Freeport-McMoRan Sulphur Inc.
Personal Solicitation Materials
SLIDE 1
McMoRan Exploration Co.
SLIDE 2
McMoRan Exploration Co.
CAUTIONARY STATEMENT
This presentation contains a number of forward-looking
statements. Important factors that could cause actual results to
differ materially from expectations include the following:
variations in the market prices of oil, natural gas and sulphur;
drilling results; unanticipated fluctuations in flow rates of
producing wells; oil, natural gas and sulphur reserve
expectations; the ability to satisfy future cash obligations and
environmental costs; general development risks and hazards; and
the ability to realize synergies. Such factors and others are
more fully described in the Company's Registration Statement on
Form S-4 filed with the Securities and Exchange Commission on
August 11, 1998.
SLIDE 3
McMoRan Exploration Co.
PRO FORMA OWNERSHIP STRUCTURE
MOXY FSC
Shareholders Shareholders
58.5% 41.5%
McMoRan Exploration Co.
(MOX*)
Oil & Gas Division Sulphur Division
Exploration Production
Development Recovered Purchases/Sales
Production Terminaling & Transport
*Application to be made for listing on NYSE
SLIDE 4
McMoRan Exploration Co.
TRANSACTION PROCESS
DATE MOXY FSC
June 3-4, 1998 (Independent Robert A. Day J.Terrell Brown
Committees) Gerald J. Ford Thomas D. Clark
June 10-25, 1998 (Legal Haynes & Boone Jones, Day,
Counsel) Reavis & Pogue
(Investment Bear Stearns Lehman Brothers
Bankers)
July 14-31, 1998 Merger Negotiations
July 31
- - Aug 1, 1998 Board Approvals
August 3, 1998 Public Announcement
SLIDE 5
McMoRan Exploration Co.
TRANSACTION TIMELINE
8/3/98.........Press Release
8/11/98........Filing of Proxy/Prospectus Materials with SEC
4-6 weeks......Proxy/Prospectus Becomes Effective: Print and
Mail Documents to Shareholders
4-6 weeks......Proxy Solicitation Period
Merger 4Q
SLIDE 6
McMoRan Exploration Co.
DEAL TERMS
Exchange Ratios - MOXY: 0.20 Share
FSC: 0.625 Share
MOX Outstanding Shares - 14.7 Million
Approval Conditions - Majority of MOXY and FSC Shareholders
Board Representation - All Existing Members of MOXY and FSC
Boards
Tax Treatment - Tax Free
Termination Fee - Expenses Only
SLIDE 7
McMoRan Exploration Co.
FSC - Initial Strategy
Maximize Cash Flow
- Build Revenues
- Reduce Costs
Use Financial Resources to Build Sulphur
Services Business and Related Businesses
Returns to Shareholders
- Share Purchase Program
SLIDE 8
McMoRan Exploration Co.
FSC - 1998 Developments
Positive Cash Flow
Growth of Sulphur Services Business
Price Decrease - U.S. $2.50/Long Ton
Culberson Mine Curtailments in 1Q98 and
Mine Closure on June 30, 1998
Price Increase Resistance
SLIDE 9
McMoRan Exploration Co.
FSC - Growth Opportunities Pursued
Sulphuric Acid Production
Sulphuric Acid Plant Management
Sulphur Recovery Unit Management
Merger/Acquisition with Integrated Businesses
- Transport Business
- By-Product
- Joint Venture
SLIDE 10
McMoRan Exploration Co.
Sulphur Business Risks
Supply/Demand Factors
Production Uncertainties
Reclamation Liabilities
SLIDE 11
McMoRan Exploration Co.
STRATEGIC BENEFITS OF COMBINATION TO FSC
Enhances Growth Opportunities Through Oil and Gas Investments
Diversification Outside Sulphur
Hedge for Natural Gas Costs
Cost Savings
Increases Market Capitalization
SLIDE 12
McMoRan Exploration Co.
STRATEGIC BENEFITS OF COMBINATION TO MOXY
Improves Ability to Take Advantage of Increasing Opportunities
Now Available in Oil & Gas Activities
Greater Financial Resources and Flexibility
Cash Flow Stream
Cost Savings
Increases Market Capitalization
SLIDE 13
McMoRan Exploration Co.
OPPORTUNITIES FOR GROWTH
Increasing Availability Of Farm-In Blocks
Lower Third Party Service Costs
Financial Strength; Cost Synergies
Extensive Geophysical, Technical and Operational
Expertise and Data Base
Acquisition Possibilities
Maximize Growth and Value of Sulphur Services
Business
SLIDE 14
McMoRan Exploration Co.
E&P Stock Index/Capital Market Trends
Graph showing following data:
- - E&P High Yield Offerings ($Billions)
1994 - $0.9
1995 - $2.4
1996 - $2.5
1997 - $4.8
1998YTD - $2.2
- - E&P Equity Offerings ($Billions)
1994 - $1.0
1995 - $2.4
1996 - $2.7
1997 - $1.8
1998YTD - $0.3
- - E&P High Yield Offerings and E&P Equity Offerings Combined
($Billions)
1994 - $1.9
1995 - $4.8
1996 - $5.2
1997 - $6.6
1998YTD - $2.5
- - BSC E&P Index* - Relative Value Index shown as a percentage
*Bear Stearn's E&P Index includes Anadarko, Apache, Barrett,
Brigham, Cabot, Chesapeake, Coho, Comstock, Cross Timbers, EEX,
Lomark, National Energy, Ocean, Oryx, Pogo, Santa Fe, Stone,
Triton and Union Pacific resources.
SLIDE 15
McMoRan Exploration Co.
Oil Price/OCS Lease Sales
Graph depicting Blocks Leased and NYMEX Light Crude Oil
Prices from 1994 through 1998 as summarized below:
Number of Blocks Leased
1994 - 560
1995 - 835
1996 - 1508
1997 - 1778
1998* - 1450
*May Lease Sale Only.
Oil Price Per Barrel
1994 - range during the year from $14.21 to $20.71
1995 - range during the year from $16.79 to $20.41
1996 - range during the year from $17.71 to $25.79
1997 - range during the year from $18.20 to $26.09
1998 - range during the first half of year from $11.84 to
$17.43
Source: Minerals Management Service
SLIDE 16
McMoRan Exploration Co.
3-D SURVEYS IN GULF OF MEXICO
(As of December 1990)
[GRID MAP OF SURVEYS]
SLIDE 17
McMoRan Exploration Co.
3-D SURVEYS IN GULF OF MEXICO
(As of June 1998)
[GRID MAP OF SURVEYS]
SLIDE 18
McMoRan Exploration Co.
AS 3-D Becomes Old Hat,
Gulf Drillers Begin To Fret
"The failure to happen on hydrocarbons after
flushing millions of dollars into the Gulf
floor isn't exceptional ... 3-D tests and the
cutting-edge computer software that read them
have hardly made dry holes a thing of the
past."
The Wall Street Journal, July 29, 1998
Anne Reifenberg & Michael Totty
SLIDE 19
McMoRan Exploration Co.
POTENTIAL LEASE EXPIRATION BY 2001
[Grid Map Depicting Areas Of Expiration on
12-31-1998, 12-31-1999, 12-31-2000, 12-31-2001]
SLIDE 20
McMoRan Exploration Co.
GULF OF MEXICO LEASE EXPIRATIONS(1)
(0 to 600 Feet Water Depth)
Year Blocks Acres
1998(2) 89 482,356
1999 402 1,933,935
2000 424 2,044,837
2001 621 3,012,801
(1) Leases within primary term on which commercial production
has not been established
(2) 8/98 to 12/98
Source: Lexco - July 98
SLIDE 21
McMoRan Exploration Co.
LACK OF E&P SUCCESS
Sifting through the ashes
SLIDE 22
McMoRan Exploration Co.
GLOBAL E&D EXPENDITURES
Despite a record year for E&D spending in
1997, the upward trend in upstream spending
is not expected to continue. "Oil prices have
plummeted, natural gas prices have weakened,
and 1998 could see the first decline in
capital spending since 1992."
Oil & Gas Journal, July 1998
Mr. Victor A. Burk
Arthur Andersen's Managing Director of Energy Industry Services
SLIDE 23
McMoRan Exploration Co.
AVERAGE OFFSHORE RIG RATES(1)
Graph Depicting Per Day Cost from June 1993
to August 1998 as follows:
$(000)
250 feet water depth
June 1993 - 21.8
October 1993 - 24.8
February 1994 - 20.3
June 1994 - 19.5
October 1994 - 20.5
February 1995 - 18.5
June 1995 - 19.5
October 1995 - 21.3
February 1996 - 22.5
June 1996 - 25.5
October 1996 - 27.8
February 1997 - 33.0
June 1997 - 40.5
October 1997 - 42.5
February 1998 - 44.0
June 1998 - 44.3
300 feet water depth
June 1993 - 26.0
October 1993 - 29.0
February 1994 - 22.5
June 1994 - 21.8
October 1994 - 22.8
February 1995 - 19.5
June 1995 - 23.0
October 1995 - 24.3
February 1996 - 26.5
June 1996 - 28.5
October 1996 - 36.0
February 1997 - 42.8
June 1997 - 52.0
October 1997 - 57.5
February 1998 - 60.3
June 1998 - 54.8
300+ feet water depth
February 1996 - 31.5
June 1996 - 33.5
October 1996 - 42.0
February 1997 - 46.0
June 1997 - 56.5
October 1997 - 67.5
February 1998 - 69.0
June 1998 - 59.8
(1) Computation includes long term contract rates through June
1998; estimated rates for July and August 1998 represent
only then spot market rates since industry data not yet
available.
Source: Howard, Weil, Labouisse, Friedrichs
SLIDE 24
McMoRan Exploration Co.
INCREASED FINANCIAL FLEXIBILITY(1)
$49 Million Cash
$51 Million 1997 EBITDAX(2)
No Debt
Existing $100 Million Credit Line
Better Access to Capital Markets
(1) Pro Forma as of June 30, 1998
(2) Pro Forma for year ended December 31, 1997
EBITDAX: Earnings before interest, taxes, depreciation,
amortization and exploration expenses.
SLIDE 25
McMoRan Exploration Co.
FSC's STRENGTHS
Source of Cash Flows: $22 Million EBITDA in 1997
Significant Portion of Sales Committed Under Long-term Contract
Minimal Maintenance Capital Expenditures
Potential Main Pass Cost Savings Provide Upside Potential
SLIDE 26
McMoRan Exploration Co.
OPERATING & COST SYNERGIES
Operational Savings
Integration of Technical Expertise
Improved Purchasing Power
G&A Savings
SLIDE 27
McMoRan Exploration Co.
PROVEN MANAGEMENT TEAM
James R. Moffett - Chairman of Board of Directors
Richard C. Adkerson - Vice Chairman, President & CEO
Robert M. Wohleber - Executive VP & CFO
President & COO - Sulphur Division
C. Howard Murrish - Executive VP
President & COO - Oil Division
SLIDE 28
McMoRan Exploration Co.
PROVEN EXPLORATION TEAM
Experienced Group of Explorationists Together More Than 25 Years
Exceptional Expertise in Gulf Coast Region
Highly Regarded Group of Geologists and Geophysicists
CLK Has Worked with MOXY Since 1977, Continues To Generate
Exploration Opportunities Exclusively For the MOXY Team
- Seven Geologists (Average 26 Years of Experience)
- Six Geophysicists (Average 29 Years of Experience)
SLIDE 29
McMoRan Exploration Co.
MOXY's 2D Seismic Coverage
[GRID MAP]
SLIDE 30
McMoRan Exploration Co.
MOXY's 3D Seismic Coverage
[GRID MAP]
SLIDE 31
McMoRan Exploration Co.
GULF OF MEXICO BLOCKS REVIEWED BY MOXY TEAM
[GRID MAP]
SLIDE 32
McMoRan Exploration Co.
MOXY'S EXTENSIVE DATA BASE
200,000 Miles of Offshore 2-D Data
350 Blocks of Offshore 3-D Data
20,000 Miles of Onshore 2-D Data
97 Square Miles of Onshore 3-D Data
260,000 Well Logs
SLIDE 33
McMoRan Exploration Co.
EXAMPLE OF FARM-IN DISCOVERY (1) - 1980s
VERMILION BLOCK 225/226 AREA PRE-DRILL
Composite Production Outline
Pre-drill No.4 Well
[Picture]
(1) By predecessor company
SLIDE 34
McMoRan Exploration Co.
EXAMPLE OF FARM-IN DISCOVERY (1)- 1980s
VERMILION BLOCK 225/226 FIELD AREA POST-DRILL
Composite Production Outline
Post-drill No.4 Well
[Picture]
(1) By predecessor company
SLIDE 35
McMoRan Exploration Co.
EXAMPLE OF FARM-IN DISCOVERY (1)-- 1990s
VERMILION BLOCK 159/160 AREA PRE-DRILL
Composite Production Outline
Pre-drill No.2(AJ1) Well
[Picture]
(1)By predecessor company
SLIDE 36
McMoRan Exploration Co.
EXAMPLE OF FARM-IN DISCOVERY (1)-- 1990s
VERMILION BLOCK 159/160 FIELD AREA POST-DRILL
Composite Production Outline
Post-drill No.2(AJ1) Well
[Picture]
(1)By predecessor company
SLIDE 37
McMoRan Exploration Co.
Exploration Team Major Field Discoveries
Cumulative
Production(1)(BCFE) Year of Discovery
------------------- -----------------
Vermilion 25 293 1977
High Island A-446/A-447/A-448 180 1978
Matagorda Island 700/713 108 1978
South Marsh Island 173/174/175/176 125 1979
Vermilion 225/226/237 392 1981
Eugene Island 308/315 136 1983
West Delta 88/89 155 1989
Main Pass 299 267(2) 1991
East Cameron 331/332 85 1992
Vermilion 143/144/159/160 96(3) 1992/97
West Cameron 616 71(4) 1997
Vermilion 144/145/159 * 1998
Brazos A-19 * 1998
1. Through 12/31/97, per Lexco report of February 1998.
2. Cumulative production as of 12/31/97 (214 BCFE) plus remaining
proved reserves as of 12/31/97.
3. Cumulative production as of 12/31/97 (20 BCFE) plus remaining
proved and probable reserves as of 12/31/97.
4. Proved and probable reserves as of 12/31/97.
* Ultimate reserves undetermined; development in progress.
Billion cubic feet equivalent (BCFE) is the ratio of 1 barrel of oil being
equivalent to 6 thousand cubic feet of natural gas based on an approximate
energy content equivalency.
SLIDE 38
McMoRan Exploration Co.
Acquisition Possibilities
With Sluggish Prices and Stocks,
Oils May Have to Merge
"The market is saying, 'Size is everything ...
Unless oil moves back above $16 a barrel and
gas above $2 a thousand cubic feet, the
financial pain may well drive a lot of
companies into the arms of someone else.'"
Business Week - August 6, 1998
SLIDE 39
McMoRan Exploration Co.
OPERATIONS OVERVIEW
Predecessor Active In Exploration and Production Since 1969
Track Record of Success
MOXY and Predecessors Participated In 56 Offshore Discoveries
Since 1977
Large Data Base of Seismic and Log Information
Advanced Technology Combined With Experience Reduces Risk
Long-Term $210MM Exploration Joint Venture In Place
SLIDE 40
McMoRan Exploration Co.
MOX PROVED RESERVES*
Oil & Gas Reserves - 74.5 BCFE
Pie Chart with the following information:
Oil/Condensate - 5.7 Million Barrels
Gas - 40.2 BCF
Sulphur Reserves
Pie Chart with the following information:
53.6 Million Long Tons
*As of December 31, 1997
Billion cubic feet equivalent (BCFE) is the ratio of 1 barrel of
oil being equivalent to 6 thousand cubic feet of natural gas
based on an approximate energy content equivalency.
SLIDE 41
McMoRan Exploration Co.
1998 OIL & GAS DISCOVERIES
Brazos A-19
Vermilion 159
West Cameron 616
West Cameron 617
SLIDE 42
McMoRan Exploration Co.
OIL & GAS PRODUCTION
GRAPH DEPICTING PRODUCTION in 1996, 1997 and ESTIMATED 1998
for MOXY and FSC as follows:
1996
MOXY - 0.7 BCF Equivalents
FSC - 11.4 BCF Equivalents
1997
MOXY - 4.3 BCF Equivalents
FSC - 9.8 BCF Equivalents
1998e
MOXY - 10.5* BCF Equivalents
FSC - 10.2* BCF Equivalents
*Estimated 1998 Production
Billion cubic feet equivalent (BCFE) is the ratio of 1 barrel of
oil being equivalent to 6 thousand cubic feet of natural gas
based on an approximate energy content equivalency.
SLIDE 43
McMoRan Exploration Co.
MOXY CAPITAL EXPENDITURES
GRAPH Depicting Capital Expenditures in Acquisition,
Development and Exploration as follows:
(in Millions)
1996
Acquisition - $-
Development - $7
Exploration - $14
Total - $21
1997
Acquisition - $24
Development - $10
Exploration - $25
Total - $59
1998e
Acquisition - $-
Development - $30
Exploration - $20
Total - $50*
*Note: 1998 estimate based on existing development plans.
SLIDE 44
McMoRan Exploration Co.
MOXY Exploration Program Estimates
(Figures in Million $'s)
1997* 1998 Remaining Total
----- ---- --------- -----
Leasehold & Seismic $ 20 $ 4 $ 23 $ 47
Overhead 3 7 16 26
Exploratory Wells 32 39 66 137
---- ---- --------- -----
100% Exploration Capital $ 55 $ 50 $ 105 $ 210
==== ==== ========= =====
MOXY Net Exploration
Capital $ 21 $ 19 $ 40 $ 80
==== ==== ========= =====
*NOTE: 1997 figures based on partial year. Program year is
December to December.
SLIDE 45
McMoRan Exploration Co.
MOXY LEASE ACREAGE*
Gross Acres Net Acres
----------- ---------
Offshore (Federal Waters) 134,768 45,301
Onshore Louisiana & Texas 5,488 1,434
------- ------
140,256 46,735
*As of 12/31/97
SLIDE 46
McMoRan Exploration Co.
MOXY LEASE INVENTORY
MAP SHOWING THE FOLLOWING WELLS AND THEIR LOCATIONS
UNDER EXPLORATION AND/OR PRODUCTION:
West Cameron 156/157-Exploration
East Cameron 119/120-Exploration
Vermilion 143/144/159/160-Production
Eugene Island 18/19-Exploration
North Bay Junop-Production
Main Pass 56-Exploration
Vermilion 145-Exploration
Brazos A19/A26-Exploration
West Cameron 492-Exploration
West Cameron 616/617/623/624/625-Exploration
East Cameron 362/Vermilion 389/409/410-Production
Vermilion 391/392/408-Exploration
Grand Isle 53/54/58/59/65-Exploration
SLIDE 47
McMoRan Exploration Co.
VERMILION 159/160 FIELD AREA
[PICTURE]
MOXY NWI = 42% in the Unit
73% (V160 #4 Stk.)
48% (V159 #3)
Water Depth = 90 feet
Gross Acreage = 15,312 Acres
SLIDE 48
McMoRan Exploration Co.
BRAZOS A-19 FIELD
[PICTURE]
MOXY NWI = 17%
Water Depth = 134 Feet
Gross Acreage = 11,520 Acres
(Operator: Shell Offshore)
SLIDE 49
McMoRan Exploration Co.
OPPORTUNITIES FOR GROWTH
Increasing Availability Of Farm-In Blocks
Lower Third Party Service Costs
Financial Strength; Cost Synergies
Extensive Geophysical, Technical and Operational Expertise and
Data Base
Acquisition Possibilities
Maximize Growth and Value of Sulphur Services Business
