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McMoRan Exploration (MMR)

Q2 2011 Earnings Call

July 19, 2011 10:00 am ET


Kathleen Quirk - Senior Vice President and Treasurer

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

Richard Adkerson - Co-Chairman


Leo Mariani - RBC Capital Markets, LLC

Joseph Bachmann - Howard Weil Incorporated

Joan Lappin - Gramercy Capital Management Corp.

Eric Anderson - Hartford Financial Management, Inc.

Joseph Allman - JP Morgan Chase & Co

Duane Grubert - Susquehanna Financial Group, LLLP

Richard Tullis - Capital One Southcoast, Inc.

Noel Parks - Ladenburg Thalmann & Co. Inc.



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 Quirk

Thank you. Good morning, everyone, and welcome to the McMoran Exploration Second Quarter 2011 Earnings 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 website homepage and clicking on the webcast link for the conference call. We also have several slides to supplement our comments this morning, and those are also available on our website at In addition to analysts and investors, the financial press has been invited to listen to today's call, and a replay webcast will be available on our website later today.

Before we begin our comments today, we'd like to remind everyone that today's press release and some 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-Chairman, 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 going through the presentation materials on our website. As usual, after our remarks, we'll open up the call for questions.

Today, McMoRan reported a net loss applicable to common stock of $50.2 million, $0.32 per share, for the second quarter of 2011, compared with a net loss of $21.7 million or $0.23 per share to the second quarter of 2010. The results in the second quarter of 2011 included a number of special items, including a $36.8 million charge to exploration expense for non-commercial well costs associated with Blueberry Hill #9 sidetrack; a $29 million impairment charge to reduce certain fields' net carrying value to fair value; a $20 million adjustment for abandonment obligations, future abandonment obligations associated with certain of our oil and gas properties. A portion of these are expected to be reimbursable under our insurance program when the reclamation expenditures are incurred. And also, we had $12.9 million in insurance proceeds that we recovered during the quarter related to losses incurred from the September 2008 hurricane.

Our production during the second quarter of 2011 averaged 197 million cubic feet of equivalents a day net to McMoRan's interest. That compared with 165 million cubic feet of equivalents a day in the second quarter of 2010. So our production in the second quarter of 2011 was higher than what we have previously estimated of 190 million a day because of favorable production performance.

Our second quarter 2011 oil and gas revenues totaled $155.5 million. That was substantially higher than last year's second quarter of $104.1 million. Our realized gas prices in the second quarter of 2011 averaged $4.71 per Mcf. It was slightly above last year's level of $4.66. And our realized prices for oil and condensate averaged $109 per barrel, compared with $76 per barrel in the second quarter of 2010.

Our earnings before interest, taxes, depreciation and exploration expenses totaled $96.9 million during the second quarter of 2011, and our operating cash flows for the second quarter totaled $102.6 million. That was net of working capital sources of $28 million and calls for abandonment funding of $20 million during the quarter.

Our capital expenditures during the quarter totaled $162 million. Our debt position at the end of the quarter totaled $561 million. That included some convertible securities. We have a $74.7 million in Convertible Senior Notes due in October 2011 with conversion price of $16.58, and $186 million in Convertible Senior Notes due in December 2017 with a conversion price of $16 per share.

We ended the quarter with $765 million in cash. Assuming conversion of our outstanding 8% Convertible Perpetual Preferred Stock and our other convertible preferred securities, we would have, on a fully diluted basis, 221 million common shares.

Now I'd like to turn the call over to Richard, who will be referring to the slide presentations series.

Richard Adkerson

Good morning, everyone. As most of you know, we had an update and review of where we've come to with our ultra-deep program on June 29. That presentation is available in our webcast, if you didn't see it. And I refer those of you who didn't listen to it to go to the webcast. Because of that, we're going to have an abbreviated presentation on the slides today, and I'm going to go through those. And then afterwards, Jim Bob will be available for your questions.

The highlights with our ultra-deep program center on our Davy Jones extension well. And in that well, we've reported that we've seen Tuscaloosa and Lower Cretaceous sands, which significantly expand the resource potential of 4 of the Davy Jones prospects, but really, enhances our overall program because it further expands the opportunities that we have throughout our ultra-deep program.

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