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McMoRan Exploration Co. (MMR)

Q2 2009 Earnings Call

July 16, 2009 10:00 am ET


Kathleen Quirk – Senior Vice President, Treasurer

Richard Adkerson – Co-Chairman

James Moffatt – Co-Chairman


Nicholas Pope – Dahlman Rose

[Ann Cameron – J.P. Morgan]

Eric Anderson – Hartford Financial

Noel Parks – Ladenburg Thalmann

[Edwin Ochine – Bathco Capital]

Richard Tullis – Capital One South Co.

Biju Perincheril – Jefferies

Gregg Brody – J.P. Morgan



Welcome to the McMoRan Exploration second quarter conference call. (Operator Instructions) I would now like to turn the conference over to Miss Kathleen Quirk, Senior Vice President and Treasurer.

Kathleen Quirk

Good morning everyone. Welcome to the McMoRan Exploration's second quarter 2009 conference call. Our results were released earlier this morning and a copy of the press release is available on our website at

Our conference call today is being broadcast live on the internet and anyone may listen to the call by accessing our web site home page and clicking on the webcast link for the conference call. We also have several slides to supplement our comments this morning, and the slides are also accessible using the webcast link at In addition to analysts and investors, the financial press has also been invited to listen to today's call, and a replay of the webcast will be available on our web site later today.

Before we begin today's comments, we'd like to remind everyone that today's press release and certain of our comments on this call include forward-looking statements. Please refer to the cautionary language included in our press release and presentation materials and to the risk factors described in our SEC filings.

On the call today are McMoRan's Co-Chairman Jim Bob Moffatt and Richard Adkerson. I'll start by briefly summarizing our financial results, and then turn the call over to Richard who will be referring to the slide material on our web site. As usual, we'll open up the call for Q&A at the end of our comments.

McMoRan reported a net loss applicable to common stock of $100.6 million, $1.40 per share in the second quarter 2009 compared with net income applicable to common stock of $49.7 million or $0.06 per fully diluted share for the second quarter of 2008. Our results in the 2009 quarter continuing operations incurred a loss of $94.7 million which included $38 million in charges to exploration expense for non-productive exploration charges related to the Cordage and Ammazzo exploration which were determined to be non-commercial in the second quarter., $14.6 million in impairment charges related to certain fields to reduce their net carrying value to fair value and $3.8 million of charges associated with additional hurricane damage to certain of our properties and a net loss of $3 million for mark to market accounting adjustments associated with our derivative contracts.

Our second quarter production averaged 187 million cubic feet of natural gas equivalents per day net to McMoRan. That was above our prior estimates of 180 million a day. Our revenues totaled $94.1 million. That compared to $372 million in the second quarter of 2008.

The realized gas prices in the second quarter which do not take into account the gains and loss on derivative contracts, averaged $3.92 per MCF. That was substantially lower than last year's average of $12.11 per MCF and a realized price for oil and condensate averaged $458.24 per barrel in the second quarter of 2009 which was lower than last year's average of $123.00 per barrel.

We financially settled the swap positions of 2.8 bcf of natural and 126,000 barrels of oil at average prices of $8.92 per mcf and $72.00 per barrel respectively. We received $18.6 million in cash for those transactions and we've got some details on our web site and in the press release of what the outstanding derivative positions are.

Our earnings before interest, tax, depreciation, amortization and exploration expenses totaled $59 million in the second quarter of 2009, bringing the year to date EBIDAX to $227 million. Our operating cash flows totaled $19.7 million for the second quarter and $53.5 million for the six month period ended June 30.

Our capital expenditures for the quarter totaled $55 million bringing the six months period to $84.3 million. As we reported during June, we completed $176 million in equity financing to the issuance of 15.5 million shares of common stock at a price of $5.75 per share and $86 million of 8% convertible perpetual preferred stock.

We ended the quarter with unrestricted cash of $225 million and had no borrowings under our bank credit facility.

I'd now like to turn the call over to Richard who will be using the slide materials on our web site.

Richard Adkerson

Good morning everyone. I'm going to give an overview of our operations and the Jim Bob will be talking about some of our drilling opportunities and progress.

Slides 3 and 4 cover the material that Kathleen just reviewed. In Slide 5 we have the slide we present every quarter which shows our producing rates during the second quarter for all of our properties and that's there for your information. There's major properties where we still curtail for the hurricane downstream issues are in Eugena Island 318 and 346.

Our production continues to be impacted by the timing of repairs to these downstream facilities. Our actual production of 187 during the second quarter reflected the fact that we still have off line 30 million a day of production that we're working to restore.

Our third quarter estimate production is 220 million a day which also reflects the Flatrock wells coming back on stream after some field maintenance and recompletion activities that occurred in the second quarter. Some of that will carry over into the second half of the year.

Production estimates of course are depending on when we get these down stream facilities completed. The timing of the planned recompletions at Flatrock and the performance of the wells as they come on stream and of our existing wells.

We are continuing to pursue as it relates to the hurricane, insurance recovery. We received $20 million of proceeds during the first half of the year. We estimate that as we incur costs over time and this will go over multiple periods of a couple of years, we'd expect to receive an additional gross amount of roughly $80 million.

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