McMoRan Exploration Reports Loss in 2Q07

McMoRan Exploration Co. (NYSE: MMR) reported a net loss of $6.5 million, $0.23 per share, for the second quarter of 2007 compared with net income of $14.1 million, $0.32 per share, for the second quarter of 2006. McMoRan's net loss from continuing operations for the second quarter of 2007 totaled $4.2 million, including $5.3 million of exploration expense and $2.8 million of start-up costs associated with Main Pass Energy Hub(TM) (MPEH(TM)). During the second quarter of 2006, McMoRan's income from continuing operations totaled $16.1 million, including $6.8 million of exploration expense ($2.2 million of nonproductive drilling and related costs) and $2.9 million of MPEH(TM) start-up costs.

James R. Moffett and Richard C. Adkerson, McMoRan's Co-Chairmen, said: "The recently announced results from our Flatrock prospect, indicating a potential major discovery, demonstrate our opportunities to add significant reserves and production through our active Deep Gas exploration program. The acquisition of the Newfield's Gulf of Mexico shelf properties, with its significant reserves and production, will provide attractive exploration and development opportunities to augment McMoRan's focused Deep Gas exploration strategy and create a dynamic company with strong cash flows and high impact exploration projects."

NEWFIELD ACQUISITION

In June 2007, McMoRan agreed to purchase the Gulf of Mexico Shelf oil and gas properties of Newfield Exploration Company (NYSE: NFX) and certain exploration rights for cash consideration of $1.1 billion. The acquisition will provide McMoRan a diversified portfolio of oil and gas properties with significant production and cash flow generating capacity and an expanded exploration acreage position to pursue opportunities on the Shelf of the Gulf of Mexico.

The properties include 125 fields on 146 offshore blocks currently producing approximately 263 MMcfe/d and which averaged 267 MMcfe/d in the second quarter of 2007. Proved reserves as of July 1, 2007 for these properties, are estimated at 327 billion cubic feet of natural gas equivalents (Bcfe), approximately 70 percent of which are natural gas. Approximately ninety percent of the proved reserves for the acquired properties were based on estimates by Ryder Scott Company, L.P. Offshore leases included in the purchase agreement total approximately 1.3 million gross acres.

McMoRan is also acquiring a 50 percent interest in Newfield's nonproducing exploration leases on the Shelf and certain of Newfield's interests in leases associated with its Treasure Island prospect inventory. Upon closing, McMoRan will be appointed operator of the Treasure Island leases subject to customary approvals.

McMoRan is retaining personnel and contractors that have supported Newfield's management of the acquired properties. In addition, the explorationists from McMoRan and Newfield will jointly pursue exploration activities on nonproducing leases on the Shelf held by Newfield.

The transaction is effective July 1, 2007, and is expected to close in August 2007 subject to customary closing conditions. McMoRan has received financing commitments from JPMorgan and Merrill Lynch & Co., which will be used to fund the transaction, repay McMoRan's existing $100 million term loan and provide working capital. The financing commitment includes a secured revolving bank credit facility and an interim bridge loan facility. McMoRan currently expects to close the transaction with a $700 million bank credit facility, a portion of which will be undrawn, and $800 million in bridge financing. McMoRan expects to issue long-term notes and equity and equity-linked securities to replace the bridge loan facility.

EXPLORATION ACTIVITIES

Since 2004, McMoRan has participated in 17 discoveries on 31 prospects drilled and evaluated, including the recent Flatrock and Cottonwood Point discoveries. Four additional prospects are either in progress or not fully evaluated.

The Flatrock discovery well, which commenced in March 2007, is currently drilling below 16,500 feet to a proposed total depth of 19,000 feet to evaluate the Operc section. As previously announced the Flatrock exploratory prospect, located in OCS Block 310 at South Marsh Island Block 212 in approximately 10 feet of water, was evaluated with wireline logs in July 2007 to a measured depth of 16,500 feet. The wireline logs indicated that the well encountered a total of 189 net feet of hydrocarbon bearing sands in five zones over a combined 364 foot gross interval. The pay zones were located in the Rob-L section, with the most significant zone having 120 net feet of hydrocarbon bearing sands over a 238 foot gross interval.

Production from the well is expected to commence quickly using existing infrastructure in the area. McMoRan intends to develop opportunities in this area aggressively and is currently permitting three offset locations to provide options for the development of the multiple reservoirs found in the Rob-L section and to evaluate the Operc section further.

McMoRan controls significant acreage in the Tiger Shoal/Mound Point area (OCS Block 310/Louisiana State Lease 340). The addition of the Flatrock discovery follows prior discoveries by McMoRan in this important area, including Hurricane, Hurricane Deep, JB Mountain, and Mound Point. McMoRan 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 and is the operator of the Flatrock well. McMoRan's investment in Flatrock totaled $12.1 million at June 30, 2007.

The Cottonwood Point exploratory prospect at Vermilion Block 31 commenced on March 1, 2007, and is currently drilling below 15,900 feet with a proposed total depth of 21,000 feet. Wireline logs have indicated that the well encountered approximately 43 net feet of hydrocarbon bearing sands over an approximate 92 foot gross interval in the upper Rob-L section. Protective casing has been set over this zone, and drilling continues to evaluate deeper objectives. The Cottonwood Point prospect is located in approximately 15 feet of water. 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 $8.8 million at June 30, 2007.

The Cas exploratory well at South Timbalier Block 70 commenced drilling on January 30, 2007, and is drilling to its 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 $11.1 million at June 30, 2007.

The Mound Point South exploratory prospect at Louisiana State Lease 340 commenced on April 12, 2007, and is currently drilling below 17,900 feet with a proposed total depth of 20,000 feet. The Mound Point South prospect is located in approximately 8 feet of water. McMoRan has an 18.3 percent working interest and a 14.5 percent net revenue interest in the Mound Point South well. McMoRan's investment in Mound Point South totaled $7.2 million at June 30, 2007.

McMoRan is planning a sidetrack of the Blueberry Hill well at Louisiana State Lease 340 following unsuccessful attempts in June 2007 to clear the blockage above the perforated interval. The sidetrack is expected to target Gyro sands in a down dip position to the original 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. McMoRan's investment in Blueberry Hill totaled $22.5 million at June 30, 2007.

Information obtained from the Blueberry Hill sidetrack 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 35.0 percent working interest and a 24.8 percent net revenue interest in the JB Mountain Deep well. McMoRan's investment in JB Mountain Deep totaled $29.6 million at June 30, 2007.

PRODUCTION AND DEVELOPMENT ACTIVITIES

Second-quarter 2007 production averaged 54 MMcfe/d net to McMoRan, including oil production of approximately 1,550 barrels per day (bbls/d) (9 MMcfe/d) from Main Pass Block 299, compared with 67 MMcfe/d, including oil production of approximately 2,350 bbls/d (14 MMcfe/d) from Main Pass Block 299, in the second quarter of 2006. Production during the second quarter of 2007 was adversely affected by unexpected downtime for facility modifications at King of the Hill, underperformance at King Kong #1 and prior period adjustments at Hurricane. McMoRan is evaluating opportunities to enhance production from these fields.

McMoRan's share of third quarter 2007 production is expected to average 300 MMcfe/d on a pro forma basis, including 250 MMcfe/d from properties acquired in the Newfield transaction. Third-quarter 2007 production estimates include the delayed start-up at Laphroaig and the impact of downtime for planned maintenance at Long Point #2. McMoRan's recent Laphroaig, Hurricane Deep and Flatrock discoveries are expected to commence production in the second half of 2007.

The Point Chevreuil #2 development well on Louisiana State Lease 18350 located in St. Mary Parish, LA commenced on April 12, 2007 and was drilled to a total depth of 14,500 feet. As previously reported, evaluation of the well determined that it did not contain commercial quantities of hydrocarbons and it was plugged and abandoned. Production from the Point Chevreuil #1 well was unaffected.

MAIN PASS ENERGY HUB(TM) 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(TM) 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(TM) facility, as approved, will be capable of regasifying LNG at a peak rate of 1.6 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(TM) 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. The total project investment will ultimately depend on comprehensive engineering studies, future construction costs levels and project specification requirements for supply.

REVENUES

McMoRan's second-quarter 2007 oil and gas revenues totaled $45.0 million, compared to $50.3 million during the second quarter of 2006. During the second quarter of 2007, McMoRan's sales volumes totaled 2.9 Bcf of gas and 349,100 barrels of oil and condensate, including 160,900 barrels from Main Pass Block 299, compared to 3.9 Bcf of gas and 360,700 barrels of oil and condensate, including 203,600 barrels from Main Pass Block 299, in the second quarter of 2006. McMoRan's second-quarter comparable average realizations for gas were $8.07 per thousand cubic feet (Mcf) in 2007 and $6.90 per Mcf in 2006; for oil and condensate, including Main Pass Block 299, McMoRan received an average of $62.87 per barrel in second-quarter 2007 compared to $64.96 per barrel in second-quarter 2006.

CAPITAL EXPENDITURES

Capital expenditures totaled $38.2 million for the second quarter of 2007 and $76.6 million for the six-months ended June 30, 2007. Capital expenditures are expected to approximate $225 million for the year, including approximately $160 million for exploration and development expenditures associated with McMoRan's deep gas activities and $65 million for development costs associated with the Newfield properties in the second half of 2007. 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 $6 million to advance commercialization of the MPEH(TM) in the second half of 2007.

PREFERRED STOCK CONVERSION

In June 2007, all of the holders of McMoRan's 5% Convertible Preferred Stock elected to convert into common stock, resulting in the issuance of approximately 6.2 million shares of McMoRan common stock. After giving effect to this transaction, common shares outstanding total approximately 34.7 million shares. The transaction will result in preferred dividend savings of $1.5 million per annum.

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