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 June 30, 2000
Commission File Number: 001-07791
McMoRan Exploration Co.
Incorporated in Delaware 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 June 30, 2000, there were issued and outstanding 15,822,000
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 16
Signature 17
Exhibit Index E-1
2
McMoRan EXPLORATION CO.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
McMoRan EXPLORATION CO.
CONDENSED BALANCE SHEETS (Unaudited)
June 30, December 31,
2000 1999
--------- ---------
(In Thousands)
ASSETS
Cash and cash equivalents $ - $ -
Accounts receivable 8,819 6,462
Inventories 269 349
Net current assets from discontinued
operations - 9,545
Prepaid expenses 1,460 3,099
--------- ---------
Total current assets 10,548 19,455
Property, plant and equipment, net 139,680 98,091
Assets of discontinued operations 73,153 114,026
Deferred tax asset - 32,370
Other assets 10,900 10,287
--------- ---------
Total assets $ 234,281 $ 274,229
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 9,687 $ 9,023
Accrued liabilities 10,381 8,722
Current portion of reclamation and
mine shutdown reserves and other 21,260 4,818
Discontinued operations debt (Note 2) 34,102 -
Net current liabilities from discontinued
operations 2,724 -
--------- ---------
Total current liabilities 78,154 22,563
Sulphur reclamation and mine shutdown reserves 58,544
Oil and Gas reclamation and shutdown reserves 17,635 55,126
Long-term debt (Note 2) 17,000 14,000
Other long-term liabilities 27,002 27,469
Stockholders' equity 35,946 155,071
--------- ---------
Total liabilities and stockholders' equity $ 234,281 $ 274,229
========= =========
The accompanying notes are an integral part of these financial
statements.
3
McMoRan EXPLORATION CO.
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
2000 1999 2000 1999
--------- -------- --------- --------
(In Thousands, Except
Per Share Amounts)
Revenues $ 15,720 $ 13,850 $ 32,725 $ 24,926
Costs and expenses:
Production and delivery costs 5,619 4,054 12,695 7,228
Depreciation and amortization 5,534 8,622 12,340 16,845
Exploration expenses 14,102 1,303 26,146 3,853
General and administrative expenses 2,669 1,895 5,373 3,441
Gain on sale of oil and gas property - - - (3,090)
--------- -------- --------- --------
Total costs and expenses 27,924 15,874 56,554 28,277
--------- -------- --------- --------
Operating loss (12,204) (2,024) (23,829) (3,351)
Interest expense (1,166) (75) (2,376) (133)
Other income, net 1,450 186 1,466 231
--------- -------- --------- --------
Loss from continuing operations
before provision for income taxes (11,920) (1,913) (24,739) (3,253)
Income tax (provision) benefit (34,941) 670 (34,941) 1,139
Loss from continuing operations (46,861) (1,243) (59,680) (2,114)
Discontinued operations:
Income (loss) from discontinued sulphur
operations (less applicable income
taxes of $1,122 in the three-month
1999 period and $2,310 in the six-
month 1999 period) (83,031) 2,082 (87,216) 4,267
Loss on disposal of sulphur assets (7,500) - (7,500) -
--------- -------- --------- --------
Net income (loss) $(137,392) $ 839 $(154,396) $ 2,153
========= ======== ========= ========
Basic net income (loss) per share of
common stock:
Loss from continuing operations $(3.11) $(0.09) $ (4.33) $(0.15)
Income (loss) from discontinued
sulphur operations (5.50) 0.15 (6.34) 0.31
Loss on disposal of sulphur assets (0.50) - (0.54) -
------ ------ ------- ------
Basic net income (loss) per share $(9.11) $ 0.06 $(11.21) $ 0.16
====== ====== ======= ======
Diluted net income (loss) per share of
common stock:
Loss from continuing operations $(3.11) $(0.09) $ (4.33) $(0.15)
Income (loss) from discontinued
sulphur operations (5.50) 0.15 (6.34) 0.30
Loss on disposal of sulphur assets (0.50) - (0.54) -
------ ------ ------- ------
Diluted net Income (loss) per share $(9.11) $ 0.06 $(11.21) $ 0.15
====== ====== ======= ======
Average shares outstanding
Basic 15,078 13,662 13,779 13,878
====== ====== ====== ======
Diluted 15,078 13,901 13,779 14,059
====== ====== ====== ======
The accompanying notes are an integral part of these financial
statements.
4
McMoRan EXPLORATION CO.
STATEMENTS OF CASH FLOW (Unaudited)
Six Months Ended
June 30,
----------------------
2000 1999
--------- ---------
(In Thousands)
Cash flow from operating activities:
Net income (loss) $(154,396) $ 2,153
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
(Income) loss from discontinued operations 94,716 (4,267)
Depreciation and amortization 12,340 16,845
Exploration expenses 26,146 3,853
Gain on sale of oil and gas property - (3,090)
Change in deferred tax asset 34,941 (1,139)
(Increase) decrease in working capital
Accounts receivable (2,864) (2,355)
Accounts payable and accrued liabilities (2,934) 5,663
Inventories and prepaid expense (850) (32)
Other (583) 21
--------- --------
Net cash provided by continuing operations 6,516 17,652
Net cash provided by (used in) discontinued
operations (5,906) 3,709
--------- --------
Net cash provided by operating activities 610 21,361
--------- --------
Cash flow from investing activities:
Exploration and development and other expenditures (33,673) (16,411)
Purchase oil and gas interests (38,650) (3,117)
Proceeds from disposition of assets, net 1,547 8,859
Other - (314)
--------- --------
Net cash used in continuing operations (70,776) (10,983)
Net cash provided by (used in) discontinued
operations (40) 1,973
--------- --------
Net cash used in investing activities (70,816) (9,010)
--------- --------
Cash flow from financing activities:
Net proceeds from long-term debt 31,156 -
Net proceeds from equity offering 50,274 -
Purchase of McMoRan common stock (15,282) (14,765)
Other (1,888) 298
--------- --------
Net cash provided by (used in) continuing
operations 64,260 (14,467)
Net cash provided by discontinued operations 5,946 -
--------- --------
Net cash provided by (used in) financing operations 70,206 (14,467)
--------- --------
Net decrease in cash and cash equivalents - (2,116)
Net amount attributable to discontinued operations - (5,682)
Cash and cash equivalents at beginning of year - 17,816
--------- --------
Cash and cash equivalents at end of period $ - $ 10,018
========= ========
The accompanying notes are an integral part of these financial
statements.
5
McMoRan EXPLORATION CO.
NOTES TO FINANCIAL STATEMENTS
1. DISCONTINUED SULPHUR OPERATIONS
In July 2000, McMoRan Exploration Co. (McMoRan) undertook a plan
to discontinue its sulphur mining operations and to sell its
remaining sulphur transportation, logistics and marketing assets.
Drilling operations at the Main Pass mine have ceased.
McMoRan's plan for discontinuing its sulphur segment include the
marketing of its sulphur operations to other third parties that
could potentially benefit from the use of such assets whether
deployed in the business of sulphur related activities or other
alternative uses.
Following is a summary of financial information for
McMoRan's discontinued sulphur operations (in thousands):
Second-Quarter Six-Months
------------------- ---------------------
2000 1999 2000 1999
--------- -------- --------- ---------
Net sales $ 36,749 $ 49,439 $ 72,628 $ 100,474
========= ======== ========= =========
Income (loss) from discontinued
operations:
Before income taxes $ (83,031) $ 3,204 $ (87,216) $ 6,577
Income tax provision - (1,122) - (2,310)
--------- -------- --------- ---------
Net $ (83,031) $ 2,082 $ (87,216) $ 4,267
========= ======== ========= =========
Estimated loss on disposal $ (7,500) $ - $ (7,500) $ -
========= ======== ========= =========
The loss from discontinued operations for the second-quarter
and six month periods of 2000 include non-cash charges totaling
$78.1 million to reflect the net realizable value of the sulphur
segment assets and liabilities. These charges include: $20.1
million to write-off the remaining book value of the Main Pass
sulphur mine; $25.2 million for the writedown of the book value
of the mining-related assets, primarily certain specialized
marine equipment utilized in handling mined sulphur, to their
estimated recoverable values; and $32.8 million for the remaining
unaccrued estimated mine reclamation costs. The estimated loss
on disposal of sulphur assets primarily reflects estimated
employee-related charges.
In connection with the decision to discontinue the sulphur
operations, primarily those associated with the sulphur
transportation, logistics and marketing business, McMoRan
recorded a $34.9 million non-cash charge to its deferred tax
valuation allowance, which eliminated its net deferred tax asset.
Although this charge related to the decision to discontinue the
sulphur operations, accounting standards require it to be
included in the loss from continuing operations.
2. EQUITY OFFERING, HALLIBURTON ALLIANCE AND LONG-TERM DEBT
In April 2000, McMoRan Exploration Co. (McMoRan) sold 3.8 million
shares of its common stock for $14.00 per share or $50.3 million
of proceeds, net of underwriting discounts of $2.9 million.
McMoRan used the proceeds to repay outstanding borrowings under
its existing bank credit facilities.
In June 2000, McMoRan executed a definitive agreement with
Halliburton Company to form a strategic alliance that combines
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 has provided a guarantee that provides up to $50
million of additional borrowings available to McMoRan Oil & Gas
LLC under terms of an amended revolving facility (amended
facility). Under terms of the amended facility, McMoRan has
potential credit availability of up to $75 million, including the
$50 million currently available under the Halliburton guarantee.
The $25 million balance of the commitment is subject to semi-
annual borrowing base re-determinations based on traditional
present value analysis of McMoRan Oil & Gas' proven reserves. At
June 30, 2000, a total of $10 million was available and undrawn
under this portion of the amended facility (see Note 6). This
amount cannot be drawn unless all amounts available under the
Halliburton guaranteed facility are fully drawn. McMoRan pays
Halliburton a fee based on usage and had provided a first
priority lien on its interest in the Brazos A-19 property as
security for its guarantee. As a result of McMoRan's sale of
the Brazos A-19 property,
6
Halliburton agreed to substitute its
lien on this property with a lien on certain other properties
(see Note 6). Halliburton also has 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 representing the reimbursement of exploration costs
will be used to reduce outstanding borrowings and the commitment
under the Halliburton guaranteed portion of the facility. As of
June 30, 2000, $17.0 million was drawn on the amended facility
and the weighted-average interest rate on these borrowings was
8.4 percent. This facility matures no later than December 31, 2003.
The amount of availability under the Halliburton guaranteed
portion of the amended facility is contingent upon McMoRan's
ability to raise additional capital. In the event McMoRan fails
to raise an additional $25 million by December 31, 2000 and an
additional $50 million by December 31, 2001, the $50 million
commitment will be reduced by the amount of the shortfall and
McMoRan will be required to repay any loans outstanding in excess
of the adjusted commitment amount. In addition to traditional
sources of funding such as those offered by the capital markets,
McMoRan can meet its obligations with respect to additional
capital through the sale of program interests in its drilling
prospects or the sale of interests in individual prospects.
In addition to the facility discussed above, McMoRan has a
variable rate revolving credit facility that is available to
Freeport-McMoRan Sulphur LLC (Freeport Sulphur) (see Note 9
"Long-Term Debt" included in McMoRan's 1999 Annual Report on Form
10-K). At June 30, 2000, outstanding borrowings under this
facility totaled $34.1 million and the weighted-average interest
rate on these borrowings totaled 6.8 percent. Outstanding
borrowings under the facility totaled $14.0 million at December
31, 1999. Subsequent to June 30, 2000, this facility was amended
(see Note 6).
3. 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 during the periods presented plus
the net effect of outstanding dilutive stock options. Stock
options representing 270,000 shares during the second quarter of
1999 and 210,000 shares of common stock for the six months ended
June 30, 1999 were included in the diluted net income per share
calculations. Stock options representing 133,000 shares in the
second quarter of 2000 and 190,000 shares for the six month ended
June 30, 2000 were considered anti-dilutive because of these
periods' net losses and were excluded from the diluted net loss
per share calculation.
Outstanding stock options excluded from the computation of
diluted net income (loss) per share of common stock because their
exercise prices were greater than the average market price of the
common stock during the period are as follows (in thousands,
except for average exercise prices):
Second Quarter Six Months
--------------- ---------------
2000 1999 2000 1999
------ ------ ------ ------
Outstanding options 1,282 406 1,153 942
Average exercise price $19.76 $20.26 $20.04 $19.03
4. FINANCIAL INSTRUMENTS AND CONTRACTS
Based on its assessment of market conditions, McMoRan may enter
into 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.
McMoRan has oil forward sales contracts related to its Main
Pass oil production. During the second quarter of 2000, McMoRan
settled contracts on 0.1 million barrels of oil at an average
price of $20.97 per barrel, which resulted in a realized loss of
$0.7 million. For the six month period ended June 30, 2000 the
settled contracts totaled 0.2 million barrels of oil at an
average price of $21.70 per barrel, which resulted in a
recognized loss of $1.5 million. As of June 30, 2000, McMoRan
had contracts to sell
7
0.2 million barrels of oil at an average
price of $19.23 per barrel through December 2001. These contracts
had a fair value of approximately $(1.8) million as of June 30,
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 expects to adopt SFAS 133
effective January 1, 2001. Adoption is expected to require
McMoRan to report other comprehensive income or loss for changes
in fair value of the instruments that qualify as hedges.
5. RATIO OF EARNINGS TO FIXED CHARGES
McMoRan's earnings to fixed charges calculation resulted in a
shortfall of $23.6 million in the first six months of 2000 and
$0.8 million in the first six months 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.
6. SUBSEQUENT EVENTS
On July 27, 2000, McMoRan sold all of the $210 million
exploration program's interests in Brazos Blocks A-19 and A-26 to
Shell Offshore Inc. for $70 million, $66.5 million net to
McMoRan's interest. McMoRan will recognize a net gain of
approximately $40 million associated with the sale during the
third quarter of 2000. The proceeds were used to repay all
outstanding borrowings under McMoRan's amended facility (Note 2).
McMoRan's 26.4 percent net revenue interest in Brazos Block
A-19 was pledged as security for the $50 million revolving
facility that is guaranteed by Halliburton under the terms of the
amended credit facility (Note 2). The bank group and Halliburton
released the Brazos Block A-19 interest as security for this
revolving facility and accepted as substitute collateral
McMoRan's interests in certain of its other producing fields and
the reserves associated with the recent discovery at Ship Shoal
Block 296. McMoRan's interest in this substitute collateral was
released from the $25 million commitment portion of the amended
facility and pledged to secure the $50 million Halliburton
guaranteed portion of the amended facility. Accordingly,
McMoRan's current credit availability under the amended credit
facility is limited to the $50 million Halliburton guarantee.
However, additional amounts under this facility up to the
remaining $25 million commitment could become available for
borrowing upon discovery of additional proved reserves.
On August 11, 2000, Freeport Sulphur amended its existing
$100 million revolving credit facility that reduced the
commitment to $64.5 million (sulphur facility). This amended
revolving credit facility is secured by substantially all of
the assets of Freeport Sulphur, including its Main Pass oil
interest, and will mature on the earlier of April 30, 2001 or the
receipt of the net proceeds from the sale of McMoRan's sulphur
transportation, logistics and marketing assets.
In August 2000, Freeport Sulphur and Devon Energy Corporation
(Devon), a successor to Pennzoil Company (Pennzoil), agreed in
principle to settle Freeport Sulphur's ongoing liability
associated with its acquisition of Pennzoil's sulphur division
(see Note 10 "Other Liabilities" included in McMoRan's 1999
Annual Report on Form 10-K). Under terms of the proposed
settlement Freeport Sulphur will assume certain Devon sulphur
related environmental liabilities and pay Devon $6.0 million.
The costs associated with this settlement approximate the value
of McMoRan's recorded liability. The terms of the settlement are
subject to renegotiation and execution of a definitive agreement
with Devon.
-----------------
Remarks
The information furnished herein should be read in conjunction
with McMoRan's financial statements contained in its 1999 Annual
Report on 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 June 30,
2000, the related statements of operations for the three and six-
month periods ended June 30, 2000 and 1999 and the statements of
cash flow for the six-month periods ended June 30, 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 (not presented herein),
and, in our report dated January 19, 2000, we expressed an unqualified
opinion on that statement. In our opinion, the information set forth
in the accompanying condensed balance sheet as of December 31, 1999,
(which has been restated to conform to the Company's presentation of
discontinued operations as discussed in Note 1), 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
July 20, 2000 (except with
respect to Note 6 as to
which the date is
August 11, 2000)
9
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Management's discussion and analysis presented below should
be read in conjunction with our discussion and analysis and
financial results contained in our 1999 Annual Report on Form
10-K. The operating results summarized in this report are not
necessarily indicative of our future operating results.
DISCONTINUED SULPHUR BUSINESS
Low sulphur prices and higher natural gas prices have caused
our mining operations at Main Pass to be uneconomic in the
current sulphur price environment. Sulphur prices have been at
low levels because of weak demand from the phosphate fertilizer
industry, the principal consumer of sulphur, and the increasing
availability of recovered sulphur. Further reductions in
sulphur demand are being experienced currently from recent
announcements of curtailments in operations by major phosphate
fertilizer producers. Concurrently, the operating costs for
Main Pass sulphur production increased dramatically as a result
of the major price increase in natural gas, a significant
element of cost in mining sulphur. Our average delivered cost
for natural gas averaged $2.51 per Mcf in 1999, $2.66 per Mcf
in the first quarter of 2000, $3.76 per Mcf in the second
quarter of 2000 and $4.65 per Mcf for July 2000.
As a result, in July 2000 we ceased our sulphur drilling
operations and initiated a phased discontinuation of our mining
operations at Main Pass. Sulphur production at Main Pass is
anticipated to decline over an approximate six-month period,
with final production expected around the end of 2000. Our
contractual obligations to our sulphur customers will be met
with available Main Pass production, sulphur inventories and
purchases of recovered sulphur. We will continue to produce
oil at Main Pass, which is currently producing at approximately
5,200 barrels of oil daily, 2,500 barrels per day net to our
interest. We are also evaluating alternative uses for the Main
Pass facilities and do not contemplate a complete reclamation
of the facilities for a period of several years.
In addition to our Main Pass sulphur mining operations, we
are also engaged in the transportation and marketing of
recovered sulphur. While this business remains profitable at
low sulphur prices, we plan to sell the business to raise funds
to cover the cost of discontinuing sulphur operations at Main
Pass and to reduce debt. We are pursuing various alternatives
with regard to the disposal of our sulphur transportation,
logistics and marketing assets. Our aggregate net book value
of these assets approximates $66 million. On August 11, 2000,
we amended our $100 million revolving credit facility (sulphur
facility) that will enable us to proceed with our business plan
to exit the sulphur business. Loan commitments under the
amended sulphur facility have been reduced from $100 million to
$64.5 million and are fully available to fund our near-term
capital requirements under our sulphur business discontinuation
plan. The amended sulphur facility is secured by substantially
all of Freeport-McMoRan Sulphur LLC's assets, including our
Main Pass oil interest, and will mature on the earlier of April
30, 2001 or the receipt of the net proceeds from the sale of
our sulphur transportation, logistics and marketing assets.
Our sulphur facility had an outstanding balance of $36.0
million as of August 11, 2000.
As a result of our plans to exit the sulphur business, both
our current and prior year financial results of the former
sulphur business segment are reported as discontinued operations.
The loss from discontinued sulphur operations for the three- and
six-month periods in 2000 includes non-cash charges totaling
$78.1 million to reflect the net realizable value of sulphur
segment assets and liabilities. These charges include: $20.1
million to write off the difference between the book value of the
Main Pass sulphur mine and estimated future cash flows from
sulphur reserves, taking into consideration recent changes in
sulphur prices and operating costs; $25.2 million for the
writedown of the book value of other mining-related assets,
primarily certain specialized marine equipment utilized in
handling mined sulphur, to estimated recoverable values; and
$32.8 million for remaining unaccrued estimated mine reclamation
costs. Additional estimated charges of $7.5 million, including
employee related costs, are included separately as "loss on
disposal of sulphur assets" for the three- and six-month periods
of 2000. Operating results relating to these discontinued
operations are currently estimated to be break-even through the
anticipated disposal date.
We have completed our shutdown efforts at our Culberson mine
in West Texas, which permanently ceased production on June 30,
1999. We intend to sell all our remaining interests in the mine
for approximately $3.5 million during the third quarter of 2000.
10
OPERATIONAL ACTIVITIES
The following summarizes our recent significant operational
activities.
. The Brazos Block A-19 JC#1 well has been shut-in since
November 1999 and efforts to re-establish production from the
existing well were unsuccessful. The operator plans to
permanently abandon the well. On July 27, 2000, we sold our
26.4 percent net revenue interest in Brazos Block A-19 and
our 38.2 percent net revenue interest in the unexplored
Brazos Block A-26 to Shell Offshore Inc. for $66.5 million.
We will recognize a net gain of approximately $40 million in
the third quarter of 2000. We will continue to pursue our
rights to recover our losses associated with the premature
abandonment of this well from our insurers.
. On June 5, 2000 we commenced exploratory drilling of the #1
well at Ship Shoal Block 296. The well, reached a total
depth of 12,800 feet and encountered 67 feet of net gas pay
in two zones. On July 31, 2000, we commenced drilling the #2
well at the prospect to delineate the parameters of the
encountered reserves of the #1 well. The #2 well's planned
total depth is 10,250 feet and drilling is expected to be
completed in the third quarter of 2000. We currently own a
61.8 percent working interest in these wells. Ship Shoal
Block 296 covers 5,000 acres and is located in approximately
260 feet of water, 62 miles offshore Louisiana.
. During the first quarter of 2000 we acquired an interest in
the Eugene Island 193/208/215 prospect from Texaco for
approximately $0.3 million and the assumption of an
abandonment obligation associated with existing wells and
platforms at the location. As previously announced, we re-
established sustained production of approximately 800 barrels
per day (350 barrels per day net to our interest) from four
wells in the field during June 2000. We are currently
evaluating the other existing wells in the field to determine
whether additional re-completion work is warranted. We also
plan to drill an exploratory well on Block 193 to a proposed
depth of 17,500 feet 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. This prospect
covers 10,000 acres and is located in approximately 100 feet
of water, 135 miles offshore Louisiana.
. As previously reported, on April 18, 2000 we reached the
contracted turnkey depth of approximately 15,000 feet at the
Vermilion Block 144 #3 well. We have set protective casing
and temporarily abandoned the well. These drilling activities
have extended the lease expiration date by 180 days to
October 2000. The estimated additional costs to reach a
proposed total depth of 17,500 feet are $4.7 million. We have
deferred additional drilling on this prospect until the
second half of 2000 while we pursue the drilling of other
prospects in our inventory and continue discussions with
industry participants regarding their participation in our
exploration program. We currently own a 95 percent working
interest and a 76.3 net revenue interest in the prospect,
which covers 5,937 acres and is located in approximately 90
feet of water adjacent to our producing field at Vermilion
Block 160.
. The Green Canyon Block 90 #1 exploratory well reached a total
depth of 9,500 feet in late July 2000. The well did not
encounter any commercial quantities of hydrocarbons and has
been subsequently plugged and abandoned. We will expense the
$5.4 million of well costs in the third quarter of 2000.
. On July 2, 2000, we commenced exploratory drilling of the #1
well at Garden Banks Block 580. The well has reached its
proposed total depth of 10,425 feet and is currently being
evaluated. We currently have a 95 percent working interest
in this well. Garden Banks Block 580 covers 5,760 acres and is
located in approximately 2,300 feet of water, 145 miles
offshore Texas.
. On February 28, 2000, we commenced exploratory drilling of
the #8 well at Grand Isle Blocks 40/41. The well reached a
total depth of approximately 17,500 feet on May 16, 2000.
Although the well encountered the geological objectives we
defined using 3-D seismic and related geological data, the
targeted sands seen were poorly developed. We concluded that
the well did not contain commercial quantities of oil and gas
reserves and have plugged and abandoned the well. As a
result, we have charged approximately $7.9 million of the
related drilling costs to exploration expense during the
second quarter of 2000.
Our working interests discussed above, other than for Ship
Shoal Block 296, are subject to certain development elections
by both Texaco and Halliburton, which if exercised would reduce
both our working interest and net revenue interests.
11
RESULTS OF OPERATIONS
Our oil and gas operations are located in the Gulf of Mexico
and Gulf Coast region, and include the oil operations at Main
Pass. As a result of our anticipated exploration expenditures, we
may continue to report operating losses in future periods.
Summary comparative data for the second-quarter and six-month
periods ended June 30, 2000 and 1999 follows:
Second Quarter Six Months
---------------------- ----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
(Dollars in thousands,
except for realized prices)
FINANCIAL DATA:
Revenues $ 15,720 $ 13,850 $ 32,725 $ 24,926
Exploration expense 14,102 1,303 26,146 3,853
Operating loss (12,204) (2,024) (23,829) (3,351)
OPERATIONAL DATA:
Sales volumes:
Gas (thousand cubic feet,
or MCF) 2,528,500 3,751,900 6,041,900 7,539,400
Oil (barrels)a 282,000 368,300 603,400 764,600
Average realizations:
Gas (per MCF) $ 3.52 $ 2.19 $ 3.00 $ 2.00
Oil (per barrel) a 23.78 14.87 23.83 12.61
a. Includes sales of sour crude oil from the Main Pass oil
operations. Main Pass sales totaled approximately 222,400
barrels at an average realization of $22.27 per barrel in
the second quarter of 2000 and 299,000 barrels at an average
realization of $14.40 per barrel in the second quarter of 1999.
For the six-month periods Main Pass sales totaled approximately
486,500 barrels at an average realization of $22.45 per barrel in
2000 and 610,300 barrels at an average realization of $12.15
per barrel in 1999.
A summary of increases (decreases) in our oil and gas
revenues between the periods follows (in thousands):
Second Six
Quarter Months
--------- --------
Oil and gas revenues - 1999 periods $ 13,850 $ 24,926
Increase (decrease)
Sales volumes:
Oil (1,283) (2,033)
Gas (2,679) (2,995)
Price realizations:
Oil 2,513 6,770
Gas 3,363 6,042
Other (44) 15
--------- --------
Oil and gas revenues - 2000 periods $ 15,720 $ 32,725
========= ========
Revenues for both the second quarter and six months ended
June 30, 2000 benefited from substantially higher average
realizations for both oil and gas over prices realized in 1999,
reflecting improved market conditions. These increases were
partially offset by a reduction in our volumes sold during 2000
when compared to volumes sold during 1999. The decreases in
sales volumes resulted from normal production declines of our
producing fields, primarily Main Pass and the Vermilion Block 160
unit, including the Vermilion Block 159 CJ-1 well, which fully
depleted its proved reserves during the second quarter of 2000.
Gas sales for the 1999 periods include sales associated with the
Vermilion Block 410 field, that we sold in March 1999. Sales
volumes during the second quarter of 1999 reflect the
commencement of operations at our West Cameron 616 field.
Production and delivery expense totaled $5.6 million during
the second quarter of 2000 and $12.7 million for the six months
ended June 30, 2000 compared with $4.1 million and $7.2 million
for the comparable periods in 1999. The increases reflect:
12
1) Net profits payments earned by others totaling $1.1 million
during the second quarter and $2.0 million for the six-month
period of 2000 associated with the Vermilion Block 160 field
unit and the Vermilion Block 160 BJ-1 well.
2) Workover costs totaling $0.7 million during the second quarter
and $2.6 million for the six months ended June 30, 2000. The
workover costs reflect our activities on Eugene Island Blocks
193/208/215 during the second quarter of 2000 and the
ultimately unsuccessful efforts to re-establish production
from the Brazos Block A-19 JC#1 well in the first quarter of
2000.
3) Additional transportation costs associated with fields that
commenced operations in the first quarter of 1999.
Depreciation and amortization expense totaled $5.5 million
during the second quarter of 2000 and $12.3 million for the six
months ended June 30, 2000 compared to $8.6 million and $16.8
million for the comparable periods of 1999. The decreases
primarily reflect the lower production volumes.
Our exploration expense has increased substantially because
of our newly expanded exploration program (see "Recent
Developments" and Note 3 "Acquisitions" included in our 1999
Annual Report on Form 10-K for a discussion of our recently
acquired exploration rights). Summarized exploration expenses
are as follows (in millions):
Second Quarter Six Months
-------------- ----------------
2000 1999 2000 1999
------ ----- ------ ------
Geological and geophysical,
including 3-D seismic purchases $ 5.2 $ 0.8 $ 13.0 $ 1.7
Dry hole costs 7.9a 0.1 11.6a,b 1.6c
Other 1.0 0.4 1.5 0.6
------ ----- ------ ------
$ 14.1 $ 1.3 $ 26.1 $ 3.9
====== ===== ====== ======
a. Includes the expensed exploratory well costs associated with
the Grand Isle Block 40/41 #8 well.
b. Includes approximately $3.7 million of expensed exploratory
well costs associated with the State Tract 210 #6 well.
c. Represents the costs associated with the unsuccessful #5
exploratory well at Vermilion Block 162.
Our exploration expenses can be expected to fluctuate in
future periods based on the level, results and cost of our
numerous planned exploratory drilling projects and, to a lesser
extent, the cost of acquiring and interpreting seismic data.
General and administrative expense totaled $2.7 million for
the second quarter of 2000 and $5.4 million for the six months
ended June 30, 2000 compared with $1.3 million and $3.9 million
for the same period last year. The increase reflects our
increased activities and our no longer being reimbursed for a
portion of the $210 million exploration program's general and
administrative expenses as a result of our fourth-quarter 1999
purchase of Phosphate Resource Partners' 47 percent interest in
the program.
Interest expense totaled $1.2 million during the second
quarter of 2000 and $2.4 million for the six months ended June
30, 2000 compared to $0.1 million during both the second quarter
and six months ended June 30, 1999. The substantial increase
reflects our additional outstanding borrowings during 2000, which
at June 30, 2000 totaled $51.1 million. 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 during the first half of 1999.
Accordingly, interest expense during the first half of 1999 only
reflects the commitment fees paid on our credit facilities.
In connection with the decision to discontinue our sulphur
operations, primarily those associated with the sulphur
transportation, logistics and marketing business, we recorded a
$34.9 million non-cash charge to our deferred tax valuation
allowance which eliminated our net deferred tax asset. This
determination was based upon updated estimates of projected
operating results from continuing operations. Although this
charge related to the decision to discontinue the sulphur
operations, accounting standards require it to be included in the
loss from continuing operations.
13
CAPITAL RESOURCES AND LIQUIDITY
Continuing operations provided net cash from operating
activities of $6.5 million during the six months ended June 30,
2000 compared to $17.7 million during the six months ended June
30, 1999. The decrease can be attributed primarily to working
capital changes. Our total cash flow from operating activities
also reflect a use of $5.9 million associated with our
discontinued sulphur operations in the first six months of 2000
reflecting the weak sulphur market and higher production costs at
the Main Pass mine.
Net cash used in investing activities totaled $70.8 million
for the six months ended June 30, 2000 compared with $9.0 million
for the six months ended June 30, 1999. In January 2000, we
acquired exploration rights to numerous prospects from both
Texaco and Shell (see "Recent Developments" in our 1999 Annual
Report on Form 10-K). The Texaco agreement, in substance,
represents a large farm-in transaction and requires cash
expenditures only as 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 Shell transaction and 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 on
Form 10-K). We subsequently purchased interests in the Eugene
Island Blocks 193/208/215 from Texaco for $0.3 million (see
"Operational Activities" above). During the second quarter of
2000 we sold various residual oil and gas interests for $1.4
million. Our exploration and development capital expenditures
totaled $33.7 million during the first half of 2000. These
expenditures included: 1) purchases of seismic and other related
geological data; 2) expensed exploratory drilling costs related
to the State Tract 210 # 6 and Grand Isle Block 40/41 #8 wells;
3) capitalized drilling costs primarily for the Vermilion Block
144/145 #3 and the Ship Shoal Block 296 #1 exploratory wells and
4) various capitalized re-completion costs on existing producing
wells.
On July 27, 2000, we sold our ownership interests in Brazos
Blocks A-19 and A-26 to Shell for $66.5 million cash (see
"Operational Activities" above). We used the sale proceeds to
repay all our outstanding borrowings under our amended credit
facility (Note 6). We believe the remaining sale proceeds and
the $50 million of credit availability made available through our
alliance with Halliburton, provide us the capital resources
necessary to conduct our planned exploration activities through
2001. However, we anticipate that we will require additional
capital for expected additional exploration opportunities and for
development activities. Our availability under the Halliburton
guarantee is contingent upon our ability to raise additional
capital of $25 million by December 31, 2000 and an additional $50
million by December 31, 2001 (Note 2). The $50 million
commitment will be reduced by the amount of any shortfall in our
supplementary financing efforts and we would be required to repay
any loans in excess of the adjusted commitment amount.
Accordingly, we are continuing to pursue other financing
opportunities, including arrangements with other companies
engaged in the oil and gas industry, as well as traditional
sources of funding such as those offered by capital markets.
During the six months ended June 30, 1999, exploration and
development expenditures totaled $16.4 million, which included:
1) capitalized oil and gas drilling costs of $12.5 million
primarily for the development of West Cameron Block 616, the
Vermilion Block 160 BJ-1 well, and the Brazos Block A-19 JC #1
well; 2) geological and geophysical and other exploration
expenses of $2.3 million; and 3) expensed drilling costs of $1.6
million associated with the Vermilion Block 162 #5 exploratory
well. 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. Net cash provided by the discontinued sulphur operations
totaled $2.0 million, reflecting the sale and leaseback of
certain rail cars partially offset by drilling costs to replace
wells lost during Hurricane Georges.
Continuing operations' financing activities provided cash of
$64.3 million during the six months ended June 30, 2000 compared
to using $14.5 million during the six months ended June 30, 1999.
In April 2000, we completed an equity offering in which we sold
3.8 million shares of our common stock for $14.00 per share. Our
net proceeds at the completion of the equity offering totaled
$50.3 million. Our cash provided from financing activities during
the first half of 2000 also reflects additional net borrowings of
$31.2 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.
Net cash provided from the discontinued sulphur operations
totaled $5.9 million, which represented the net borrowings
necessary to fund its operating activities.
14
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 half of 2000
we purchased 799,900 shares of our common stock for $15.2
million, an average of $19.00 per share. During the first half
of 1999, we purchased 877,735 shares of our common stock for
$14.8 million, an average of $16.83 per share. The 1999 purchases
included one transaction in which we purchased from Phosphate
Resource Partners all 769,535 shares of our common stock they
owned for $12.8 million or $16.64 per share. From inception of
the share purchase program through June 30, 2000, we have
purchased approximately 2.2 million shares for $41.6 million, an
average price of $18.56 per share. The timing of 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.
As previously discussed, (see "Discontinued Sulphur
Business" above), we plan to sell our sulphur transportation,
logistics and marketing assets and use the expected proceeds to
repay all outstanding borrowing on the amended sulphur credit
facility (Note 6). The remaining sale proceeds will be used to
support the reclamation operations at the Main Pass mine. We
expect to incur approximately $20 million of mine reclamation
expenditures at Main Pass and its related facilities within the
next twelve months.
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.
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.
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 on Form 10-K.
15
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.
IMC-Agrico has alleged that our announced suspension of sulphur
production at Main Pass and our proposed sale of our sulphur
transportation assets constitute a statement of intent to breach
our obligations under the agreement. We intend to vigorously
defend ourselves from IMC-Agrico's allegations and to pursue our
rights under the agreement.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) Our Annual Meeting of Stockholders was held May 4, 2000
(the Annual Meeting). Proxies were solicited pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended.
(b) At the Annual Meeting Robert A. Day, Rene L. Latiolais,
Gabrielle K. McDonald and J. Taylor Wharton were elected to serve
until the 2003 Annual Meeting of Stockholders. In addition to
the directors elected at the Annual Meeting, the terms of the
following directors continued after the Annual Meeting: Richard
C. Adkerson, Morrison C. Bethea, Gerald J. Ford, H. Devon Graham,
Jr., James R. Moffett and B. M. Rankin, Jr.
(c) At the Annual Meeting, holders of McMoRan common stock
elected the following directors with the number of votes cast for
or withheld from each nominee as follows:
Name For Withheld
- ---- ---------- --------
Robert A. Day 11,630,994 152,739
Rene L. Latiolais 11,627,814 155,919
Gabrielle K.McDonald 11,623,229 160,504
J. Taylor Wharton 11,627,662 156,071
With respect to the election of the directors, there were no abstentions.
At the Annual Meeting, the stockholders also voted on and
approved a proposal to ratify the appointment of Arthur Andersen
LLP to act as the independent auditors to audit our financial
statements for the year 2000. Holders of 11,733,097 shares voted
for, holders of 35,757 shares voted against and holders of 14,879
shares abstained from voting on, such proposal.
At the Annual Meeting, the stockholders voted on and
approved a proposal to adopt McMoRan's 2000 Stock Incentive Plan
in the form presented in McMoRan's proxy statement dated March
30, 2000. Holders of 10,980,905 shares voted for, holders of
700,952 shares voted against and holders of 101,876 shares
abstained from voting on such proposal. There were no broker
non-votes with respect to the proposal.
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) The registrant filed no Current Reports on Form 8-K during the
period covered by this Quarterly Report on Form 10-Q.
16
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: August 14, 2000
17
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 Mangement 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 McMoRan 1999 Stock Incentive Plan.
10.6 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).
10.7 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).
10.8 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).
E-1
10.9 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).
10.10 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)).
10.11 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)).
10.12 Main Pass 299 Sulphur and Salt Lease, effective May 1, 1988.
(Incorporated by reference to Exhibit 10.3 to the Freeport Sulphur
S-1).
10.13 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)
10.14 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).
10.15 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).
10.16 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).
10.17 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).
10.18 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).
10.19 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).
10.20 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).
10.21 Side letter with IGL regarding the Sulphur Supply Agreement.
(Incorporated by reference to Exhibit 10.10 to the Freeport Sulphur
S-1).
10.22 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).
E-2
10.23 Amendment Number 1 to the Processing Agreement. (Incorporated by
reference to Exhibit 10.12 to the Freeport Sulphur S-1).
10.24 Amendment Number 2 to the Processing Agreement. (Incorporated by
reference to Exhibit 10.13 to the Freeport Sulphur S-1).
10.25 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).
10.26 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).
10.27 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).
10.28 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).
10.29 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).
10.30 Supplemental Letter Agreement between FM Services and
Rene' L. Latiolais effective July 1, 2000.
10.31 Amended and Restated Credit Agreement dated June 15, 2000 among
McMoRan Oil and Gas, as borrower, Chase Bank of Texas, National
Association, as agent and the Lenders Signatory thereto.
10.32 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).
10.33 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).
10.34 Participation Agreement dated as of June 15, 2000 but effective as
of March 24, 2000 between McMoRan Oil & Gas and Halliburton Energy
Services, Inc.
15.1 Letter dated July 20, 2000 from Arthur Andersen LLP
regarding the unaudited financial statements.
27.1 McMoRan Financial Data Schedule.
27.2 Restated McMoRan Financial Data Schedule.
E-3