SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 1997
Commission File Number: 0-23870
McMoRan Oil & Gas Co.
Incorporated in Delaware 72-1266477
(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, 1997, there were issued and outstanding 14,036,519 shares
of the registrant's Common Stock, par value $0.01 per share.
This Amendement No. 1 to the Quarterly Report on Form 10-Q is being
filed by McMoRan Oil & Gas Co. ("MOXY" or the "Company") to amend the following
items:
Management's Discussion and Analysis
of Financial Condition and Results
of Operations
Signature
Exhibit Index
McMoRan Oil & Gas Co.
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
OVERVIEW
McMoRan Oil & Gas Co. (MOXY) is an independent oil and gas company
engaged in the exploration, development and production of oil and
natural gas. MOXY commenced operations in May 1994 following the
distribution of its common stock to the stockholders of Freeport-
McMoRan Inc. (FTX) in order to carry on substantially all of the oil
and gas exploration activities previously conducted by FTX for its own
account. MOXY and its predecessors have conducted exploration,
development and production operations offshore in the Gulf and onshore
in the Gulf Coast and other areas for more than 25 years, which have
provided MOXY with an extensive geological and geophysical database
and significant technical and operational expertise. MOXY expects to
continue to concentrate its efforts in this selected geographic area
where its management team has significant exploration experience.
OPERATIONAL ACTIVITIES
During the first quarter of 1997, MOXY had the following activity
within its 40 percent owned exploration and development program with
MCN Corporation (MCN):
* Daily gross production at the Vermilion Block 160 field averaged
approximately 14 million cubic feet (Mmcf) of natural gas and 570
barrels of condensate. Additional drilling on a development well,
which discovered approximately 215 feet of net pay in 1996, resulted
in the discovery of an additional 47 feet of net pay. MOXY
immediately began drilling an additional well to develop the newly
discovered reserves. After completion of all drilling activity from
the platform, the wells will be completed and could be on stream
during the third quarter of 1997, depending on the number of wells
drilled. The MOXY/MCN program has a 28 percent revenue interest in
this field unit which is subject to re-determination subsequent to
final development drilling. In addition, the MOXY/MCN program's
interest in two of the four blocks within the Vermilion Block 160
field unit is subject to a 30 percent net profits interest.
* Production at the Vermilion Block 410 field began in late
December 1996 from the first of the two production platforms.
Production began from the second platform in February 1997. Daily
gross production currently totals approximately 75 Mmcf of gas and is
expected to exceed 80 Mmcf of gas after the completion of limited
remediation work. The MOXY/MCN program has a 28 percent revenue
interest in this field.
* In March 1997, the MOXY/MCN program agreed to sell its interest
in West Cameron Block 503 for $7.2 million, $2.9 million net to MOXY.
The sale closed in April 1997, with MOXY recognizing a $2.3 million
gain and using the proceeds to repay borrowings from MCN.
* New 3-D seismic data was received and mapping began on West
Cameron Blocks 616 and 617, as well as on Grand Isle Block 65 and the
adjacent Grand Isle Blocks 58 and 59. Depending on the results of
analyzing the new seismic data, exploratory drilling could commence
during the second half of 1997.
MOXY was high bidder on seven of the eight leases on which it bid
at the OCS Lease Sale 166, held in March 1997. Awarding of the leases
is subject to approval by the Minerals Management Service, which is
expected during the second quarter of 1997. MOXY's seven high bids
totaled $5.5 million. MOXY entered into an agreement with Freeport-
McMoRan Resource Partners, Limited Partnership (FRP) pursuant to which
FRP will acquire a 50 percent working interest ownership in these
leases and will bear 60 percent of the associated acquisition and
exploration costs. MCN will have no interest in these new leases.
In April 1997, MOXY's 25 percent owned exploration joint venture
with Phillips Petroleum Company and FRP completed drilling of an
exploratory well on the North Bay Junop prospect, the second of two
high-risk, high-potential prospects which have been drilled within the
joint venture's project area in south Louisiana. The well reached
total depth but did not encounter commercial hydrocarbons in the
primary objective zones. MOXY is currently reviewing several
alternatives regarding shallower potentially productive zones
encountered in this well, as well as evaluating other leads for
drilling additional wells within the project area which have been
identified by 3-D seismic survey.
RESULTS OF OPERATIONS
MOXY reported a net loss of $2.5 million ($0.18 per share) for the
first quarter of 1997 compared with a net loss of $4.3 million ($0.31
per share) for the 1996 period.
Three Months Ended
March 31,
--------------
1997 1996
----- -----
Revenues (In millions):
Oil and gas sales $ 2.4 $ .7
Management fees .4 .4
----- -----
$ 2.8 $ 1.1
===== =====
Production quantities:
Gas (Mcf) 792,300 155,800
Oil (barrels) 5,600 8,400
Average realization:
Gas (per Mcf) $2.78 $3.09
Oil (per barrel) $23.43 $20.17
MOXY's 1997 revenues consisted of $2.4 million from its 40
percent share of the MOXY/MCN program's interest in production from
the Vermilion Block 160 and 410 fields and $0.4 million from
management fees earned from the MOXY/MCN program. Revenues for the
1996 period consisted of its revenue interest in the Vermilion Block
160 field and management fees earned from the MOXY/MCN program.
MOXY's revenues for the first three months of 1997 increased
significantly over the 1996 period level as the Vermilion Block 410
field began producing from the first of two production platforms in
December 1996, with production from the second platform commencing in
February 1997.
Three Months Ended
March 31,
---------------
1997 1996
------ -----
(in millions, except per share amounts)
Production and delivery,
including depreciation
and amortization $ 2.0 $ 0.4
Exploration Expenses:
Geological and geophysical $ 1.5 $ 1.2
Exploratory drilling and
leasehold costs 0.9 3.3
Reimbursement of previously
expensed costs - -
----- -----
$ 2.4 $ 4.5
===== =====
Operating loss $(2.3) $(4.5)
Net loss $(2.5) $(4.3)
Net loss per share $(.18) $(.31)
The fluctuations in MOXY's production and delivery costs and
depreciation and amortization expenses are consistent with the changes
in production quantities referenced above.
MOXY's unsuccessful exploratory drilling and leasehold costs
fluctuate from period to period based on the related drilling results
and the amount of costs involved in the project. Exploratory drilling
and leasehold costs in the 1997 and 1996 first quarter periods each
included costs related to one unsuccessful drilling project, with
greater 1996 costs reflecting a higher project cost.
Interest expense totaled $0.4 million for the three month 1997
period versus zero for the three month 1996 period, reflecting the
increased borrowings from MCN (initiated in mid-1996) to fund MOXY's
share of exploration and development expenditures.
As a result of anticipated future exploration expenditures, MOXY
expects to continue to report operating losses for at least the near
future.
CAPITAL RESOURCES AND LIQUIDITY
Management believes the opportunities for MOXY to discover significant
oil and gas reserves can best be achieved through the use of advanced
3-D seismic technology, applied in conjunction with a larger, longer-
term exploration program. In late 1996, MOXY entered into an
agreement with a geophysical services company pursuant to which MOXY
committed to purchase 3-D seismic surveys covering a significant
number of lease blocks over a multi-year period. With the anticipated
conclusion of the exploration portion of the MOXY/MCN program in mid-
1997 ($9.0 million remained to be spent at March 31, 1997), MOXY must
secure alternative sources of funding to finance its future
exploration activities. Management is currently evaluating options to
obtain additional long-term funding, none of which can be considered
assured, including entering into one or more new exploration joint
ventures, issuing additional equity or undertaking a business
combination with another entity.
MCN did not participate in the new 3-D seismic program discussed
above and will have no right to any of the leases acquired as a result
of this new seismic data. Furthermore, MCN has indicated that it does
not wish to enter into the type of long-term agreement that MOXY
believes will best enable MOXY to pursue its future exploration
activities. At March 31, 1997, MOXY had $14.0 million of borrowings
outstanding from MCN, with an additional $7.5 million of borrowings
available from MCN for past expenditures. MOXY's share of net
revenues from the program's properties, which includes Vermilion
Blocks 160 and 410, and its share of proceeds from the West Cameron
Block 503 sale are dedicated to the repayment of the MCN loan.
MOXY has committed expenditures of approximately $6.5 million for
the remainder of 1997, which approximates the remaining available
borrowings under the MOXY/MCN program. MOXY's future viability
depends on a number of factors, primarily its ability to secure
additional funding, the success of its exploration and development
activities, the production of its proved reserves and the prices of
oil and gas, none of which can be assured because of the uncertainties
and risks inherent in oil and gas operations. MOXY's ability to
continue its operations beyond the funding provided by the MOXY/MCN
program depends on securing additional funding and achieving success
in its exploration activities. No payment of dividends to MOXY
shareholders is presently contemplated.
MOXY incurred $5.0 million of cash exploration and development
expenditures during the first three months of 1997, principally
consisting of $1.6 million for development at Vermilion Blocks 160 and
410, $0.4 million for lease acquisition costs, $0.9 million in
drilling and leasehold costs charged to expense and $1.5 million of
geological and geophysical costs.
CAUTIONARY STATEMENT
Management's discussion and analysis contains forward-looking
statements. All statements other than statements of historical fact
included in this report, including, without limitation, statements regarding
plans and objectives of MOXY's management for future operations and MOXY's
exploration and development activities are forward-looking statements.
Important factors that could cause actual results to
differ materially from MOXY's expectations include, without limitation,
exploratory drilling results, economic and business conditions, general
development risks and hazards and risks inherent with the encountering
of formations with abnormal pressures, changes in laws or regulations and
other factors, many of which are beyond the control of MOXY. Further
information regarding these and other factors that may cause MOXY's future
performance to differ from that projected in the forward-looking statements
are described in more detail in MOXY's Form 10-K for the year ended
December 31, 1996.
_________________________
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
PART II--OTHER INFORMATION
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) No reports on Form 8-K were filed by the registrant during the
quarter for which this report is filed.
McMoRan Oil & Gas 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 Oil & Gas Co.
By: /s/ C. Donald Whitmire
-----------------------------
C. Donald Whitmire
Controller
(authorized signatory and
Principal Accounting Officer)
Date: September 24, 1997
McMoRan OIL & GAS CO.
EXHIBIT INDEX
Exhibit
Number
15.1 Letter dated August 20, 1997 from Arthur Andersen LLP
regarding unaudited interim financial statements.