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McMoRan Exploration (MMR)

Q4 2011 Earnings Call

January 17, 2012 10:00 am ET

Executives

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

Kathleen L. Quirk - Senior Vice President and Treasurer

Richard C. Adkerson - Co-Chairman

Analysts

Gregg Brody - JP Morgan Chase & Co, Research Division

Joan E. Lappin - Gramercy Capital Management Corp.

Leo P. Mariani - RBC Capital Markets, LLC, Research Division

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

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

Biju Z. Perincheril - Jefferies & Company, Inc., Research Division

Joseph D. Allman - JP Morgan Chase & Co, Research Division

Leon G. Cooperman - Omega Advisors, Inc.

Eric B. Anderson - Hartford Financial Management, Inc.

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, and good morning, everyone. Welcome to the McMoRan Exploration Fourth Quarter 2011 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 home page and clicking on the webcast link for the call.

We also have several slides to supplement our comments this morning, and we'll be referring to the slides during the call. The slides are also accessible using the webcast link on 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 today's comments, we'd like to remind everyone that our 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 our 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'll be referring to the slide materials on our website.

Today, McMoRan reported net income applicable to common stock of $28.4 million, $0.16 per diluted share for the fourth quarter of 2011, compared with a net loss applicable to common stock of $84.3 million or $0.83 per share for the fourth quarter of 2010.

Our fourth quarter 2011 results included $39.1 million in insurance proceeds. During the fourth quarter, McMoRan settled claims from the 2008 hurricane events and recorded gains associated with the final settlement and other insurance reimbursements. Since 2009, we recorded $155 million in gains associated with the 2008 hurricane events.

Our fourth quarter results also included $9.1 million in impairment charges to reduce certain fields' net carrying value to fair value, and $11.4 million in charges for adjustments for asset retirement obligations associated with certain of our oil and gas properties.

Production during the fourth quarter of 2011 averaged 170 million cubic feet of natural gas equivalents per day, net to McMoRan. That compared with 144 million cubic feet of natural gas equivalents per day in the fourth quarter of 2010. Our production in the fourth quarter was in line with the estimates that we reported in October of 2011.

For the year, our production averaged 187 million cubic feet of equivalents per day compared with 161 million in 2010.

Our fourth quarter 2011 oil and gas revenues totaled $118.6 million compared to $95.1 million during the fourth quarter of 2010. Our realized gas prices in the fourth quarter of 2011 of $3.57 per Mcf were lower than last year's quarter average of $4.05 per Mcf, and our realized prices for oil and condensate of $111.46 per barrel in the fourth quarter were higher than last year's average of $83.23 per barrel.

Our earnings before interest, taxes, depreciation and exploration expense totaled $67.6 million in the fourth quarter of 2011, and our operating cash flows totaled $48.5 million for the fourth quarter, which included -- which were net of $56.6 million in abandonment expenditures, $39 million in insurance proceeds and $2.5 million in working capital sources.

Our capital expenditures for the fourth quarter totaled $105.6 million. We ended the year with total debt of $553.6 million, which included $254 million in convertible securities, and ended with $569 million in cash on hand.

Currently, McMoRan has 161 million shares of common stock outstanding. Assuming conversion of our convertible securities, McMoRan would have approximately 224 million shares on a fully converted basis.

I'll now turn the call over to Richard, who'll be referring to the materials in our slides.

Richard C. Adkerson

Good morning, everyone. I'm going to go through the slides, and then Jim Bob will be available to respond to questions afterwards.

We are now proceeding with the completion activities for the Davy Jones discovery. On January 15, our team successfully retrieved a piece of equipment that had become lodged in the well bore in December last year, last month, and now, this clears the way for us to proceed with the production testing for Davy Jones. Afterwards, we will then test the Davy Jones No. 2 well, which was a successful delineation well, which I added to our resource potential from the Davy Jones area.

We have 4 exploration wells now in progress: Blackbeard East, Lafitte, where we're proceeding with determining the resource potential there. We have spudded the Blackbeard West No. 2 well, and we've commenced operations at the onshore well operated by Chevron, the Lineham Creek well. All the data that we're seeing in our drilling continues to support the potential for the ultra-deep trend to involve the major new geologic opportunity for us that spans a wide area over the Gulf of Mexico Shelf.

In 2011, we had favorable production performance. It was actually 17% higher than our original plan going into the year. And as Kathleen said, we ended the year with $569 million in cash.

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