McMoRan Reports Fourth Quarter and Full-Year Financial Results for 2008
McMoRan has reported a net loss applicable to common stock of $309.2 million, $4.39 per share, for the fourth quarter of 2008 compared with net income applicable to common stock of $9.7 million, $0.20 per share, for the fourth quarter of 2007. For the twelve months ended December 31, 2008, McMoRan reported a net loss of $233.6 million, $3.79 per share, compared with a net loss of $63.9 million, $1.86 per share, in the 2007 period. McMoRan's twelve-month 2007 financial and operating results include the results from the acquired Newfield properties beginning on the August 6, 2007 acquisition closing date.
Fourth-quarter 2008 results from continuing operations totaled a loss of $304.0 million, including $291.8 million, $4.14 per share, in impairment losses for certain fields to reduce their net carrying value to fair value as more fully described below, an unrealized gain of $43.2 million, $0.61 per share, for mark-to-market accounting adjustments associated with open oil and gas derivative contracts, $16.8 million, $0.24 per share, of additional charges associated with damage to certain properties from Hurricane Ike and a $9.5 million, $0.13 per share, charge to exploration expense for the Northeast Belle Isle exploration well that was determined to be non commercial in the fourth quarter of 2008. During the fourth quarter of 2007, McMoRan's net income from continuing operations totaled $8.5 million, including a net loss of $15.9 million for non-cash mark-to-market accounting adjustments associated with McMoRan's oil and gas derivative contracts, $6.8 million in exploration expenses, and $2.0 million of start-up costs associated with Main Pass Energy Hub™ (MPEH™).
Fourth-quarter 2008 results included impairment charges and other reductions to the carrying value of our oil and gas property, plant and equipment totaling $291.8 million, $4.14 per share. The charges include $246.9 million in impairments associated with properties with proved reserves and $44.9 million related to a reduction in carrying values on wells that have not been fully evaluated. Accounting rules require impairment assessments to be performed on a field by field basis whenever events or circumstances indicate that proved oil and gas property carrying amounts may not be recoverable from the related estimated future undiscounted cash flows. In performing its proved property impairment assessment, McMoRan used applicable forward prices for oil and natural gas and independent reserve engineers' estimates for reserves as of December 31, 2008. These amounts are reflected in depreciation, depletion and amortization and had no effect on cash flows.
Results for the twelve months of 2008 from continuing operations totaled a loss of $205.8 million, including $310.7 million, $5.05 per share, in impairment charges, $169.4 million, $2.75 per share, of charges associated with damage to certain properties from Hurricane Ike, and a gain of $40.6 million, $0.66 per share, for unrealized mark-to-market charges on McMoRan's open oil and gas derivative contracts.
McMoRan expects to realize a substantial recovery under its insurance programs of hurricane related costs, expected to be incurred over several years. Anticipated insurance recoveries have not been recognized in operating results. Results for the twelve months of 2007 from continuing operations totaled a net loss of $63.9 million, including $59.0 million of exploration expense and $9.8 million of start-up costs associated with MPEH™.
McMoRan's fourth-quarter 2008 oil and gas revenues totaled $111.8 million, compared to $247.9 million during the fourth quarter of 2007. During the fourth quarter of 2008, McMoRan's sales volumes totaled 10.2 Bcf of gas, 607,500 million barrels of oil and condensate and 1.0 Bcfe of plant products, compared to 19.6 Bcf of gas, 1,056,600 barrels of oil and condensate and 1.2 Bcfe of plant products in the fourth quarter of 2007. McMoRan’s fourth-quarter comparable average realizations for gas were $6.77 per thousand cubic feet (Mcf) in 2008 and $7.27 per Mcf in 2007; for oil and condensate McMoRan received an average of $53.84 per barrel in fourth-quarter 2008 compared to $88.77 per barrel in fourth-quarter 2007. Realizations do not take into account gains or losses on derivative contracts.
CASH FLOWS AND CAPITAL EXPENDITURES
Fourth-quarter 2008 cash used in operations totaled $12.8 million, after $24.4 million in working capital uses. Operating cash flows for the twelve months ended December 31, 2008 totaled $623.4 million. Capital expenditures totaled $49.5 million for the fourth quarter of 2008 and $236.4 million for the twelve months ended December 31, 2008. Capital expenditures for 2009 are expected to approximate $230 million, including approximately $100 million in exploration costs, $75 million in development costs and $55 million for costs incurred in 2008 that will be funded in 2009. Capital spending will continue to be driven by opportunities and will be managed based on available cash and cash flows.
James R. Moffett and Richard C. Adkerson, Co-Chairmen of McMoRan, said, "We are pleased with the continued positive drilling and production results at the important Flatrock field and are positive about future opportunities in this high potential area. We also continue to focus on pursuing opportunities on our expanded asset base established through our major Gulf of Mexico acquisition in 2007, including the South Timbalier Block 168 ultra-deep trend. We will be responsive to the effects of the currently lower oil and gas prices by prudently managing our capital spending as we continue to seek to build asset values through our focused drilling program."
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