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McMoRan Exploration (MMR)

Q4 2012 Earnings Call

January 18, 2013 10:00 am ET

Executives

Kathleen L. Quirk - Senior Vice President and Treasurer

Richard C. Adkerson - Co-Chairman

James R. Moffett - Co-Chairman, Chief Executive Officer and President

Analysts

Leon G. Cooperman - Omega Advisors, Inc.

Duane Grubert - Susquehanna Financial Group, LLLP, Research Division

Noel A. Parks - Ladenburg Thalmann & Co. Inc., Research Division

Eric B. Anderson - Hartford Financial Management, Inc.

Joan E. Lappin - Gramercy Capital Management Corp.

Richard M. Tullis - Capital One Southcoast, Inc., Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the McMoRan Exploration conference call. [Operator Instructions] I would now like to turn the conference over to Ms. Kathleen Quirk, Senior Vice President and Treasurer. Please go ahead, ma'am.

Kathleen L. Quirk

Thank you. Good morning, everyone, and welcome to the McMoRan Exploration Fourth Quarter 2012 Conference Call. Our results were released earlier this morning, and a copy of the press release is available on our website at mcmoran.com. Our conference call today is being broadcast live on the Internet, and anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call.

As usual, we have several slides to supplement our comments this morning, and we'll be referring to the slides during the call. The slides are accessible on the Webcast link at mcmoran.com. In addition to analysts and investors, the financial press has been invited to listen to today's call, and a replay of the webcast will be available on our website later today.

Before we begin our comments, we'd like to remind everyone that today's press release and certain of our comments on this call include forward-looking statements. We'd like to refer everyone 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-Chairmen, Jim Bob Moffett and Richard Adkerson.

I'll start by briefly summarizing the financial results and then turn the call over to Richard, who will be reviewing the slide materials. As usual, after our remarks, we'll open up the call for questions. Today, McMoRan reported a net loss applicable to common stock of $1.2 million, $0.01 per share, for the fourth quarter of 2012 compared with net income of $28.4 million or $0.16 per share for the fourth quarter of 2011. The fourth quarter 2000 [sic](2012) results include $39.7 million in net gains associated with the sale of 2 traditional Gulf of Mexico property packages and impairment charges totaling $34.5 million.

Production for the fourth quarter of 2012 averaged 119 million cubic feet of equivalents per day, net to McMoRan, that was in line with our previous guidance and compared to 170 million a day in the fourth quarter of 2011. Our oil and gas revenues during the fourth quarter totaled $80.6 million compared to $118.6 million during the fourth quarter of 2011.

Our realized gas prices in the fourth quarter of 2012 were $3.68 per Mcf, as compared with $3.57 in the year-ago period, and the realized prices for oil and condensate averaged $104 per barrel in the 2012 period compared with $111 per barrel in the year-ago period.

Our earnings before interest, taxes, depreciation, amortization and exploration expense totaled $37 million in the fourth quarter of 2012. We used cash in operating activities totaling $28.9 million, which included $31 million in working capital uses and $28 million in abandonment expenditures.

Capital expenditures during the quarter totaled $89.5 million. We ended the year with $557 million in total debt, which includes $257 million in convertible securities, and we ended with a cash position of $114.9 million.

We currently have 162 million shares outstanding. And assuming conversion of our remaining convertible securities, McMoRan would have approximately 224 million shares on a fully converted basis.

The press release contains an update on our announced transaction whereby Freeport McMoRan Copper & Gold would acquire McMoRan for per share consideration consisting of $14.75 per share in cash and 1.15 units of a royalty trust, which will hold a 5% overriding royalty interest in future production for McMoRan's existing ultra-deep exploration prospects.

In connection with the transaction, the royalty trust form was filed with the SEC, a registration statement on Form S-4 that includes a preliminary proxy statement for McMoRan, that also constitutes prospectus for the royalty trust. We expect to conduct the shareholders meeting for the vote in the second quarter and close the transaction at that time.

I will now turn the call over to Richard, who will be referring to the slide materials included on our website.

Richard C. Adkerson

Thank you, Kathleen. On Slide 4, we have the highlights from the fourth quarter. And during the quarter, we continued to advance our ultra-deep exploration and development activities. We have 2 rigs drilling ultra-deep wells currently. Both of those are located onshore. At the Davy Jones No. 1 well, operations continue in our efforts to conduct a flow test on the well.

As previously disclosed, we completed the sale of 2 packages of conventional non-core Gulf of Mexico oil and gas properties during the fourth quarter. And our results in the quarter include a $40 million gain on these transactions. And in this announcement, we are disclosing that we recently completed the sale of the Laphroaig Field onshore for $80 million.

Read the rest of this transcript for free on seekingalpha.com