SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2000
Commission File Number: 001-07791
McMoRan Exploration Co.
Incorporated in Deleware 72-1424200
(IRS Employer Identification No.)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No _
On March 31, 2000, there were issued and outstanding 12,219,400
shares of the registrant's Common Stock, par value $0.01 per
share.
McMoRan Exploration Co.
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets 3
Statements of Operations 4
Statements of Cash Flow 5
Notes to Financial Statements 6
Remarks 8
Report of Independent Public Accountants 9
Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10
Part II. Other Information 17
Signature 18
Exhibit Index E-1
2
McMoRan Exploration Co.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
McMoRan EXPLORATION CO.
CONDENSED BALANCE SHEETS (Unaudited)
March 31, December 31,
2000 1999
------- ---------
(In Thousands)
ASSETS
Cash and cash equivalents $ - $ -
Accounts receivable 28,490 25,652
Inventories 17,801 16,619
Deferred tax asset and prepaid expenses 5,046 4,236
--------- ---------
Total current assets 51,337 46,507
Property, plant and equipment, net 238,235 198,532
Deferred tax asset 33,055 32,370
Other assets, including goodwill
(net of accumulated amortization of
$551 and $451, respectively) 24,832 23,872
--------- ---------
Total assets $ 347,459 $ 301,281
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 48,130 $ 32,070
Accrued liabilities 14,070 12,727
Current portion of reclamation and mine
shutdown reserves and other 5,041 4,818
--------- ---------
Total current liabilities 67,241 49,615
Reclamation and mine shutdown reserves 61,312 55,126
Long-term debt 65,202 14,000
Other long-term liabilities 26,841 27,469
Stockholders' equity 126,863 155,071
--------- ----------
Total liabilities and stockholders' equity $ 347,459 $ 301,281
========= ==========
The accompanying notes are an integral part of these financial
statements
3
McMoRan EXPLORATION CO.
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended
March 31,
-------------------
2000 1999
-------- --------
(In Thousands, Except
Per Share Amounts)
Revenues $ 52,884 $ 62,111
Costs and expenses:
Production and delivery 42,987 48,030
Depreciation and amortization 9,040 9,404
Exploration expenses 12,044 2,550
General and administrative expenses 4,633 3,322
Gain on sale of oil and gas property - (3,090)
-------- --------
Total costs and expenses 68,704 60,216
-------- --------
Operating income (loss) (15,820) 1,895
Interest expense (1,210) (58)
Other income, net 26 196
-------- --------
Net income (loss) before income taxes (17,004) 2,033
Provision for income taxes - (719)
-------- --------
Net income (loss) $(17,004) $ 1,314
======== ========
Net income (loss) per share of
common stock
Basic $(1.36) $0.09
====== =====
Diluted $(1.36) $0.09
====== =====
Average common shares outstanding
Basic 12,480 14,094
====== ======
Diluted 12,480 14,209
====== ======
The accompanying notes are an integral part of these financial
statements.
4
McMoRan EXPLORATION CO.
STATEMENTS OF CASH FLOW (Unaudited)
Three Months Ended
March 31,
---------------------
2000 1999
--------- --------
(In Thousands)
Cash flow from operating activities:
Net income (loss) $ (17,004) $ 1,314
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 9,040 9,404
Exploration expenses 12,044 2,550
Gain on sale of oil and gas property - (3,090)
Reclamation and mine shutdown expenditures (1,095) (811)
Utilization of deferred tax asset - 707
Change in assets and liabilities:
(Increase) decrease in working capital
Accounts receivable (3,326) 1,110
Accounts payable and accrued liabilities 12,342 2,965
Inventories and prepaid expenses (2,731) (3,962)
Other 506 65
--------- --------
Net cash provided by operating activities 9,776 10,252
--------- --------
Cash flow from investing activities:
Exploration, development and other capital
expenditures (10,506) (17,241)
Purchase of oil and gas interests (38,650) (3,117)
Proceeds from disposition of assets - 16,421
Other - 254
--------- --------
Net cash used in investing activities (49,156) (3,683)
--------- --------
Cash flow from financing activities:
Proceeds from long-term debt 51,202 -
Purchase of McMoRan common stock (11,054) -
Other (768) 63
--------- --------
Net cash provided by financing activities 39,380 63
--------- --------
Net increase in cash and cash equivalents - 6,632
Cash and cash equivalents at beginning of year - 17,816
--------- --------
Cash and cash equivalents at end of period $ - $ 24,448
========= ========
The accompanying notes are an integral part of these financial
statements.
5
McMoRan EXPLORATION CO.
NOTES TO FINANCIAL STATEMENTS
1. EQUITY OFFERING AND LONG-TERM DEBT
In January 2000, McMoRan Exploration Co. (McMoRan) filed a shelf
registration statement to register up to $300 million of
securities, including common stock, preferred stock and debt
securities. On April 19, 2000, McMoRan sold 3.8 million shares
of its common stock for $14 per share and received $50.3 million
of proceeds, net of underwriting discounts of $2.9 million.
McMoRan used the proceeds to repay outstanding borrowings under
McMoRan's existing bank facilities.
In March 2000, McMoRan signed a letter of intent with
Halliburton Company to form a strategic alliance that will
combine the skills, technologies and resources of both companies'
personnel and technical consultants into an integrated team that
will assist McMoRan in managing its oil and gas activities.
Halliburton, through its business units, will provide integrated
products and services to McMoRan at market rates and McMoRan will
use Halliburton's products and services on an exclusive basis to
the extent practicable.
Halliburton will provide a guarantee of up to $50 million of
borrowings under an amended McMoRan Oil & Gas revolving facility
currently being negotiated, and McMoRan will pay Halliburton a
fee and provide certain security for its guarantee. Halliburton
will have the right to elect to participate in McMoRan's future
development opportunities by providing a portion of the
exploration and development costs of each prospect in which it
elects to participate. Amounts paid by Halliburton related to the
reimbursement of exploration costs, will be used to reduce
outstanding borrowings and Halliburton's guarantee under the
amended credit facility. The continuing availability of the full
guarantee will depend on McMoRan's ability to raise additional
capital, which must total $75 million by December 31, 2000 and
$125 million by December 31, 2001, including in each case the
proceeds raised in the recently completed equity offering
discussed above. In the event McMoRan raises less capital by
those dates, it is currently anticipated that there will be a
dollar-for-dollar reduction of the Halliburton guarantee and an
equivalent loan repayment obligation. The specific terms and
conditions of the strategic alliance, the credit facility and the
guarantee are subject to the negotiation and execution of
definitive agreements.
McMoRan has existing variable rate revolving credit
facilities that are held by its operating subsidiaries Freeport-
McMoRan Sulphur LLC (Freeport Sulphur) and McMoRan Oil & Gas LLC.
At March 31, 2000, outstanding borrowings on these facilities
totaled $65.2 million. At March 31, 2000, $45.2 million was
drawn on the Freeport Sulphur facility and the weighted average
interest rate on these borrowings totaled 6.4 percent. This
facility matures on December 12, 2002. As of March 31, 2000, $20
million was drawn on the McMoRan Oil & Gas facility and the
weighted average interest rate on these borrowings was 8.23
percent. This facility matures on January 14, 2002. The amounts
outstanding under these credit facilities have been substantially
reduced with the proceeds from the equity offering discussed
above.
2. EARNINGS PER SHARE
Basic net income (loss) per share of common stock was calculated
by dividing net income (loss) applicable to common stock by the
weighted-average number of common shares outstanding during the
periods presented. Diluted net income (loss) per share was
calculated by dividing net income by the weighted-average number
of common shares outstanding plus outstanding dilutive options,
which represented 115,000 shares in the first quarter of 1999.
During the first quarter of 2000, McMoRan had outstanding options
representing 309,000 shares of common stock that otherwise would
have been included in the calculation of diluted loss per share
but were excluded as anti-dilutive considering the loss incurred
during the quarter.
Outstanding options to purchase 461,000 shares of common
stock, at an average exercise price of $22.20 during the first
quarter of 2000 and 1,055,000 shares of common stock at average
exercise price of $18.82 per share during the first quarter of
1999 were not included in the computation of diluted net income
(loss) per share. These options were excluded because their
exercise prices were greater than the average market price during
the periods presented.
6
3. FINANCIAL INSTRUMENTS AND CONTRACTS
Based on its assessment of market conditions, McMoRan may enter
financial contracts to manage certain risks resulting from
fluctuations in commodity prices (oil and natural gas). Costs or
premiums and gains or losses on the contracts, including closed
contracts, are recognized with the hedged transactions. Also,
gains or losses are recognized if the hedged transaction is no
longer expected to occur or if deferral criteria are not met.
McMoRan monitors its credit risk on an ongoing basis and
considers this risk to be minimal because its contracts are with
financially strong counterparties.
Freeport Sulphur had a price protection program covering
approximately 50 percent of the Main Pass sulphur mine's natural
gas requirements for the first quarter of 2000. Under terms of
these closed contracts, Freeport Sulphur purchased approximately
900,000 million British thermal units (mmbtu) of natural gas at
an average price of $2.43 per mmbtu during the first quarter of
2000, which resulted in a recognized gain of $0.1 million.
Freeport Sulphur has no remaining open natural gas contracts at
this time.
Freeport Sulphur also has oil forward sales contracts
related to its Main Pass oil production. Gains or losses on these
contracts are recognized with the hedged transaction. Freeport
Sulphur settled contracts on 0.1 million barrels of oil at an
average price of $22.24 per barrel, which resulted in a realized
loss of $0.8 million during the first quarter of 2000. As of
March 31, 2000, Freeport Sulphur had contracts to sell 0.3
million barrels of oil at an average price of $19.76 per barrel
through December 2001. These contracts had a fair value of
approximately $(1.4) million as of March 31, 2000.
In June 1998, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards 133,
"Accounting for Derivative Instruments and Hedging Activities"
(SFAS 133), which establishes accounting and reporting standards
that every derivative instrument be recorded in the balance sheet
as either an asset or liability measured at its fair value. In
June 1999, the FASB delayed SFAS 133's effective date by one year
to fiscal years beginning after June 15, 2000, with earlier
application permitted. McMoRan has tentatively determined it
will adopt SFAS 133 effective January 1, 2001 and does not
believe adoption will have a material impact on its financial
position or results of operations.
4. BUSINESS SEGMENTS
McMoRan has two operating segments: "oil and gas" and
"sulphur." McMoRan's oil and gas are produced offshore in the
Gulf of Mexico and include its facilities at Vermilion Blocks 160
and 159 and West Cameron Block 616. McMoRan's oil and gas segment
also includes the oil produced at Main Pass from the same
geologic formation containing the deposit's sulphur. The sulphur
business segment includes purchasing recovered sulphur and the
transporting, terminaling, processing and marketing of sulphur,
both mined and purchased, utilizing its extensive logistics
network of sulphur terminaling and transportation assets in the
Gulf Coast region. Frasch sulphur is produced at the Main Pass
mine located 32 miles offshore Louisiana. The segment data
presented below were prepared on the same basis as the
consolidated McMoRan financial statements.
Eliminations
Oil & Gas Sulphur and Other Total
--------- --------- ---------- ---------
(In Thousands)
First Quarter of 2000
Revenues $ 17,005 $ 35,879 $ - $ 52,884
Production and delivery 7,076 35,911 - 42,987
Depreciation and amortization 6,806 2,234 - 9,040
Exploration expenses 12,044 - - 12,044
General and administrative
expenses 1,893 1,929 811 4,633
--------- --------- --------- ---------
Operating loss (10,814) (4,195) (811) (15,820)
Interest expense (534) (676) - (1,210)
Interest and other income 16 10 - 26
--------- -------- --------- ---------
Net loss $ (11,332) $ (4,861) $ (811) $ (17,004)
========= ======== ========= =========
Capital expenditures $ 10,471 $ 35 $ - $ 10,506
========= ======== ========= =========
Total assets $ 150,140 $160,727 $ 36,592a $ 347,459
========= ======== ========= =========
7
Eliminations
Oil & Gas Sulphur and Other Total
--------- -------- --------- ---------
(In Thousands)
First Quarter of 1999
Revenues $ 11,076 $ 51,035 $ - $ 62,111
Production and delivery 3,174 44,856 - 48,030
Depreciation and amortization 8,223 1,181 - 9,404
Exploration expenses 2,550 - - 2,550
General and administrative
expenses 738 1,776 808 3,322
Gain on sale of property (3,090) - - (3,090)
--------- -------- -------- ---------
Operating income (loss) (519) 3,222 (808) 1,895
Interest expense (9) (49) - (58)
Interest and other income 45 151 - 196
Income tax provision (12) - (707) (719)
--------- -------- -------- ---------
Net income (loss) $ (495) $ 3,324 $ (1,515) $ 1,314
========= ======== ======== =========
Capital expenditures $ 10,653 $ 6,588 $ - $ 17,241
========= ======== ======== =========
Total assets $ 90,716 $189,172 $ 38,934a $ 318,822
========= ======== ======== =========
(a) Represents assets held by the parent company, the most
significant of which include McMoRan's deferred tax assets
and certain prepaid pension benefits.
5. RATIO OF EARNINGS TO FIXED CHARGES
McMoRan had no ratio of earnings to fixed charges in the first
quarter of 2000 because its net loss was inadequate to cover its
fixed charges of $3.2 million. McMoRan had no outstanding debt
until the fourth quarter of 1999; accordingly there is no ratio
of earnings to fixed charges for the first quarter of 1999. For
this calculation, earnings consist of income from continuing
operations before income taxes and fixed charges. Fixed charges
include interest and that portion of rent deemed representative
of interest.
-----------------
Remarks
The information furnished herein should be read in conjunction
with McMoRan's financial statements contained in its 1999 Annual
Report and Form 10-K. The information furnished herein reflects
all adjustments which are, in the opinion of management,
necessary for a fair statement of the results for the periods.
All such adjustments are, in the opinion of management, of a
normal recurring nature.
8
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of McMoRan Exploration
Co.:
We have reviewed the accompanying condensed balance sheet of
McMoRan Exploration Co. (a Delaware corporation) as of March 31,
2000, and the related statements of operations and cash flow for
the three-month periods ended March 31, 2000 and 1999. These
financial statements are the responsibility of the Company's
management.
We conducted our reviews in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with auditing standards generally
accepted in the United States, the objective of which is the
expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with accounting
principles generally accepted in the United States.
We have previously audited, in accordance with auditing standards
generally accepted in the United States, the balance sheet of
McMoRan Exploration Co. as of December 31, 1999, and the related
statements of operations, stockholders' equity and cash flow for
the year then ended (not presented herein), and, in our report
dated January 19, 2000, we expressed an unqualified opinion on
those financial statements. In our opinion, the information set
forth in the accompanying condensed balance sheet as of December
31, 1999, is fairly stated, in all material respects, in relation
to the balance sheet from which it has been derived.
/s/ ARTHUR ANDERSEN LLP
New Orleans, Louisiana
April 20, 2000
9
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations.
OVERVIEW
We engage in the exploration, development and production of
oil and gas offshore in the Gulf of Mexico and onshore in the
Gulf Coast region and in the mining, purchasing, transporting,
terminaling, processing and marketing of sulphur. We became a
publicly traded entity on November 17, 1998 when McMoRan Oil &
Gas Co. and Freeport-McMoRan Sulphur Inc. combined their
operations. As a result, McMoRan Oil & Gas LLC and Freeport-
McMoRan Sulphur LLC (Freeport Sulphur) became our wholly owned
subsidiaries.
RECENT DEVELOPMENTS
Texaco and Shell Transactions - As previously reported, in
January 2000, we acquired significant exploration rights from
both Texaco Exploration and Production Inc. and Shell Offshore
Inc., representing a substantial acreage position in the Gulf of
Mexico shelf area. As a result of these transactions and
including our existing offshore lease inventory, we currently
have exploration rights in 160 blocks covering approximately
743,000 gross acres, which we believe is among the largest
offshore exploration acreage portfolios held by any independent
oil and gas company operating in the shelf area of the Gulf of
Mexico.
The leasehold acreage involved in both transactions expire
ratably over a four year period and are located in federal and
state waters offshore Louisiana and Texas in water depths of 10
to 2,600 feet, with the majority of the leases in water depths of
less than 400 feet. Our ownership interests in the leases
obtained from Shell range from 25 percent to 100 percent, while
the ownership interests we can earn on the Texaco leases range
from 17 percent to 100 percent. The majority of these leases have
ownership interests that exceed 50 percent. We will earn varying
interests in the Texaco leases when we drill exploratory wells to
specified depths that are capable of producing and we commit to
install facilities to develop the oil and gas we discover. Texaco
can either elect to retain an approximate 25 percent to 50
percent working interest, or it can elect to retain an overriding
royalty interest of approximately 10 percent convertible at
Texaco's election after payout to a proportionally reduced 25
percent working interest. Shell has retained an 8.3 percent
overriding royalty (proportionately reduced to its interest) in
the properties it sold to us. Under our agreement with Texaco we
have agreed to commit $110 million on exploration of these leases
by June 30, 2003 and have agreed to spend a minimum of $10
million during the remainder of 2000. See "Recent
Developments," Note 3 " Acquisitions," and Note 10 "Commitments
and Contingencies" in our 1999 Annual Report and Form 10-K.
Halliburton Transaction - We have signed a letter of intent with
Halliburton Company to form a strategic alliance that will
combine the skills, technologies and resources of Halliburton's
employees with those of our personnel and technical consultants
into an integrated team that will assist McMoRan in managing its
oil and gas activities. Under terms of the alliance,
Halliburton's business units, such as Halliburton Energy
Services, Brown & Root Energy Services and Landmark Graphics
Corporation, will provide drilling, completion, production and
well control products and related services to us at market rates,
and we will use Halliburton's services on an exclusive basis to
the extent practicable. Halliburton will also guarantee up to
$50 million under an amended revolving credit facility that we
are currently negotiating with our banks, and in connection with
the guarantee we will pay Halliburton a fee and provide certain
security. In addition, Halliburton may elect to participate in
the prospects we propose to develop by funding a 20 percent share
of our exploration and development costs on the prospect in
exchange for 20 percent of our interest in the prospect before
payout and 6 percent of our interest after payout. Exploration
costs initially paid by Halliburton will be applied to reduce
both the bank loan and Halliburton guarantee, both of which will
expire no later than December 31, 2003.
Equity Offering - The Texaco and Shell transactions discussed
above have provided us the opportunity to aggressively expand our
exploration activities over the near term. Our 2000 budget
includes exploration expenditures of approximately $89 million,
most of which will be incurred during the remainder of 2000,
primarily for exploration of 11 prospects. We have explored
various financing alternatives to fund this anticipated increase
in our exploration activities. In addition to the formation of
the Halliburton alliance discussed above, in January 2000 we
filed a shelf registration statement to register up to $300
million of securities, including common stock, preferred stock
and debt securities. In April 2000, we sold 3.8 million shares of
our common stock for $14.00 per share, resulting in net proceeds
of $50.3 million, which were used to repay a substantial portion
of our then outstanding borrowings under our existing revolving
lines of
10
credit. An additional 570,000 shares of our common stock
could be sold at $14.00 per share, under an over-allotment option
granted to the underwriters. This option is exercisable through
May 13, 2000. We are continuing to explore other opportunities to
raise additional capital for our anticipated 2001 exploration and
development activities, including arrangements with other
companies engaged in the oil and gas industry.
Homestake Sulphur Company LLC - We have been involved in a legal
dispute with Homestake, our 16.7 percent joint operating partner
at Main Pass, over its election to refuse to take or pay for its
share of sulphur for 2000. On April 14, 2000, both parties
signed a stipulation of dismissal of the litigation, which has
been filed with the court. The stipulation of dismissal provides
that Homestake withdrew its election not to take or pay for its
share of sulphur in 2000 and both parties will undertake an
accounting for the amounts due to date.
OPERATIONAL ACTIVITIES
The following are significant recent operational activities.
Oil and Gas
- -----------
. On February 28, 2000, we commenced exploratory drilling on
the Grand Isle Blocks 40/41 #8 well. The well is anticipated
to reach a total depth of approximately 16,500 feet during
the second quarter of 2000. We currently have an approximate
94 percent working interest in the well, which pending
certain elections by the farmor and other third parties,
could be reduced to a 52.3 percent working interest and a
42.9 percent net revenue interest. Grand Isle Blocks 40/41
cover 2,100 acres and are located in approximately 90 feet of
water, 16 miles offshore Louisiana.
. On March 16, 2000, exploratory drilling commenced at the
Vermilion Blocks 144/145 #3 well under terms of a $5.0
million turnkey contract that provided for the well to be
drilled to a depth of approximately 15,000 feet. On April 18,
2000, the well reached the contracted turnkey depth. We have
set protective casing and moved the rig off location and
temporarily abandoned the well. These drilling activities
have extended the lease expiration date by 180 days to
October 2000. At this time, we have deferred additional
drilling on this prospect, which has an estimated additional
cost of $4.7 million to reach a proposed total depth of
17,500 feet. We will pursue the drilling of other prospects
in our inventory while we continue discussions with industry
participants regarding their participation in our exploration
program. We plan to complete drilling of this prospect in the
second half of 2000. We currently own a 95 percent working
interest and a 76.3 percent net revenue interest in the
prospect, which covers 5,937 acres and is located in
approximately 90 feet of water adjacent to our producing
fields at Vermilion Blocks 160 and 159.
. During the first quarter of 2000, we acquired an interest in
the Eugene Island Blocks 193/208/215 prospect from Texaco for
approximately $0.3 million and by assuming a proportional
share of an estimated $9 million ($5 million, net to us)
abandonment obligation associated with existing wells and
platforms at the location. We must re-establish production
from various temporarily abandoned wells by specified dates
in order to retain the leases, which otherwise will
terminate. Accordingly, we have commenced our efforts to re-
establish production by May 2000. We plan to drill an
exploratory well to a proposed depth of 17,500 feet at this
prospect during the second half of 2000. We currently own a
53.4 percent working interest and a 41.7 percent net revenue
interest in this prospect. The prospect covers 12,500 gross
acres and is located in approximately 100 feet of water,
located 135 miles offshore Louisiana.
. We commenced drilling the Vermilion Block 408 #1
exploratory well in December 1999. The well reached a total
depth of 8,000 feet and encountered 167 feet of net oil pay.
The well has tested at a flow rate of 3,040 barrels of oil
and 11.1 million cubic feet (MMCF) of gas per day on a 48
hour test. Development plans are now being considered for
this new producing area. We expect production to commence by
mid-2001 . We own a 28.5 percent working interest and a 22.9
percent net revenue interest in this well. Vermilion Block
408 covers 5,000 gross acres and is located in approximately
380 feet of water, 115 miles offshore Louisiana.
. Development of the Brazos Block A-19 JC #1 exploratory well
was completed in the third quarter of 1999 and in October
1999 initial gas production commenced at a rate of
approximately 84 MMCF per day. However, during a shutdown in
November 1999, the operator detected a pressure buildup in
the production casing and after flowing the well on an
emergency basis, production was halted. Subsequently the
operator discovered the existence of significant damage to
the production tubing. Efforts to re-establish production
have been unsuccessful. The operator has temporarily
abandoned
11
the well, with a permanent abandonment planned at a
future date. A complete analysis of the failure continues.
The joint venture partners intend to drill another well, and
we currently estimate that the replacement well will commence
production by mid-2001. We plan to pursue our rights of
recovery of this loss from insurers and others. Reserve
estimates at the field have not been affected by the initial
well's failure. We own a 33.3 percent working interest and a
26.4 percent net revenue interest in Brazos Block A-19, which
covers 5,760 acres and is located in approximately 135 feet
of water, 35 miles offshore Texas.
. We drilled an exploratory well to a total depth of
approximately 12,000 feet in the shallow waters of Espiritu
Santo Bay, Calhoun County, Texas during the fourth quarter of
1999. We have decided not to test the various sands
encountered by the State Tract 210 #6 well. As a result, our
interest earned in the well has been relinquished to the
farmor, who plans to test the well and will supply the test
information to us. We have the right to participate in and
to operate any subsequent proposed wells on this prospect.
Accordingly, we have charged approximately $3.7 million of
the costs associated with drilling this well to exploration
expense in the first quarter of 2000.
RESULTS OF OPERATIONS
We have two operating segments: "oil and gas" and
"sulphur." The oil and gas segment includes all of our oil and
gas operations located in the Gulf of Mexico and Gulf Coast
region, including the oil operations at Main Pass. Our sulphur
segment includes purchasing recovered sulphur and the
transporting, terminaling, processing and marketing of sulphur,
both mined and recovered, utilizing our extensive logistics
network of sulphur terminaling and transportation assets in the
Gulf Coast region. We also produce Frasch sulphur at the Main
Pass mine. As a result of our anticipated exploration
expenditures and the currently low sulphur prices, we may report
operating losses in future periods. Selected summary comparative
data by segment for the first-quarter periods follow:
Three Months Ended
March 31,
-----------------------
2000 1999
--------- ---------
(Dollars in thousands,
except for realized prices)
FINANCIAL DATA:
Operating income (loss)
Oil and gas $ (10,814) $ (519)
Sulphur (4,195) 3,222
Other (811) (808)
--------- ---------
Total $ (15,820) $ 1,895
========= =========
OPERATING DATA:
Sales Volumes
Gas (thousand cubic feet,
or MCF) 3,513,400 3,787,500
Oil (barrels) a 321,400 396,500
Sulphur (long tons) 676,300 780,100
Average Realization
Gas (per MCF) $ 2.62 $ 1.80
Oil (per barrel)a 23.88 10.51
Sulphur (per long ton)b 52.47 64.95
a. Includes sales of sour crude oil from the Main Pass oil
operations. The Main Pass barrels sold totaled approximately
264,100 barrels at an average realization of $22.61 per barrel
in the first quarter of 2000 and 311,300 barrels at an average
realization of $9.99 per barrel in the first quarter of 1999.
b. Prices realized on both recovered and mined sulphur reflect
sales to different geographic regions.
Oil and Gas Operations
A summary of increases (decreases) in our oil and gas revenues
between the periods follows (in thousands):
12
First
Quarter
---------
Oil and gas revenues -
prior year period $ 11,076
Increase (decrease)
Sales volumes:
Oil (789)
Gas (493)
Price realizations:
Oil 4,297
Gas 2,881
Other 33
--------
Oil and gas revenues -
current year period $ 17,005
========
Our first-quarter 2000 oil and gas revenues benefited from
increases in average realizations for both oil, by 127 percent,
and gas, by 46 percent, when compared to prices realized during
the first quarter of 1999. These increases were partially offset
by decreases in sales volumes of oil (19 percent) and gas (7
percent) over sales levels a year ago. The decreases in sales
volumes resulted from normal production declines of our producing
fields, primarily Main Pass, and the March 1999 sale of our 28
percent interest in the Vermilion Block 410 field.
Production and delivery expense totaled $7.1 million in the
first quarter of 2000 compared to $3.2 million in the first
quarter of 1999. The increase is attributed primarily to
approximately $1.9 million of workover costs at the Brazos Block
A-19 JC#1 well (see "Operational Activities" above), an
additional $0.9 million in transportation costs related to the
fields that commenced production during the first quarter of 1999
and a net profits payment of $0.9 million associated with our
operations at the Vermilion Block 160 field unit and the
Vermilion Block 160 BJ-1 well.
Depreciation and amortization expense totaled $6.8 million
in the first quarter of 2000 compared to $8.2 million in the same
period last year. The decrease reflects the lower production
volumes and unit-of-production depreciation rates in the first
quarter of 2000 compared to the first quarter of 1999.
Exploration expense totaled $12.0 million during the first
quarter of 2000 compared to $2.6 million during the first quarter
of 1999. The increase reflects the initial expenditures on our
newly expanded exploration program (see "Recent Developments"
above). Our exploration expenditures during the first quarter
include geological and geophysical expenditures, including the
purchase of 3-D seismic data, totaling $7.8 million compared to
$0.9 million in the first quarter of 1999. During the first
quarter of 2000, we decided against further development of the
State Tract 210 #6 exploratory well (see "Operational
Activities" above) and accordingly expensed the related well
costs, which totaled $3.7 million. During the first quarter of
1999, we similarly expensed the costs of the unsuccessful
Vermilion Block 162 # 5 exploratory well, totaling $1.4 million.
Our exploration expenses can be expected to fluctuate in future
periods based on the level, results and costs of our numerous
planned exploratory drilling projects and, to a lesser extent,
the cost of acquiring and interpreting seismic data.
Sulphur Operations
A summary of the increases (decreases) in our sulphur revenues
between the periods follows (in thousands):
First
Quarter
---------
Sulphur revenues -
prior year period $ 51,035
Increase (decrease)
Sales volumes (6,742)
Price realization (8,440)
Other 26
---------
Sulphur revenues -
current year period $ 35,879
=========
Our sulphur revenues decreased by 30 percent during the first
quarter of 2000 when compared with the first quarter of 1999.
This decrease reflects an approximate 13 percent decrease in
sales volumes and
13
a 19 percent decrease in the average
realization per ton from levels reported last year. Sales volumes
and average realizations of sulphur have been negatively affected
by the fourth quarter implementation of production curtailments
by the major U.S. phosphate fertilizer producers in response to
cyclical declines in the demand for fertilizer. These
curtailments contributed to a decrease in sulphur prices of $5.00
per ton, to an average market price of $57.50 per ton in Tampa,
Florida in the first quarter of 2000. Fluctuations in sulphur
market prices primarily impact our mining operations but
generally do not have a significant effect on the margins that we
earn by marketing and transporting recovered sulphur. Future
sulphur prices will continue to fluctuate as a result of changes
in sulphur market conditions and can be expected to continue to
be weak if current conditions in the phosphate fertilizer market
persist. There is no price change anticipated for sulphur in the
Tampa, Florida market for the second quarter of 2000.
We sell a significant portion of the sulphur we produce to
IMC-Agrico Company, a phosphate fertilizer producer, under a
long-term supply contract. Our sales to IMC-Agrico totaled 43.8
percent of our total revenues and 65.2 percent of our total
sulphur sales in the first quarter of 2000 compared to 57.8
percent of our total revenues and 70.9 percent of our total
sulphur sales in the first quarter of 1999. Sales to IMC-Agrico
are based on market prices and include a premium with respect to
approximately 40 percent of the sales. The agreement requires
IMC-Agrico to purchase approximately 75 percent of its annual
sulphur consumption from us for as long as it has a requirement
for sulphur. We are currently litigating the validity of certain
terms of this contract. See Part II - Item 1 "Legal
Proceedings."
Sulphur production and delivery expense for the first
quarter of 2000 totaled $35.9 million compared to $44.9 million
for the first quarter of 1999. This decrease primarily reflects
the reduced volumes sold during the first quarter of 2000,
associated with the major U.S. fertilizer producers' curtailments
of production. Our first-quarter 2000 production costs include a
$1.7 million charge to adjust our March 31, 2000 sulphur
inventory to its net realizable value. Production costs during
the first quarter of 1999 benefited by $1.8 million, which
reflects the receipt of proceeds on our business interruption
insurance claim resulting from the effects Hurricane Georges had
on Main Pass' production.
Depreciation expense totaled $2.2 million during the first
quarter of 2000 compared to $1.2 million during the first quarter
of 1999. The increase reflects the significant decrease in the
estimated proved sulphur reserves at the Main Pass mine at
December 31, 1999 (see "Recent Developments" and Note 13
"Supplementary Mineral Reserve Information" in our 1999 Annual
Report and Form 10-K for a discussion of Main Pass' estimated
proved sulphur reserves). The reduction of our proved sulphur
reserves has accelerated our recognition of the estimated $60.2
million of abandonment and reclamation costs for the mine and its
related facilities by increasing our unit-of-production
depreciation rate. Accordingly, our first-quarter 2000 Main Pass
depreciation expense totaled $0.9 million, an increase of $0.6
million over the amount that would have been reported had Main
Pass' sulphur proved reserves not been substantially reduced at
December 31, 1999. Goodwill amortization totaled $0.1 million
during both the first quarters of 2000 and 1999.
Other
General and administrative expense totaled $4.6 million for
the first quarter of 2000 compared with $3.3 million for the
first quarter of 1999. Our oil and gas segment represented $1.2
million of the increase, reflecting our increased exploration
activities and that we are no longer reimbursed by Phosphate
Resource Partners for a portion of the $210 million program's
general and administrative expenses as a result of the fourth-
quarter 1999 sale of their 47 percent interest in the program to
us.
Interest expense totaled $1.2 million during the first
quarter of 2000 compared to $0.1 million during the first quarter
of 1999. The substantial increase reflects our outstanding
borrowings during the quarter, which at March 31, 2000 totaled
$65.2 million. Our borrowings reflect $20 million borrowed under
our McMoRan revolving credit facility and $45.2 million under our
Freeport Sulphur facility. Our outstanding borrowings were used
to fund our Shell lease acquisition, exploration expenditures, a
portion of our purchase of Phosphate Resource Partners' 47
percent interest in our $210 million exploration program,
repurchases of our common stock and working capital. There were
no borrowings on either facility during the first quarter of
1999. Accordingly, interest expense during the first quarter of
1999 only reflects the commitment fees paid on these facilities.
CAPITAL RESOURCES AND LIQUIDITY
Operating activities provided net cash of $9.8 million
during the first quarter of 2000 compared to $10.2 million during
the first quarter of 1999. The decrease can be attributed
primarily to the decrease in
14
sulphur revenues offset in part by the timing of cash disbursements.
Net cash used in investing activities totaled $49.2 million
in the first quarter of 2000 compared with $3.7 million during
the first quarter of 1999. As previously discussed in "Recent
Developments" above, in January 2000, we acquired exploration
rights to numerous prospects from both Texaco and Shell. The
Texaco agreement, in substance, represents a large farm-in
transaction and requires cash expenditures only as a prospects
are identified and drilled. In the Shell transaction we purchased
55 leases for approximately $37.6 million. We also paid $0.8
million in the first quarter of 2000 for acquisition costs
related to the purchase of Phosphate Resources Partners' 47
percent interest in a $210 million exploration program (see Note
4. "Rights Offering and Exploration Program" included in our
1999 Annual Report and Form 10-K) and the Shell transaction. We
subsequently purchased interests in the Eugene Island Blocks
193/208/215 from Texaco for $0.3 million (see "Operational
Activities" above). Our exploration and development capital
expenditures totaled $10.5 million during the first quarter of
2000, which included purchases of seismic and other related
geological data, expensed exploratory drilling costs related to
the State Tract 210 # 6 exploratory well and various re-
completion efforts at our existing producing wells.
During the first quarter of 1999, we incurred $17.2 million
of exploration, development and other capital expenditures. Oil
and gas exploration and development expenditures totaled $10.6
million, which included capitalized oil and gas drilling costs of
$8.0 million primarily for the development of West Cameron Block
616 and the Vermilion Block 160 BJ-1 well, geological and
geophysical and other exploration expenses of $1.2 million and
expensed drilling costs of $1.4 million associated with the
Vermilion Block 162 #5 exploratory well. Additionally, our
sulphur operations incurred $4.8 million of capitalized costs
primarily associated with replacement wells resulting from
Hurricane Georges in September 1998 and $1.8 million for certain
sulphur rail cars that had previously been leased. We
subsequently received $7.5 million in connection with an
agreement to sell and leaseback approximately 270 of our sulphur
rail cars. We also received $5.7 million in net proceeds from the
sale of the purchased net revenue interests in the Vermilion
Block 160 field unit and the Vermilion Block 159 CJ-1 well and
the sale of our 28 percent net revenue interest in the Vermilion
Block 410 field.
Financing activities provided cash of $39.4 million during
the first quarter of 2000 compared to $0.1 million in the first
quarter of 1999. The amounts provided during the first quarter
2000 reflect borrowings totaling $51.2 million under our long-
term revolving bank facilities, offset in part by purchases of
McMoRan's common stock under our stock repurchase program (see
below) and other financing costs. The proceeds received during
the first quarter of 1999 primarily reflect the exercise of stock
options.
In 1999, our Board of Directors authorized an open market
share purchase program for up to two million shares of our common
stock. In March 2000, the Board of Directors authorized the
purchase of up to an additional 500,000 shares of our common
stock, increasing the total shares authorized under our share
repurchase program to 2.5 million. During the first quarter of
2000 we purchased 591,300 shares of our common stock for $11.5
million, an average of $19.46 per share. We purchased an
additional 208,600 shares of our common stock during the period
from April 1, 2000 through April 19, 2000 for $3.7 million, an
average of $17.68 per share. From inception through April 19,
2000 we have purchased approximately 2.2 million shares under our
share purchase program for $41.6 million, an average price of
$18.56 per share. The timing of the purchases is dependent upon
many factors, including the price of our common stock, our
operating results, cash flows and financial position, and general
economic and market conditions.
The successful completion of the equity offering referred to
above, together with additional credit availability of up to $50
million in our proposed agreement with Halliburton, will provide
us the capital resources necessary to meet our 2000 exploration
plans. However, we anticipate that we will require additional
capital for our anticipated 2001 exploration and development
activities and other exploration opportunities that may arise.
We are continuing to explore other financing opportunities,
including arrangements with other companies engaged in the oil
and gas industry.
CAUTIONARY STATEMENT
Management's Discussion and Analysis of Financial Condition
and Results of Operations contain forward-looking statements.
All statements other than statements of historical fact included
in this report, including, without limitation, statements
regarding plans and objectives of our management for future
operations and our exploration and development activities are
forward-looking statements.
15
Important factors that could cause actual oil and gas
operations results to differ materially from our expectations
include, without limitation, drilling results, the availability
of financing, unanticipated fluctuations in flow rates of
producing wells, depletion rates, economic and business
conditions, general development risks and hazards and risks
inherent with the production of oil and gas, such as fires,
natural disasters, blowouts and the encountering of formations
with abnormal pressures, changes in laws or regulations and other
factors, many of which are beyond the control of McMoRan.
Important factors that could affect the future results of our
sulphur operations include without limitation reserve
expectations, demand for sulphur, the availability of financing,
the ability to satisfy future cash obligations and environmental
costs, the reliance on IMC-Agrico as a customer, the seasonality
and volatility of sulphur markets, increased competition in the
transporting and terminaling of sulphur, and environmental
issues. Further information regarding these and other factors
that may cause our future performance to differ from that
projected in the forward-looking statements are described in more
detail under "Cautionary Statements" in our 1999 Annual Report
and Form 10-K.
_________________________
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
16
PART II--OTHER INFORMATION
Item 1. Legal Proceedings.
Freeport-McMoRan Sulphur LLC v. IMC-Agrico Company, Civ. Act. No.
462,776 (19th Jud. Dist. Ct. for Parish of East Baton Rouge, La.;
filed July 22, 1999). Our sulphur supply agreement with IMC-
Agrico requires good faith renegotiation of the pricing
provisions if a party can prove that fundamental changes in IMC-
Agrico's operations or the sulphur and sulphur transportation
markets invalidate certain assumptions and result in the
performance by that party becoming _commercially impracticable_
or _grossly inequitable._ In the fourth quarter of 1998, IMC-
Agrico attempted to invoke this contract provision in an effort
to renegotiate the pricing terms of the agreement. After careful
review of the agreement, IMC-Agrico's operations and the
referenced markets, we determined that there is no basis for
renegotiation of the pricing provisions of the agreement. After
discussions failed to resolve this dispute, we filed suit against
IMC-Agrico seeking a judicial declaration that no basis exists
under the agreement for a renegotiation of its pricing terms.
Homestake Sulphur Company, LLC v. Freeport-McMoRan Sulphur LLC,
Civ. Act. No. 99C-12-195VAB (Del. Superior Ct. New Castle County;
filed December 22, 1999). Homestake Sulphur Company, LLC owns
16.7 percent of the Main Pass mine. Homestake asserted that the
operating agreement for Main Pass sulphur contains a provision
under which it could elect to waive its right to produce its
share of sulphur for 2000 and could be relieved of its obligation
to pay some of its share of operating expenses for 2000.
Homestake filed suit seeking a declaratory judgment and monetary
damages supporting its position. On April 3, 2000, Homestake
advised us that they wished to abandon the litigation and on
April 14, 2000, we and Homestake signed a stipulation of
dismissal of the litigation, which has been filed with the court.
The stipulation of the dismissal provides that Homestake
withdrew its election to refuse taking and paying for its share
of sulphur in 2000, and that both parties will perform an
accounting for the amounts due as if Homestake never sought to
invoke the election.
Jacob Gottlieb v. James R. Moffett, Richard C. Adkerson, B.M.
Rankin, Henry A. Kissinger, Phosphate Resource Partners Limited
Partnership, McMoRan Oil & Gas Co. and IMC Global Inc., Civ. Act.
No. 16393 (Del. Ch. filed May 19, 1998). On May 19, 1998,
plaintiff filed an action on behalf of a purported class of
plaintiffs who own depository units of Phosphate Resource
Partners. The plaintiff alleged various breaches of fiduciary
duties by certain individual directors, IMC Global Inc. and
Freeport McMoRan Inc. The Plaintiff also alleged that McMoRan
Oil & Gas Co. conspired with and aided and abetted the individual
director defendants with their alleged breaches of fiduciary
duty. This action was dismissed without prejudice and without
payment to anyone.
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits to this report are listed in the Exhibit Index
appearing on page E-1 hereof.
(b) During the period covered by this Quarterly Report on Form 10-Q
the registrant filed the following Current Reports on Form 8-K :
. A report dated January 14, 2000 reporting an event under
Items 2 and 7, filed on January 20,2000.
. A report dated January 19, 2000 reporting an event under
Item 5, filed on January 20, 2000.
. A report dated March 10, 2000 reporting an event under
Item 5, filed on March 10, 2000.
. A report dated April 3, 2000 reporting an event under
Item 5, filed on April 3, 2000.
17
McMoRan Exploration Co.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
McMoRan Exploration Co.
By: /s/ C. Donald Whitmire, Jr.
---------------------------
C. Donald Whitmire, Jr.
Vice President and Controller-
Financial Reporting
(authorized signatory and
Principal Accounting Officer)
Date: May 1, 2000
18
McMoRan Exploration Co.
Exhibit Index
Exhibit Number
2.1 Agreement and Plan of Mergers dated
as of August 1, 1998. (Incorporated by reference to
Annex A to McMoRan's Registration Statement on Form S-4
(Registration No. 333-61171) filed with the SEC on
October 6, 1998 (the McMoRan S-4)).
3.1 Amended and Restated Certificate of
Incorporation of McMoRan. (Incorporated by reference
to Exhibit 3.1 to McMoRan's 1998 Annual Report on Form
10-K (the McMoRan 1998 Form 10-K).
3.2 By-laws of McMoRan as amended
effective February 11, 1999. (Incorporated by
reference to Exhibit 3.2 to the McMoRan 1998 Form 10-K).
4.1 Form of Certificate of McMoRan Common
Stock (Incorporated by reference to Exhibit 4.1 of the
McMoRan S-4).
4.2 Rights Agreement dated as of November
13, 1998. (Incorporated by reference to Exhibit 4.2 to
McMoRan 1998 Form 10-K).
4.3 Amendment to Rights Agreement dated
December 28, 1998. (Incorporated by reference to
Exhibit 4.3 to McMoRan 1998 Form 10-K).
4.4 Standstill Agreement dated August 5,1999 between
McMoRan and Alpine Capital, L.P., Robert W. Bruce III,
Algenpar, Inc, J.Taylor Crandall, Susan C. Bruce,
Keystone, Inc., Robert M. Bass, the Anne T. and Robert
M. Bass Foundation, Anne T. Bass and The Robert Bruce
Management Company, Inc. Defined Benefit Pension Trust.
(Incorporated by reference to Exhibit 4.4 to McMoRan's
Third Quarter 1999 Form 10-Q).
10.1 McMoRan Adjusted Stock Award Plan. (Incorporated by
reference to Exhibit 10.1 of the McMoRan S-4).
10.2 McMoRan 1998 Stock Option Plan for Non-Employee
Directors. (Incorporated by reference to Exhibit 10.2
of the McMoRan S-4).
10.3 McMoRan 1998 Stock Option Plan. (Incorporated by
reference to Annex D to the McMoRan S-4).
10.4 Stock Bonus Plan (Incorporated by reference from
McMoRan's Registration Statement on Form S-8
(Registration No. 333-67963) filed with the SEC on
November 25, 1998.
10.5 Agreement for Purchase and Sale dated as of August 1,
1997 between FM Properties Operating Co. and McMoRan
Oil & Gas (Incorporated by reference to Exhibit 10.1 to
the Current Report on Form 8-K filed by McMoRan Oil &
Gas dated as of September 2, 1997).
10.6 Participation Agreement between McMoRan Oil & Gas and
Gerald J. Ford dated as of December 15, 1997
(Incorporated by reference to Exhibit 10.6 to the MOXY
1997 10-K).
10.7 Services Agreement dated as of November 17, 1998
between McMoRan and FM Services Company. (Incorporated
by reference to Exhibit 10.11 to McMoRan 1998 Form 10-K).
10.8 McMoRan Financial Counseling and Tax Return Preparation
and Certification Program, effective September 30,
1998. (Incorporated by reference to Exhibit 10.13 to
McMoRan 1998 Form 10-K).
E-1
10.9 Employee Benefits Agreement by and between Freeport-
McMoRan Inc. and Freeport Sulphur. (Incorporated by
reference to Exhibit 10.1 to Freeport Sulphur's Annual
Report on Form 10-K for the fiscal year ended December
31, 1997 (Freeport Sulphur 1997 10-K)).
10.10 Asset Sale Agreement for Main Pass
Block 299 between Freeport-McMoRan Resource Partners,
Limited Partnership (Freeport-McMoRan Resource
Partners) and Chevron USA, Inc. dated as of May 2,
1990. (Incorporated by reference to Exhibit 10.2 to
Freeport Sulphur's Registration Statement on Form S-1
(Registration No. 333-40375) filed with the SEC on
November 17, 1997 (the Freeport Sulphur S-1)).
10.11 Main Pass 299 Sulphur and Salt Lease,
effective May 1, 1988. (Incorporated by reference to
Exhibit 10.3 to the Freeport Sulphur S-1).
10.12 Joint Operating Agreement by and
between Freeport-McMoRan Resource Partners,
IMC-Fertilizer, Inc. and Felmont Oil Corporation, dated
as of June 5, 1990. (Incorporated by reference to
Exhibit 10.4 to the Freeport Sulphur S-1)
10.13 Joint Operating Agreement by and between Freeport-
McMoRan Resource Partners, IMC-Fertilizer, Inc. and
Felmont Oil Corporation, dated as of May 1, 1988.
(Incorporated by reference to Exhibit 10.5 to the
Freeport Sulphur S-1).
10.14 Amendment No. 1 to Joint Operating
Agreement dated July 1, 1993 between Freeport McMoRan
Resource Partners, IMC Fertilizer, Inc. and Homestake
Sulphur Company. (Incorporated by reference to Exhibit
10.14 to McMoRan's 1999 Annual Report on Form 10-K the
McMoRan 1999 Form 10-K).
10.15 Amendment No. 2 to Joint Operating
Agreement dated November 30, 1993 between Freeport
McMoRan Resource Partners, IMC Fertilizer, Inc. and
Homestake Sulphur Company. (Incorporated by reference
to Exhibit 10.15 in the McMoRan 1999 Form 10-K).
10.16 Agreement to Coordinate Operating Agreements by
and between Freeport-McMoRan Resource Partners,
IMC-Fertilizer and Felmont Oil Corporation, dated as
of May 1, 1988. (Incorporated by reference to Exhibit
10.6 to the Freeport Sulphur S-1).
10.17 Asset Purchase Agreement between
Freeport-McMoRan Resource Partners and Pennzoil Company
dated as of October 22, 1994 (Asset Purchase
Agreement). (Incorporated by reference to Exhibit 10.7
to the Freeport Sulphur S-1).
10.18 Amendment No. 1 to the Asset Purchase
Agreement dated as of January 3, 1995. (Incorporated by
reference to Exhibit 10.8 to the Freeport Sulphur S-1).
10.19 Agreement for Sulphur Supply, as
amended, dated as of July 1, 1993 among Freeport-
McMoRan Resource Partners, IMC Fertilizer and
IMC-Agrico Company (Sulphur Supply Agreement).
(Incorporated by reference to Exhibit 10.9 to the
Freeport Sulphur S-1).
10.20 Side letter with IGL regarding the
Sulphur Supply Agreement. (Incorporated by reference to
Exhibit 10.10 to the Freeport Sulphur S-1).
10.21 Processing and Marketing Agreement
between the Freeport Sulphur (a division of Freeport-
McMoRan Resource Partners) and Felmont Oil Corporation
dated as of June 19, 1990 (Processing Agreement).
(Incorporated by reference to Exhibit 10.11 to the
Freeport Sulphur S-1).
10.22 Amendment Number 1 to the Processing
Agreement. (Incorporated by reference to Exhibit 10.12
to the Freeport Sulphur S-1).
E-2
10.23 Amendment Number 2 to the Processing
Agreement. (Incorporated by reference to Exhibit 10.13
to the Freeport Sulphur S-1).
10.24 Amended and Restated Credit Agreement
dated November 17, 1998 among Freeport Sulphur, as
borrower, McMoRan, as Guarantor and, the financial
institutions party thereto. (Incorporated by reference
to Exhibit 10.29 to McMoRan 1998 Form 10-K).
10.25 Letter Agreement between FM Services
and Rene L. Latiolais effective as of January 1, 1999.
(Incorporated by reference to Exhibit 10.31 to McMoRan
1998 Form 10-K).
10.26 Agreement for Consulting Services between Freeport-
McMoRan and B. M. Rankin, Jr. effective as of January
1, 1991)(assigned to FM Services as of January 1,
1996); as amended on December 15, 1997 and on December
7, 1998. (Incorporated by reference to Exhibit 10.32
to McMoRan 1998 Form 10-K).
10.27 Processing and Marketing Agreement
between the Freeport Sulphur (a division of Freeport
Resource Partners) and Felmont Oil Corporation dated as
of June 19, 1990 (Processing Agreement). (Incorporated
by reference to Exhibit 10.11 to the Freeport Sulphur S-1).
10.28 Amendment Number 1 to the Processing
Agreement. (Incorporated by reference to Exhibit 10.12
to the Freeport Sulphur S-1).
10.29 Amendment Number 2 to the Processing
Agreement. (Incorporated by reference to Exhibit 10.13
to the Freeport Sulphur S-1).
10.30 McMoRan's Performance Incentive Awards Program as
amended effective February 1, 1999. (Incorporated by
reference to Exhibit 10.18 to McMoRan's 1998 Form 10-K).
10.31 Supplemental Letter Agreement between FM Services and
Rene' L. Latiolais effective August 1, 1999.
(Incorporated by reference to Exhibit 10.33 to
McMoRan's Third Quarter 1999 Form 10-Q).
10.32 Amended and Restated Credit Agreement
dated January 18, 2000 among McMoRan Oil and Gas, as
borrower, Chase Bank of Texas, National Association, as
agent and the Lenders Signatory thereto.
10.33 Asset Purchase Agreement dated
effective December 1, 1999 between SOI Finance Inc.,
Shell Offshore Inc. and McMoRan Oil & Gas.
(Incorporated by reference to Exhibit 10.33 in the
McMoRan 1999 Form 10-K).
10.34 Offshore Exploration Agreement dated
December 20, 1999 between Texaco Exploration and
Production Inc. and McMoRan Oil & Gas. (Incorporated by
reference to Exhibit 10.34 in the McMoRan 1999 Form 10-K).
15.1 Letter dated April 20, 2000 from Arthur Andersen LLP
regarding the unaudited financial statements.
27.1 McMoRan Financial Data Schedule.
E-3