USA: McMoRan Announces Fourth-Quarter / Twelve-Month 2010 Results

McMoRan Exploration Co.  today reported a net loss applicable to common stock of $77.0 million, $0.75 per share, for the fourth quarter of 2010 compared with a net loss applicable to common stock of $9.5 million, $0.11 per share, for the fourth quarter of 2009.

Under applicable accounting rules, McMoRan recorded a $51.6 million noncash charge for the difference between the $16 per share conversion price negotiated in September 2010 and the $17.18 per common share price on the December 30, 2010 closing date associated with the convertible perpetual preferred stock offering in the fourth quarter.

For the twelve months ended December 31, 2010, McMoRan reported a net loss applicable to common stock of $190.1 million, $2.00 per share, compared with a net loss applicable to common stock of $225.3 million, $2.87 per share, in the 2009 period.

James R. Moffett and Richard Adkerson, McMoRan’s Co-Chairmen, said, “We look forward to a very active year of exploration and development as we continue to define the potential of our prospects on the GOM Shelf. We are currently drilling high potential exploration wells and progressing efforts to establish initial production from our Davy Jones ultra-deep discovery. The financing completed during 2010 will enable us to build on our

success as we work to deliver significant value for shareholders.”

Gulf of Mexico (GOM) Shelf assets and related financings on December 30, 2010.

Shallow Water, Ultra-Deep Exploration & Development Activities:

Davy Jones

• Offset appraisal well (Davy Jones No. 2) drilling below 27,100 feet towards a proposed total depth of 29,950 feet.
• Completion and flow testing of the Davy Jones No. 1 discovery well is expected to be performed by year-end 2011.

Blackbeard East

• Drilling below 31,400 feet. The well has been re-permitted to 34,000 feet.
• Recent wireline logs have indicated hydrocarbon bearing sands in the Oligocene (Frio) section below 30,000 feet. This is the first hydrocarbon bearing Frio sand encountered either on the GOM Shelf or in the deepwater offshore Louisiana. McMoRan is considering down dip drilling opportunities on the flanks of the structure to evaluate this section further.

• Logging results from the Miocene indicate 178 net feet of hydrocarbons. A 25,000 foot offset appraisal well is planned for 2011 to evaluate these zones further.

Lafitte ultra-deep exploratory well commenced drilling on October 3, 2010 and is drilling below 16,100 feet towards a proposed total depth of 29,950 feet.

Shallow Water, Deep Gas Exploration & Development Activities:

• Laphroaig No. 2 has been drilled to 18,366 feet. Gamma ray and resistivity information obtained from log-while-drilling (LWD) tools indicate multiple possible hydrocarbon bearing zones measuring 140 net feet in  aggregate. The well will be deepened to evaluate deeper objectives.
• Platte is drilling below 16,300 feet towards a proposed total depth of 17,000 feet.
• Operations at Hurricane Deep have commenced. The well has a proposed total depth of 20,000 feet.

Fourth-quarter 2010 production averaged 144 million cubic feet of natural gas equivalents per day (MMcfe/d) net to McMoRan. Full-year 2010 average daily production averaged 161 MMcfe/d net to McMoRan.

Average daily production for 2011 is expected to approximate 160 MMcfe/d net to McMoRan, including 175 MMcfe/d in the first quarter of 2011. Potential to increase production rates from successful exploration and development activities.

Operating cash flows, net of $44.3 million in abandonment expenditures and $24.6 million in working capital requirements, totaled $(21.5) million for the fourth quarter of 2010. For the year ended December 31, 2010, operating cash flow totaled $98.2 million.

Capital expenditures totaled $57.0 million in the fourth quarter of 2010 and $217.3 million for the year ended December 31, 2010.

Cash at December 31, 2010 totaled $905.7 million.

Year-end 2010 proved reserves of oil and gas totaled 276.1 billion cubic feet of natural gas equivalents (Bcfe) based on independent reservoir engineers’ preliminary estimates.

James R. Moffett and Richard Adkerson, McMoRan’s Co-Chairmen, said, “We look forward to a very active year of exploration and development as we continue to define the potential of our prospects on the GOM Shelf. We are currently drilling high potential exploration wells and progressing efforts to establish initial production from our Davy Jones ultra-deep discovery. The financing completed during 2010 will enable us to build on our

success as we work to deliver significant value for shareholders.”

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Source: McMoRan, January  18, 2011;