McMoRan Exploration Co. Reports Fourth-Quarter 2006 and Twelve-Month Results and Updates Gulf of Mexico Exploration and Development & Main Pass Energy Hub(TM) Activities.NEW ORLEANS New Orleans (ôr`lēənz –lənz, ôrlēnz`), city (2006 pop. 187,525), coextensive with Orleans parish, SE La., between the Mississippi River and Lake Pontchartrain, 107 mi (172 km) by water from the river mouth; founded -- McMoRan Exploration Co. (NYSE NYSE See: New York Stock Exchange : MMR MMR measles-mumps-rubella (vaccine); see measles, mumps, and rubella vaccine live, under vaccine. MMR abbr. measles, mumps, rubella vaccine ): HIGHLIGHTS * McMoRan continued its active Deep Miocene exploration program with positive drilling results during the fourth-quarter of 2006 at Zigler Canal onshore Vermilion Parish, Louisiana Vermilion Parish (French: Paroisse de Vermilion) is a parish located in the U.S. state of Louisiana. The parish seat is Abbeville and as of 2000, the population was 53,807. Geography The parish has a total area of 3,984 km² (1,538 mi²). and Laphroaig in inland waters Canals, lakes, rivers, water courses, inlets, and bays that are nearest to the shores of a nation and subject to its complete sovereignty. Inland waters, also known as internal waters, are subject to the total sovereignty of the country as much as if they were an actual part , onshore St. Mary Parish, Louisiana St. Mary Parish (French: Paroisse de Sainte-Marie) is a parish located in the U.S. state of Louisiana. The parish seat is Franklin. As of 2000, the population was 53,500. Two prominent politicians have come from St. Mary Parish in recent years. . * McMoRan initiated production from 14 wells in 2006, including four wells in the fourth quarter. Three additional wells are under development. * Fourth-quarter 2006 production averaged 73 million cubic feet of natural gas equivalents per day (MMcfe/d) net to McMoRan compared with an average of 34 MMcfe/d in the fourth quarter of 2005. * In-progress exploratory drilling includes the Hurricane Deep prospect at South Marsh Island Block 217. The well is currently drilling below 14,800 feet with a planned true vertical depth of 21,250 feet. * 14 discoveries on 28 prospects drilled and evaluated since 2004, including six discoveries in 2006. Three additional prospects in progress or not fully evaluated. * First-quarter 2007 production expected to average 70-80 MMcfe/d. * McMoRan produced 23.9 billion cubic feet of natural gas equivalents (Bcfe) in 2006. McMoRan's reserve additions and revisions replaced 75 percent of production. Based on independent reservoir engineers' estimates, McMoRan's year end 2006 proved oil and gas reserves totaled 75.8 Bcfe. * U.S. Maritime Administration (MARAD) approved McMoRan's license application for the Main Pass Energy Hub[TM] (MPEH[TM]) project. * McMoRan expects to participate in eight to ten exploratory wells during 2007 targeting Deep Miocene objectives in the Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east and Gulf Coast areas. McMoRan Exploration Co. (NYSE: MMR) today reported a net loss of $9.2 million, $0.32 per share, for the fourth quarter of 2006 compared with a net loss of $26.1 million, $1.06 per share, for the fourth quarter of 2005. McMoRan's net loss from its continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the fourth quarter of 2006 totaled $11.6 million, which includes $17.0 million of exploration expense, an impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge of $12.2 million to reduce the net book value of the Minuteman minuteman Colonial soldier of the American Revolution. Minutemen were first organized in Massachusetts in September 1774, when revolutionary leaders sought to eliminate Tories, or British sympathizers, from the militia by replacing all officers. field to its estimated fair value at December 31, 2006 and $2.8 million of start-up costs associated with MPEH[TM]. McMoRan's fourth quarter 2006 net loss also included a gain of $11.0 million associated with the formation of a new exploration agreement, net of reimbursements for certain rights to our private partner. During the fourth quarter of 2005, McMoRan's net loss from continuing operations totaled $21.0 million, including $2.2 million of MPEH[TM] start-up costs and $21.9 million of exploration expense. [TABLE OMITTED] James R. Moffett and Richard C. Adkerson, Co-Chairmen of McMoRan, said, "During 2006, we continued to pursue our focused strategy of targeting Deep Miocene exploration prospects while adding to our production from past success. We will continue these efforts during 2007 to expose shareholders to values we believe are available through drilling high impact wells in our focused exploration areas. The receipt of our license application for our MPEH[TM] project in January 2007 was a significant development in our efforts to establish a new LNG LNG (liquefied natural gas): see under natural gas. gateway. We are positive about the potential for the facility and look forward to establishing commercial arrangements that would provide long-term value to shareholders." EXPLORATION ACTIVITIES Since 2004, McMoRan has participated in 14 discoveries on 28 prospects that have been drilled and evaluated, including six discoveries in 2006. Three additional prospects are either in progress or not fully evaluated. The Zigler Canal exploratory well onshore in Vermilion Parish, Louisiana commenced drilling on June 17, 2006 and was sidetracked to a true vertical depth of 13,635 feet (14,792 feet measured depth). In November 2006, the well was evaluated with log while drilling logs, which indicated a potential 30 net feet of hydrocarbon hydrocarbon (hī'drōkär`bən), any organic compound composed solely of the elements hydrogen and carbon. The hydrocarbons differ both in the total number of carbon and hydrogen atoms in their molecules and in the proportion of hydrogen bearing sands over a 125 foot gross interval. Production commenced on December 30, 2006. McMoRan has a 50.0 percent working interest and a 35.75 percent net revenue interest. The Laphroaig exploratory well in St. Mary Parish, Louisiana commenced drilling on April 8, 2006 and was sidetracked to a true vertical depth of 18,412 feet (19,515 feet measured depth). In December 2006, the well was evaluated with log while drilling logs, which indicated a potential 14 net feet of hydrocarbon bearing sands over a 24 foot gross interval. Commencement of operations is pending a successful production test. McMoRan has a 50.0 percent working interest and a 37.3 percent net revenue interest. The Hurricane Deep well at South Marsh Island Block 217 commenced drilling on October 26, 2006. The well is currently drilling below 14,800 feet with a planned true vertical depth of 21,500 feet. The Hurricane Deep prospect is located in twelve feet of water in OCS OCS - Object Compatibility Standard 310, one mile northeast of the Hurricane discovery well which is currently producing. McMoRan controls 7,700 gross acres in this area. McMoRan has a 25.0 percent working interest and a 17.7 percent net revenue interest. McMoRan's investment in Hurricane Deep totaled $8.8 million at December 31, 2006. Testing of the Blueberry blueberry, plant of the large genus Vaccinium, widely distributed shrubs (occasionally small trees) of the family Ericaceae (heath family), usually found on acid soil. They are often confused with the related huckleberry. Hill well at Louisiana State Lease 340 is currently in progress. As previously reported, the Blueberry Hill well encountered four potentially productive hydrocarbon bearing sands below 22,200 feet. McMoRan has a 35.3 percent working interest and a 24.2 percent net revenue interest. Information obtained from the testing of the Blueberry Hill well will be incorporated in future plans for the JB Mountain Deep well, as both areas demonstrate similar geologic settings and are targeting deep Miocene sands equivalent in age. McMoRan's investment in Blueberry Hill and JB Mountain Deep totaled $16.5 million and $29.5 million, respectively, at December 31, 2006. The Marlin exploratory well at Grand Isle Grand Isle can refer to:
 nz),n. . Fourth-quarter 2006 exploration expense includes $7.0 million for costs incurred through December 31, 2006. Exploration expense in the first-quarter 2007 is expected to include $1.0 million for costs incurred for this well after December 31, 2006. During the fourth quarter, McMoRan entered into an exploration agreement with Plains Exploration & Production Company (NYSE: PXP (Packet eXchange Protocol) See PEP. ) whereby PXP will participate in up to nine of McMoRan's Deep Miocene exploratory prospects for approximately 60 percent of McMoRan's interest. Under the agreement, PXP paid McMoRan $20 million for leasehold interests and associated prospects. PXP is participating in the Hurricane Deep prospect at South Marsh Island Block 217 and participated in the Marlin exploratory well described above. McMoRan expects to commence drilling eight to ten exploratory prospects during 2007 targeting Deep Miocene structures in the shallow waters See:
PRODUCTION AND DEVELOPMENT ACTIVITIES Fourth-quarter 2006 production averaged 73 MMcfe/d net to McMoRan, including oil production of 1,900 bbls/d (11.4 MMcfe/d) from Main Pass Block 299, compared with 34 MMcfe/d, including oil production of 1,250 bbls/d (7.5 MMcfe/d) from Main Pass Block 299, in the fourth quarter of 2005. During 2006, McMoRan commenced production from 14 wells, including four wells in the fourth quarter of 2006. During the fourth quarter, production was initiated at Liberty Canal, Hurricane No. 3, Point Chevreuil and Zigler Canal and McMoRan performed successful recompletions at Deep Tern C-1 and C-2 and King Kong King Kong giant ape brought to New York as “eighth wonder of world.” [Am. Cinema: Payton, 367] See : Giantism No. 2. Fourth quarter 2006 production was adversely impacted by lower than projected production at certain wells and a delay in the start up of the West Cameron Block 43 No. 3 well. McMoRan's share of first quarter 2007 production is expected to average 70-80 MMcfe/d. McMoRan is currently working with the operator to commence production at the West Cameron Block 43 No. 3 well in the first quarter of 2007. MAIN PASS ENERGY HUB([TM]) UPDATE In January 2007, MARAD approved McMoRan's license application for its MPEH[TM] project. MARAD concluded in the Record of Decision that construction and operation of MPEH[TM] deepwater port will be in the national interest and consistent with national security and other national policy goals and objectives, including energy sufficiency and environmental quality. MARAD also concluded that MPEH[TM] will fill a vital role in meeting national energy requirements for many years to come and that the port's offshore deepwater location will help reduce congestion The condition of a network when there is not enough bandwidth to support the current traffic load. congestion - When the offered load of a data communication path exceeds the capacity. and enhance safety in receiving LNG cargoes to the U.S. MARAD's approval and issuance of the Deepwater Port license for MPEH[TM] is subject to various terms, criteria and conditions contained in the Record of Decision, including demonstration of financial responsibility, compliance with applicable laws and regulations, environmental monitoring and other customary conditions. This approval is an important milestone as McMoRan continues to pursue the highly attractive commercial potential for the project. The project's location near large and liquid U.S. gas markets and the significant potential of the onsite cavern storage provide attractive commercial opportunities for LNG suppliers, natural gas consumers and marketers. The MPEH[TM] facility, as approved, will be capable of regasifying LNG at a peak rate of 1.6 Billion cubic feet (Bcf) per day, storing 28 Bcf of natural gas in salt caverns and delivering 3.1 Bcf per day, including gas from storage, of natural gas to the U.S. market. Unique advantages of the MPEH[TM] project include use of existing offshore structures, onsite natural gas cavern storage capabilities, significant logistical lo·gis·tic also lo·gis·ti·cal adj. 1. Of or relating to symbolic logic. 2. Of or relating to logistics. [Medieval Latin logisticus, of calculation savings associated with the offshore location and premium markets available from its eastern Gulf of Mexico location. These advantages would provide LNG suppliers with a highly attractive netback net·back n. Linkage of the price of crude oil to the market price of products refined from it. price and offer U.S. natural gas consumers a reliable source of supply. McMoRan is continuing discussions with potential LNG suppliers as well as gas marketers and consumers in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. to develop commercial arrangements for the facilities. Prior to commencing construction of the facility, McMoRan expects to enter into commercial arrangements that would enable McMoRan to finance the construction costs of the project, with preliminary estimates of approximately $1 billion (approximately half of which is for pipelines and cavern storage), on favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. terms. REVENUES McMoRan's fourth-quarter 2006 oil and gas revenues totaled $53.2 million, compared to $34.5 million during the fourth quarter of 2005. During the fourth quarter of 2006, McMoRan's sales volumes totaled 4.1 Bcf of gas and 437,000 barrels of oil and condensate condensate, matter in the form of a gas of atoms, molecules, or elementary particles that have been so chilled that their motion is virtually halted and as a consequence they lose their separate identities and merge into a single entity. , including 180,700 barrels from Main Pass Block 299, compared to 1.8 Bcf of gas and 223,300 barrels of oil and condensate in the fourth quarter of 2005, including 100,400 barrels from Main Pass Block 299. McMoRan's fourth-quarter comparable average realizations for gas were $7.20 per thousand cubic feet (Mcf) in 2006 and $12.67 per Mcf in 2005; for oil and condensate, including Main Pass Block 299, McMoRan received an average of $54.46 per barrel in fourth-quarter 2006 compared to $53.16 per barrel in fourth-quarter 2005. PRODUCTION, RESERVE REPLACEMENT and RESERVES McMoRan produced 23.9 Bcfe in 2006, compared with 13.0 Bcfe in 2005. McMoRan's reserve additions and revisions replaced 75 percent of production during 2006. Independent reservoir engineers' estimates of McMoRan's proved oil and gas reserves as of December 31, 2006 were 75.8 Bcfe, compared with 81.7 Bcfe at December 31, 2005. Independent reservoir engineers' estimates of the present value of future net cash flows before income taxes from the production and sale of McMoRan's estimated proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. , determined using a ten percent discount rate and market pricing at the end of 2006 of $61.15 per barrel of oil and $5.64 per MMbtu of natural gas and other assumptions required by the Securities and Exchange Commission, was $270.6 million at December 31, 2006. Using New York Mercantile Exchange New York Mercantile Exchange (NYMEX) The world's largest physical commodity futures exchange. forward pricing Forward pricing Practice mandated by the SEC that open-end investment companies establish all incoming buy and sell orders on the next net asset valuation of fund shares. forward pricing at December 31, 2006, to determine the present value of the future net cash flows, the present value of estimated proved reserves would approximate $358.1 million. CASH AND CASH EQUIVALENTS AND CAPITAL EXPENDITURES On December 31, 2006, McMoRan had unrestricted cash and cash equivalents of $17.8 million and $28.8 million in borrowings under its credit facility. Capital expenditures for the fourth quarter of 2006 totaled $49.5 million, and $252.4 million for the twelve-months ended December 31, 2006. McMoRan's capital expenditures included significant development activities in addition to exploration drilling. Capital expenditures for 2007 are expected to approximate $150 million. Capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. may change as additional opportunities become available. In addition, McMoRan plans to incur approximately $3 million to advance commercialization of the MPEH[TM] in the first quarter of 2007. McMoRan is completing arrangements with a group of lenders for a new $100 million 5-year, second lien A Second lien financing is a form of financing secured on a second ranking basis by (more or less) the same security, which secures the first ranking financing. The first lien lenders and the second lien lenders agree that, in the event of a security enforcement or bankruptcy, the term loan. The net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). of the new term loan, which is expected to close in January 2007, will be used to repay borrowings under the revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility, for future drilling activities and other corporate purposes. Concurrent with the closing of the new term loan, McMoRan will amend its existing revolving credit facility to allow for the new secured debt and reduce the amount available under the borrowing base from $70 million to $50 million. McMoRan Exploration Co. is an independent public company engaged in the exploration, development and production of oil and natural gas offshore in the Gulf of Mexico and onshore in the Gulf Coast area. McMoRan is also pursuing plans for the development of the MPEH[TM] which will be used for the receipt and processing of liquefied natural gas liquefied natural gas: see under natural gas. Liquefied natural gas (LNG) A product of natural gas which consists primarily of methane. Its properties are those of liquid methane, slightly modified by minor constituents. and the storage and distribution of natural gas. Additional information about McMoRan and the MPEH[TM] project is available on its internet website "www.mcmoran.com" and at "www.mpeh.com". CAUTIONARY STATEMENT: This press release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding various oil and gas discoveries, oil and gas exploration, development and production activities, anticipated and potential production and flow rates; anticipated revenues; the economic potential of properties; estimated exploration costs; the potential Main Pass Energy Hub(TM) Project, and the estimated capital costs for developing the project. Accuracy of the projections depends on assumptions about events that change over time and is thus susceptible to periodic change based on actual experience and new developments. McMoRan cautions readers that it assumes no obligation to update or publicly release any revisions to the projections in this press release and, except to the extent required by applicable law, does not intend to update or otherwise revise the projections more frequently than quarterly. Important factors that might cause future results to differ from these projections include: variations in the market prices of oil and natural gas; drilling results; unanticipated fluctuations in flow rates of producing wells; oil and natural gas reserves expectations; the ability to satisfy future cash obligations and environmental costs; general exploration and development risks and hazards; and the ability to obtain regulatory approvals and significant project financing Project financing A form of asset-based financing in which a firm finances a discrete set of assets on a stand-alone basis. for the potential Main Pass Energy Hub(TM )project. Such factors and others are more fully described in more detail in McMoRan's 2005 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and subsequent Quarterly Reports on Form 10-Q Form 10-Q See 10-Q. on file with the Securities and Exchange Commission. A copy of this release is available on our web site at www.mcmoran.com. A conference call with securities analysts about the fourth-quarter 2006 results is scheduled for today at 10:00 AM Eastern Time. The conference call will be broadcast on the Internet. Interested parties may listen to the conference call live by accessing the call on "www.mcmoran.com". A replay of the call will be available through Friday, February 9, 2007. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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