McMoRan's Q1 Loss Grows

McMoRan Exploration Co. on Tuesday reported a net loss of $14.9 million, $0.53 per share, for the first quarter of 2007 compared with a net loss of $13.5 million, $0.50 per share, for the first quarter of 2006.

McMoRan's net loss from its continuing operations for the first quarter of 2007 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) project. First-quarter 2007 results also include a charge to expense of $3.2 million to adjust reclamation accruals on two fields. During the first quarter of 2006, McMoRan's net loss from continuing operations totaled $11.4 million, including $20.6 million of exploration expense ($12.3 million of nonproductive drilling and related costs) and $1.8 million of MPEH start-up costs.

James R. Moffett and Richard C. Adkerson, Co-Chairmen of McMoRan, said, "We continue to be encouraged by the results of our drilling program and the opportunities to build values through drilling high impact wells in our focused exploration areas. We are also aggressively pursuing the values available through establishing a major new offshore LNG terminal and onsite natural gas storage facility at our proposed Main Pass Energy Hub(TM)."

EXPLORATION ACTIVITIES

Since 2004, McMoRan has participated in 15 discoveries on 29 prospects drilled and evaluated. Six additional prospects are either in progress or not fully evaluated. McMoRan currently has rights to approximately 360,000 gross acres and plans to participate in drilling a total of 8-10 exploratory wells in 2007, including the four wells in-progress.

In March 2007, McMoRan conducted a successful production test at the Laphroaig discovery, located onshore in St. Mary Parish, LA. The production test indicated a gross flow rate of approximately 41 million cubic feet of natural gas per day (MMcf/d), 16 MMcf/d net to McMoRan, on a 31/64th choke with flowing tubing pressure of 13,177 pounds per square inch. Infrastructure near this onshore location will allow production to be established quickly with first production currently expected in the third quarter of 2007.

As previously reported, the Laphroaig discovery was deepened to a true vertical depth of 19,060 feet in February 2007. Wireline logs indicated that the well encountered 56 net feet of hydrocarbon sand over a 75 foot gross interval. McMoRan has rights to approximately 2,100 gross acres in this area and has a 50.0 percent working interest and a 38.5 percent net revenue interest. As previously reported, the Hurricane Deep well at South Marsh Island Block 217 commenced drilling on October 26, 2006 and was drilled to a true vertical depth of 20,712 feet in March 2007. Logs indicated that the upper Gyro sand totaled 900 gross feet. Based on wireline logs, the top section of the Gyro sand has a potential 40 feet of net hydrocarbons in a 53-foot gross interval. This exceptional sand thickness suggests that prospects in the Mound Point/JB Mountain/Hurricane/ Blueberry Hill area could have substantial potential Gyro reservoirs.

The Hurricane Deep well was temporarily abandoned in March 2007 pending receipt of special tubulars, which are expected to be received in mid-2007. First production from the Gyro sand is expected in the third quarter of 2007. McMoRan also has two zones behind pipe in the shallower Rob-L and Operc sections of the well. The Hurricane Deep prospect is located in 12 feet of water on OCS 310, one mile northeast of the Hurricane discovery well, which is currently producing. McMoRan controls 7,700 gross acres in this area. McMoRan has a 25.0 percent working interest and a 17.7 percent net revenue interest. Hurricane Deep is McMoRan's seventh successful well in the OCS 310/State Lease 340 area.

DRILLING SCHEDULE
                                     Net            Proposed
                         Working  Revenue  Current   Total
                         Interest Interest   Depth    Depth  Spud Date
--------------------------------- -------- -------- -------- ---------
In-Progress
----------------------------------------------------------------------
South Timbalier Block 70                                     January
"Cas"                       15.0%    12.4% 13,400'  25,000'   30, 2007
--------------------------------- -------- -------- -------- ---------
Vermilion Block 31                                           March 1,
"Cottonwood Point"          15.0%    11.3%  8,900'  21,000'     2007
--------------------------------- -------- -------- -------- ---------
South Marsh Island Block                                     March 27,
 212 "Flatrock"             25.0%    18.8%  1,700'  16,500'     2007
--------------------------------- -------- -------- -------- ---------
Louisiana State Lease 340                                    April 12,
"Mound Point South"         18.3%    14.5%    900'  20,000'     2007
--------------------------------- -------- -------- -------- ---------
Louisiana State Lease
 18350 "Point Chevreuil                                      April 12,
 #2 Development"            25.0%    17.5%  4,500'  14,500'     2007
--------------------------------- -------- -------- -------- ---------
Near-Term Well
----------------------------------------------------------------------
Matagorda Island Block
 557 "Deep Cavallo"         40.0%    29.8%     n/a  14,000'  Mid-2007
--------------------------------- -------- -------- -------- ---------

The Cas exploratory well at South Timbalier Block 70 commenced drilling on January 30, 2007, and is currently drilling below 13,400 feet with a planned true vertical depth of 25,000 feet. The Cas prospect is located in approximately 65 feet of water. McMoRan has rights to 5,000 gross acres in this area. McMoRan has a 15.0 percent working interest and a 12.4 percent net revenue interest. McMoRan's investment in Cas totaled $3.3 million at March 31, 2007.

The Cottonwood Point exploratory prospect at Vermilion Block 31 commenced on March 1, 2007, and is currently drilling below 8,900 feet with a proposed total depth of 21,000 feet. McMoRan has a 15.0 percent working interest and an 11.3 percent net revenue interest in the Cottonwood Point well. McMoRan's investment in Cottonwood Point totaled $2.7 million at March 31, 2007.

The Flatrock exploratory prospect at South Marsh Island Block 212 commenced on March 27, 2007, and is currently drilling below 1,700 feet with a proposed total depth of 16,500 feet. McMoRan has a 25.0 percent working interest and an 18.8 percent net revenue interest in the Flatrock well.

The Mound Point South exploratory prospect at Louisiana State Lease 340 commenced on April 12, 2007, and is currently drilling below 900 feet with a proposed total depth of 20,000 feet. McMoRan has an 18.3 percent working interest and a 14.5 percent net revenue interest in the Mound Point South well.

As previously reported, the Blueberry Hill well at Louisiana State Lease 340 encountered four potentially productive hydrocarbon bearing sands below 22,200 feet in February 2005. Testing of this well commenced in the fourth quarter of 2006 following the receipt of special tubulars and casing for the high pressure well. The well has been perforated but production has not been established because of blockage above the perforated intervals. Additional operations to clear the blockage and complete testing of the well will be undertaken. Information obtained from the testing of the Blueberry Hill well and the results of the Hurricane Deep well will be incorporated in future plans for the JB Mountain Deep well at South Marsh Island Block 224, as all three areas demonstrate similar geologic settings and are targeting deep Miocene sands equivalent in age. McMoRan has a 49.0 percent working interest and a 33.9 percent net revenue interest in the Blueberry Hill completion and a 35.0 percent working interest and a 24.8 percent net revenue interest in JB Mountain Deep. McMoRan's investment in Blueberry Hill and JB Mountain Deep totaled $21.3 million and $29.5 million, respectively, at March 31, 2007.

PRODUCTION AND DEVELOPMENT ACTIVITIES

First-quarter 2007 production averaged 70 MMcfe/d net to McMoRan, including oil production of approximately 1,750 bbls/d (10.5 MMcfe/d) from Main Pass Block 299, compared with 46 MMcfe/d, including oil production of approximately 2,400 bbls/d (14.3 MMcfe/d) from Main Pass Block 299, in the first quarter of 2006. McMoRan's share of second quarter 2007 production is expected to average 60-70 MMcfe/d. Second-quarter 2007 production estimates include the impact of downtime for planned maintenance at the Long Point #2 well. McMoRan expects rates to increase as production is established at the recent Laphroaig and Hurricane Deep discoveries. Production rates could also benefit from the successful completion of Blueberry Hill and from potential recompletions or workovers currently being considered at various fields.

McMoRan commenced drilling the Point Chevreuil #2 well on Louisiana State Lease 18350 located in St. Mary Parish, LA on April 12, 2007 to develop the proved reserves discovered in the Point Chevreuil #1 well. The well is currently drilling below 4,500 feet and has a proposed total depth of 14,500 feet. This development well is located approximately one mile west of the original discovery. McMoRan has rights to approximately 4,300 gross acres in this area and holds a 25.0 percent working interest and a 17.5 percent net revenue interest in the Point Chevreuil field.

MAIN PASS ENERGY HUB UPDATE

McMoRan is continuing discussions with potential LNG suppliers as well as gas marketers and consumers in the United States to develop commercial arrangements for the 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, will be capable of regasifying LNG at a peak rate of 1.6 billion cubic feet (Bcf) per day, storing 28 Bcf of natural gas in salt caverns and delivering 3.1 Bcf per day, including gas from storage, of natural gas to the U.S. market.

Unique advantages of the MPEH project include use of existing offshore structures, onsite natural gas cavern storage capabilities, significant logistical savings associated with the offshore location and premium markets available from its eastern Gulf of Mexico location. These advantages would provide LNG suppliers with a highly attractive netback price and offer U.S. natural gas consumers a reliable source of supply.

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, projected to approximate $800 million, and a potential additional investment of up to $600 million for pipelines and cavern storage based on preliminary engineering estimates.

REVENUES

McMoRan's first-quarter 2007 oil and gas revenues totaled $51.4 million, compared to $35.4 million during the first quarter of 2006. During the first quarter of 2007, McMoRan's sales volumes totaled 3.8 Bcf of gas and 417,000 barrels of oil and condensate, including 160,200 barrels from Main Pass Block 299, compared to 2.2 Bcf of gas and 311,200 barrels of oil and condensate, including 199,300 barrels from Main Pass Block 299, in the first quarter of 2006. McMoRan's first-quarter comparable average realizations for gas were $7.59 per thousand cubic feet (Mcf) in 2007 and $8.12 per Mcf in 2006; for oil and condensate, including Main Pass Block 299, McMoRan received an average of $54.24 per barrel in first-quarter 2007 compared to $57.15 per barrel in first-quarter 2006.

FINANCING TRANSACTIONS

In January 2007, McMoRan completed arrangements for a new $100 million Senior Term Loan for its wholly owned subsidiary McMoRan Oil & Gas LLC (MOXY). The net proceeds of the new five-year term loan were used to repay borrowings under MOXY's existing revolving credit facility. The remainder will be used for future drilling activities and other corporate purposes.

CASH AND CASH EQUIVALENTS AND CAPITAL EXPENDITURES

On March 31, 2007, McMoRan had unrestricted cash and cash equivalents of $57.7 million. Capital expenditures for the first quarter of 2007 totaled $38.4 million and are expected to total $150 million for the year, including approximately $100 million for exploration expenditures and approximately $50 million for currently identified development costs. Spending may be increased as additional opportunities become available or to fund additional development capital expenditures on successful wells. In addition, McMoRan plans to incur approximately $9 million to advance commercialization of the MPEH over the remainder of 2007. McMoRan may pursue additional funding through potential debt or equity financing for its oil and gas and MPEH activities.

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 the MPEH, which will be used for the receipt and processing of liquefied natural gas and the storage and distribution of natural gas.

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