 we signed a letter of
intent with Halliburton Company to form a strategic alliance
that will combine the skills, technologies and resources of
both companies' personnel and technical consultants into an
integrated team that will manage our oil and gas activities.
-- Under terms of the proposed alliance, Halliburton will provide
a guarantee that will provide us access to up to $50 million
of additional borrowings under an amended bank credit
facility.
-- On April 19, 2000, we completed a public offering of 3.8
million shares of common stock, which generated net proceeds
of approximately $50.3 million.
-- First quarter 2000 oil and gas sales volumes totaled
approximately 3,513 million cubic feet (MMCF) of gas and
321,400 barrels of oil and condensate, including approximately
264,000 barrels from Main Pass.
-- Sulphur sales for the first quarter of 2000 totaled
approximately 676,300 long tons, representing our share of
mine production and purchased sulphur.
-- In March 2000, MMR's Board of Directors authorized the
purchase of up to an additional 500,000 shares of our common
stock, increasing the total shares authorized under our share
repurchase program to 2.5 million. Shares purchased for the
period January 1, 2000 through April 19, 2000 totaled
approximately 0.8 million shares for $15.2 million, an average
of $19.00 per share.
First Quarter
2000 1999
(In thousands,
except per share amounts)
Revenues $ 52,844 $ 62,111
Operating income (loss) (15,820) 1,895
Net income (loss) (17,004) 1,314
Diluted net income (loss) per share (1.36) 0.09
Diluted average shares outstanding 12,480 14,209
NEW ORLEANS--April 20, 2000-- McMoRan Exploration Co. (NYSE:MMR)
today reported a net loss of $17.0 million, $1.36 per share, for the
first quarter of 2000 compared with net income of $1.3 million, $0.09
per share, for the first quarter of 1999. Significant factors
contributing to the first-quarter 2000 loss include: our purchase of a
substantial amount of 3-D seismic data and related exploration
expenditures for $6.1 million, which under the successful efforts
method of accounting must be expensed as incurred; the $3.7 million
charge to expense of the costs associated with the State Tract 210 No.
6 exploratory well in the Grass Island prospect; remedial expenses of
$1.9 million at Brazos Block A-19; and interest expense of $1.2
million incurred in connection with increased debt levels. The
remainder of the loss is primarily attributable to lower sulphur
market prices, partly offset by reduced sulphur costs.
BROAD-BASED EXPLORATION PROGRAM:
As previously announced in separate transactions, MMR acquired
from Texaco Exploration and Production Inc. and Shell Offshore Inc.
exploration rights to significant acreage positions in the Gulf of
Mexico. These properties along with our existing acreage, seismic data
base and technical expertise provide a substantial foundation for an
aggressive, broad-based exploration program on one of the largest
offshore exploration acreage positions in the shelf area of the Gulf
of Mexico. Our oil and gas exploration and development budget for 2000
totals approximately $135 million, of which $49.1 million, including
lease acquisition costs, was expended in the first quarter of 2000
compared with $13.8 million in the first quarter of 1999.
In March 2000, we signed a letter of intent with Halliburton
Company to form a strategic alliance that will combine the skills,
technologies and resources of Halliburton's employees, together with
those of our personnel and technical consultants, into an integrated
team that will manage our oil and gas activities. Under this alliance,
Halliburton's business units, Halliburton Energy Services, Brown &
Root Energy Services and Landmark Graphics Corporation, will provide
integrated products and services to us at market rates, and we will
use Halliburton's services on an exclusive basis to the extent
practicable. Halliburton also will guarantee up to $50 million under
an amended revolving credit facility that we are currently negotiating
with our banks. Halliburton may elect to participate in each prospect
we plan to develop. Upon its election to participate, Halliburton will
pay 20 percent of the prospect's exploration and development costs and
receive 20 percent of our working interest in the prospect before
payout and 6 percent of our working interest after payout. Exploration
costs initially funded by Halliburton will be applied to reduce both
the bank loan and the Halliburton guarantee. This alliance will extend
through December 31, 2003. The formation of the alliance is subject to
certain conditions, including negotiation and execution of definitive
agreements.
On April 19, 2000, we completed an offering of 3.8 million shares
of common stock at $14.00 per share, which resulted in net proceeds of
approximately $50.3 million. This capital together with bank
borrowings and cash flow from operations will fund our exploration and
development activities for the remainder of 2000.
DRILLING and DEVELOPMENT ACTIVITIES:
Grand Isle Blocks 40/41. On February 28, 2000, we commenced
exploratory drilling on the Grand Isle Block 41 No. 8 well. The well
is anticipated to reach a total depth of approximately 16,500 feet
during the second quarter of 2000. We have an approximate 52.3 percent
working interest and a 42.9 percent net revenue interest in this
prospect. Grand Isle Blocks 40/41 cover 2,100 acres and are located in
approximately 90 feet of water, 16 miles offshore Louisiana.
Vermilion Blocks 144/145. On March 16, 2000, exploratory drilling
commenced at the Vermilion Block 144 No. 3 well under terms of a $5.3
million turnkey contract that provided for the well to be drilled to a
depth of approximately 15,000 feet. On April 18, 2000, the well
reached the contracted turnkey depth. We will set protective casing,
move the rig off location and temporarily abandon the well. These
drilling activities have extended the lease expiration date by 180
days to October 2000. At this time, we have deferred additional
drilling on this prospect, which has an estimated additional cost of
$4.7 million to reach a proposed total depth of 17,500 feet. We will
pursue the drilling of other prospects in our inventory while we
continue discussions with industry participants regarding their
participation in our exploration program. We plan to complete drilling
of this prospect in the second half of 2000. We currently own a 95
percent working interest and a 76.3 percent net revenue interest in
the prospect, which covers 5,937 acres and is located in approximately
90 feet of water adjacent to our producing fields at Vermilion Blocks
160 and 159.
Eugene Island Blocks 193/208/215. During the first quarter 2000 we
acquired an interest in this prospect from Texaco for approximately
$0.3 million and assumed an abandonment obligation associated with
wells and a platform at the location. To retain the leases we must
re-establish production from the temporarily abandoned wells on these
blocks. We also plan to drill an exploratory well to a proposed depth
of 17,500 feet during the second half of 2000. We currently own a 53.4
percent working interest and a 41.7 percent net revenue interest in
this prospect which cover 12,500 acres and is located in approximately
100 feet of water offshore Louisiana.
Vermilion Block 408. We commenced drilling the Vermilion Block 408
No.1 exploratory well in December 1999. The well reached a total depth
of 8,000 feet and encountered 167 feet of net oil pay. The well has
tested at a flow rate of 3,040 barrels of oil and 11.1 MMCF of gas per
day on a 48 hour test. Plans are now being developed for this new
producing area. We expect production to commence by the mid-2001. We
own a 28.5 percent working interest and a 22.9 percent net revenue
interest in this well. Vermilion Block 408 covers 5,000 acres located
in approximately 380 feet of water, 115 miles offshore Louisiana.
Brazos Block A-19. In April 1998, the Brazos Block A-19 JC No.1
exploratory well encountered hydrocarbons in a separate reservoir
compartment within the larger Picaroon Field area, at a depth of
17,500 feet. Development of the Brazos Block A-19 JC No. 1 well was
completed in the third quarter of 1999. Production commenced in
October 1999; however, during a shutdown in November 1999 the operator
detected a pressure buildup in the production casing. After flowing
the well on an emergency basis, production was halted. Subsequently
the operator discovered the existence of significant damage to the
production tubing. Efforts to reestablish production proved
unsuccessful. The operator has temporarily abandoned the well with a
permanent abandonment planned at a future date. A complete analysis of
the failure continues. Prior to the shut-in the well was producing
approximately 84 MMCF per day. The joint venture partners intend to
drill another well, and we currently estimate that the replacement
well will commence production by mid-2001. We will pursue our rights
for recovery of this loss from insurers and others. Our reserve
estimates for the field have not been affected. The field is located
35 miles offshore Texas and covers 5,760 acres.
Grass Island Prospect. We drilled an exploratory well to a total
depth of approximately 12,000 feet in the shallow onshore waters of
Espiritu Santo Bay, Calhoun County, Texas during the fourth quarter of
1999. We have decided not to test the various sands encountered by the
State Tract 210 No. 6 well. As a result, our interest earned in this
well has reverted back to the farmor, who plans to test the well and
will supply the test information to us. We have the right to
participate in and to operate any subsequent proposed well on this
prospect. Accordingly, we have charged approximately $3.7 million of
the costs associated with drilling this well to exploration expense in
the first quarter of 2000.
REVENUES / PRODUCTION:
MMR's first-quarter 2000 oil and gas revenues totaled $17.0
million, including $6.0 million from Main Pass 299 oil, compared to
$11.1 million during the first quarter of 1999, which included $3.1
million from Main Pass 299 oil. Our revenues benefited from higher
average realized prices for both oil and gas which totaled $23.88 per
barrel and $2.62 per thousand cubic feet (Mcf) during the first
quarter of 2000, respectively, compared to $10.51 per barrel and $1.80
per Mcf during the first quarter of 1999, respectively. Our
first-quarter 2000 oil and gas sales resulted from average net daily
production of approximately 39 MMCF of gas and 3,500 barrels of oil
and condensate, including Main Pass 299, which totaled approximately
2,900 barrels of oil per day during the first quarter of 2000.
Our first-quarter 2000 revenues from sulphur operations totaled
$35.9 million compared to $51.0 million during the first quarter of
1999. We sold approximately 676,300 long tons of mined and recovered
sulphur during the first quarter of 2000. Current sulphur market
conditions resulted in a decrease in Tampa sulphur market prices of
$5.00 per ton in the first quarter of 2000. In the fourth quarter of
1999, the major U.S. phosphate fertilizer producers began implementing
production curtailments in response to the cyclical nature of
fertilizer, which has negatively affected U.S. sulphur demand.
Recovery of phosphate fertilizer demand would favorably influence
sulphur prices.
COMMON STOCK PURCHASES:
In March 2000, our Board of Directors authorized the purchase of
up to an additional 500,000 shares of our common stock increasing the
total shares authorized under our share repurchase program to 2.5
million. During the first quarter of 2000, we purchased 591,300 shares
of our common stock for approximately $11.5 million, an average of
$19.46 per share. We purchased an additional 208,600 shares for $3.7
million, an average of $17.68 per share through April 12, 2000. As of
April 19, 2000, approximately 0.3 million of the total 2.5 million
shares authorized remain available for purchase. On March 31, 2000, we
had 12,219,400 outstanding shares of common stock.
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; and
the mining, purchasing, transporting, terminaling, processing and
marketing of sulphur.
CAUTIONARY STATEMENT. This press release contains certain
forward-looking statements regarding exploration, development and
acquisition activities, anticipated production rates and prices.
Important factors that might cause future results to differ from these
projections include: variations in the market prices of oil, natural
gas and sulphur; drilling results; unanticipated fluctuations in flow
rates of producing wells; oil, natural gas and sulphur reserves
expectations; the ability to satisfy future cash obligations and
environmental costs; general exploration and development risks and
hazards; and mine closure costs. Such factors and others are more
fully described in more detail in MMR's 1999 Form 10-K filed with the
Securities and Exchange Commission.
A copy of this release is available by calling 1-800-469-1252 and
on our web site at mcmoran.com.
McMoRan EXPLORATION CO.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
--------------------
2000 1999
(In Thousands, Except
Per Share Amounts)
Revenues $ 52,884 $ 62,111
Costs and expenses:
Production and delivery 42,987(a) 48,030
Depreciation and amortization 9,040 9,404
Exploration expenses 12,044(b) 2,550
General and administrative expenses 4,633 3,322
Gain on sale of oil and gas property - (3,090)
-------- --------
Total costs and expenses 68,704 60,216
Operating income (loss) (15,820) 1,895
Interest expense (1,210) (58)
Other income, net 26 196
Net income (loss) before income taxes (17,004) 2,033
Provision for income taxes - (719)
-------- --------
Net income (loss) $(17,004) $ 1,314
Net income (loss) per share of
common stock
Basic $(1.36) $0.09
Diluted $(1.36) $0.09
Average common shares outstanding
Basic 12,480 14,094
Diluted 12,480 14,209
OPERATING DATA (Unaudited)
Three Months Ended
March 31,
-----------------------
2000 1999
Sales Volumes:
Gas (thousand cubic feet,
or MCF) 3,513,400 3,787,500
Oil (barrels)(c) 321,400 396,500
Sulphur (long tons) 676,300 780,100
Average realization:
Gas (per MCF) $ 2.62 $ 1.80
Oil (per barrel)(c) 23.88 10.51
Sulphur (per ton) 52.47 64.95
a. Includes a $1.7 million charge to adjust our March 31, 2000
sulphur inventory to its net realizable value.
b. These expenditures include seismic data purchases and related
expenditures of $6.1 million associated with our expanded
exploration activities and $3.7 million of expensed exploratory
well drilling costs associated with the State Tract 210 No. 6 well
at the Grass Island Prospect.
c. Includes sales of sour crude oil from our Main Pass oil operations.
The Main Pass 299 barrels sold totaled approximately 264,100
barrels at an average realization of $22.61 per barrel in the first
quarter of 2000 and 311,300 barrels at an average realization of
$9.99 per barrel in the first quarter of 1999.
McMoRan EXPLORATION CO.
CONDENSED BALANCE SHEETS (Unaudited)
March 31, December 31,
2000 1999
(In Thousands)
ASSETS
Cash and cash equivalents $ - $ -
Accounts receivable 28,490 25,652
Inventories 17,801 16,619
Deferred tax asset and prepaid expenses 5,046 4,236
Total current assets 51,337 46,507
Property, plant and equipment, net 238,235(a) 198,532
Deferred tax asset 33,055 32,370
Other assets, including goodwill
(net of accumulated amortization of
$551 and $451, respectively) 24,832 23,872
Total assets $ 347,459 $ 301,281
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 48,130 $ 32,070
Accrued liabilities 14,070 12,727
Current portion of reclamation and mine
shutdown reserves and other 5,041 4,818
Total current liabilities 67,241 49,615
Reclamation and mine shutdown reserves 61,312 55,126
Long-term debt 65,202(a) 14,000
Other long-term liabilities 26,841 27,469
Stockholders' equity (b) 126,863 155,071
Total liabilities and stockholders'
equity $ 347,459 $ 301,281
a. Includes borrowings used to purchase 55 undeveloped leases
from Shell Offshore Inc. for $37.6 million.
b. Includes common stock held in treasury totaling $38.0 million at
March 31, 2000 and $26.5 million at December 31, 1999.
McMoRan EXPLORATION CO.
STATEMENTS OF CASH FLOW (Unaudited)
Three Months Ended
March 31,
-------------------
2000 1999
(In Thousands)
Cash flow from operating activities:
Net income (loss) $ (17,004) $ 1,314
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 9,040 9,404
Exploration expenses 12,044 2,550
Gain on sale of oil and gas property - (3,090)
Reclamation and mine shutdown expenditures (1,095) (811)
Utilization of deferred tax asset - 707
Change in assets and liabilities:
(Increase) decrease in working capital
Accounts receivable (3,326) 1,110
Accounts payable and accrued liabilities 12,342 2,965
Inventories and prepaid expenses (2,731) (3,962)
Other 506 65
Net cash provided by operating activities 9,776 10,252
Cash flow from investing activities:
Exploration, development and other capital
expenditures (10,506) (17,241)
Purchase of oil and gas interests (38,650)(a) (3,117)
Proceeds from disposition of assets - 16,421
Other - 254
Net cash used in investing activities (49,156) (3,683)
-------- --------
Cash flow from financing activities:
Proceeds from long-term debt 51,202 -
Purchase of McMoRan common stock (11,054) -
Other (768) 63
Net cash provided by financing activities 39,380 63
Net increase in cash and cash equivalents - 6,632
Cash and cash equivalents at beginning
of year - 17,816
Cash and cash equivalents at end of period $ - $ 24,448
a. Includes the purchase of 55 offshore leases from Shell
Offshore Inc. for $37.6 million.
Cash and cash equivalents at end of period $ - $ 24,448
a. Includes the purchase of 55 offshore leases from Shell
Offshore Inc. for $37.6 million.
--30--SL/na*
CONTACT: McMoRan Exploration Co.
Financial Contacts:
Chris D. Sammons, 504/582-4474
or
Paul A. Connolly, 504/582-4203
or
Contact:
Garland Robinette, 504/582-1627 |
