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 September 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 September 30, 2000, there were issued and outstanding
15,831,992 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 9
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
McMoRan EXPLORATION CO.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
McMoRan EXPLORATION CO.
CONDENSED BALANCE SHEETS (Unaudited)
September 30, December 31,
2000 1999
----------- ----------
(In Thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 37,867 $ -
Accounts receivable 11,041 6,462
Inventories 628 349
Net assets from discontinued operations 5,323 9,545
Prepaid expenses 481 3,099
----------- ----------
Total current assets 55,340 19,455
Property, plant and equipment, net 112,201 97,359
Assets of discontinued operations 72,995 114,254
Deferred tax asset - 32,370
Other assets, including restricted cash
of $3.5 million 13,530 10,791
----------- ----------
Total assets $ 254,066 $ 274,229
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 12,450 $ 9,023
Accrued liabilities 19,959 8,722
Current portion of discontinued
operations accrued reclamation costs 29,488 3,838
Discontinued operations debt 45,000 -
Other 1,431 980
----------- ----------
Total current liabilities 108,328 22,563
Accrued oil and gas reclamation costs 15,889 10,976
Discontinued operations accrued
reclamation costs 45,116 44,150
Long-term debt - 14,000
Other long-term liabilities 23,226 27,469
Stockholders' equity 61,507 155,071
----------- ----------
Total liabilities and stockholders' equity $ 254,066 $ 274,229
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 3
<TABLE>
<CAPTION>
McMoRan EXPLORATION CO.
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- --------------------
2000 1999 2000 1999
-------- -------- --------- --------
(In Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenues $ 14,238 $ 13,779 $ 46,963 $ 38,705
Costs and expenses:
Production and delivery costs 5,575 4,425 18,270 11,653
Depreciation and amortization 3,508 7,294 15,848 24,139
Exploration expenses 17,200 1,080 43,346 4,933
General and administrative expenses 3,044 1,682 8,417 5,123
(Gain) loss on sale of oil and gas
properties (43,202) 540 (43,202) (2,550)
-------- -------- --------- --------
Total costs and expenses (13,875) 15,021 42,679 43,298
-------- -------- --------- --------
Operating income (loss) 28,113 (1,242) 4,284 (4,593)
Interest expense (426) (158) (2,802) (291)
Other income, net 409 129 1,875 360
-------- -------- --------- --------
Income (loss) from continuing
operations before provision for
income taxes 28,096 (1,271) 3,357 (4,524)
Income taxes (provision) benefit - 437 (34,942) 1,576
-------- -------- --------- --------
Income (loss) from continuing
operations 28,096 (834) (31,585) (2,948)
Discontinued operations:
Income (loss) from discontinued
sulphur operations (plus applicable
income tax benefit of $247,000 in
the three-month 1999 period and
less income taxes of $2,063,000 in
the nine-month 1999 period) (2,648) (437) (89,864) 3,830
Loss on disposal of sulphur assets - - (7,500) -
-------- -------- --------- --------
Net income (loss) $ 25,448 $ (1,271) $(128,949) $ 882
======== ======== ========= ========
Basic net income (loss) per share
of common stock:
Income (loss) from continuing
operations $1.78 $(0.07) $(2.19) $(0.21)
Income (loss) from discontinued
sulphur operations (0.17) (0.03) (6.21) 0.28
Loss on disposal of sulphur assets - - (.52) -
----- ------ ------ ------
Basic net income (loss) per share $1.61 $(0.10) $(8.92) $ 0.07
===== ====== ====== ======
Diluted net income (loss) per share
of common stock:
Income (loss) from continuing
operations $1.77 $(0.07) $(2.19) $(0.22)
Income (loss) from discontinued
sulphur operations (0.17) (0.03) (6.21) 0.28
Loss on disposal of sulphur assets - - (.52) -
----- ------ ------ ------
Diluted net income (loss) per share $1.60 $(0.10) $(8.92) $ 0.06
===== ====== ====== ======
Average shares outstanding
Basic 15,828 12,978 14,462 13,578
====== ====== ====== ======
Diluted 15,858 12,978 14,462 13,805
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 4
<TABLE>
<CAPTION>
McMoRan EXPLORATION CO.
STATEMENTS OF CASH FLOW (Unaudited)
Nine Months Ended
September 30,
------------------------
2000 1999
---------- ----------
(In Thousands)
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ (128,949) $ 882
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
(Income) loss from discontinued operations 97,364 (3,830)
Depreciation and amortization 15,848 24,139
Exploration expenses 43,346 4,933
Gain on sale of oil and gas properties (43,202) (2,550)
Change in deferred tax asset 34,941 (1,588)
(Increase) decrease in working capital
Accounts receivable (5,070) (3,416)
Accounts payable and accrued liabilities 5,645 (545)
Inventories and prepaid expense (233) 994
Other 1,301 2,000
---------- ----------
Net cash provided by continuing operations 20,991 21,019
Net cash used in discontinued operations (31,678) (4,544)
---------- ----------
Net cash provided by (used in) operating activities (10,687) 16,475
---------- ----------
Cash flow from investing activities:
Exploration and development and other expenditures (50,887) (17,758)
Purchase oil and gas interests (39,793) (3,117)
Proceeds from disposition of assets, net 74,669 9,510
Other - (347)
---------- ----------
Net cash used in continuing operations (16,011) (11,712)
Net cash provided by discontinued operations 678 1,934
---------- ----------
Net cash used in investing activities (15,333) (9,778)
---------- ----------
Cash flow from financing activities:
Net proceeds from equity offering 50,274 -
Purchase of MMR common stock (15,282) (25,080)
Deferred financing costs and other (2,105) 1,096
---------- ----------
Net cash provided by (used in) continuing operations 32,887 (23,984)
Net cash provided by discontinued operations 31,000 -
---------- ----------
Net cash provided by financing activities 63,887 (23,984)
---------- ----------
Net increase (decrease) in cash and cash equivalents 37,867 (17,287)
Net amount attributable to discontinued operations - 2,610
Cash and cash equivalents at beginning of year - 17,816
---------- ----------
Cash and cash equivalents at end of period $ 37,867 $ 3,139
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 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.
On August 30, 2000, operations at the Main Pass mine were
suspended and on August 31, 2000 production ceased. McMoRan is
currently evaluating its alternatives as to the ultimate
disposition of the mine. McMoRan has retained the services of
Chase Securities Inc. to assist it in the marketing of its
sulphur assets to other third parties that could potentially
benefit from the use of such assets whether deployed in sulphur-
related activities or other alternative uses.
Following is a summary of financial information for McMoRan's
discontinued sulphur operations (in thousands):
<TABLE>
<CAPTION>
Third-Quarter Nine-Months
------------------ --------------------
2000 1999 2000 1999
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $34,020 $ 49,323 $ 106,648 $ 146,797
Income (loss) from
discontinued operations:
Before income taxes $(2,648) $ (684) $ (89,864) $ 5,893
Income tax benefit
(provision) - 247 - (2,063)
------- -------- --------- ---------
$(2,648) $ (437) $ (89,864) $ 3,830
======= ======== ========= =========
Estimated loss on disposal $ - $ - $ (7,500) $ -
======= ======== ========= =========
</TABLE>
The loss from discontinued operations for the nine month
period of 2000 includes 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. Although the former sulphur segment
generated a loss during the third quarter of 2000, its
projections still forecast break-even operations from the July
2000 measurement date through its ultimate disposal date.
As a result of the termination of production at Main Pass,
certain sulphur reclamation and mine shutdown costs are expected
to be incurred on an accelerated basis. Accordingly, McMoRan has
recorded $29.5 million of its sulphur reclamation costs as
current liabilities at September 30, 2000. McMoRan incurred a
total of $4.5 million of reclamation costs associated with its
discontinued sulphur operations, including $4.3 million
associated with the Main Pass mine and related facilities,
during the third quarter of 2000.
McMoRan's loss on the disposal of its sulphur assets was
estimated to be $7.5 million at the July 2000 measurement date.
The accrual for the loss is comprised of employee-related
charges, including $4.7 million of employee termination charges
and $2.8 million associated with the funding requirements
resulting from curtailments of McMoRan's retirement and post-
retirement health and welfare pension plans. McMoRan anticipates
funding of these costs will occur within the next twelve months.
In connection with the decision to discontinue the sulphur
operations, McMoRan recorded a $34.9 million non-cash charge to
its deferred tax valuation allowance, which eliminated its net
deferred tax asset related primarily to its sulphur
transportation, logistics and marketing business. 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 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 then existing
bank credit facilities.
<PAGE> 6
In June 2000, McMoRan consummated an 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' proved reserves.
Currently, McMoRan has no availability under this portion of the
commitment; however, the $25 million of availability could again
become available in total or in part upon discovery of additional
proved reserves. Any future amounts available under this $25
million portion of the commitment cannot be drawn unless all
amounts available under the Halliburton guaranteed facility are
fully drawn.
McMoRan pays Halliburton a commitment fee based on its usage.
As security for Halliburton's guarantee, McMoRan has provided a
first priority lien on interests in its more significant
producing fields and in Ship Shoal Block 296, where it announced
a discovery during the second quarter of 2000. 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 September 30, 2000,
McMoRan had no borrowings outstanding under this facility and
Halliburton has not yet elected to participate in any McMoRan
prospects. This facility will mature by December 31, 2003.
The amount of availability under the Halliburton guaranteed
portion of the amended facility is contingent upon McMoRan's
raising additional capital. McMoRan has raised $75 million of
additional capital as of September 30, 2000, which satisfies the
Halliburton requirements through December 31, 2000. McMoRan met
these capital requirements by completing the $50 million equity
offering discussed above and by entering into farm-out agreements
for certain of its exploration prospects. These farm-out
agreements, which involve the participation of third parties in
McMoRan's exploration prospects, will reduce McMoRan's future
drilling commitments by at least $25 million. McMoRan is
required to raise a total of $125 million of capital by December
2001, which requires McMoRan to raise an approximate $50 million
of additional capital in 2001. In the event McMoRan fails to
raise the cumulative $125 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
exploration prospects or the sale of interests in individual
exploration 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). On August 11,
2000, Freeport Sulphur amended its credit facility to provide
$64.5 million for use in McMoRan's discontinued sulphur
operations. This amended revolving credit facility is secured by
substantially all of the assets of Freeport Sulphur, including
its Main Pass oil interests, 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. On September 30, 2000, borrowings outstanding under this
facility totaled $45.0 million and the weighted-average interest
rate on these borrowings totaled 8.0 percent. Borrowings
outstanding under the previous sulphur facility totaled $14.0
million at December 31, 1999.
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
<PAGE> 7
of outstanding dilutive stock options. Stock
options representing 30,000 common shares during the third
quarter of 2000 and 227,000 common shares for the nine months
ended September 30, 1999 were included in the diluted net income
per share calculations. Stock options representing 417,000
shares in the third quarter of 1999 and 129,000 shares for the
nine months ended September 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):
<TABLE>
<CAPTION>
Third Quarter Nine Months
--------------- ---------------
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Outstanding options 1,674 66 1,289 781
Average exercise price $18.40 $24.82 $19.75 $19.31
</TABLE>
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 the prices of oil and natural gas. Costs or
premiums and gains or losses on the contracts, including closed
contracts, are recognized with the hedged transactions if
deferral criteria are met. Gains or losses on the contracts are
recognized currently 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 of the financial strength of its
counterparties.
McMoRan has oil forward sales contracts related to its Main
Pass oil production. During the third quarter of 2000, McMoRan
settled contracts on 0.1 million barrels of oil at an average
price of $19.60 per barrel, which resulted in a recognized loss
of $0.6 million. For the nine-month period ended September 30,
2000 the settled contracts totaled 0.3 million barrels of oil at
an average price of $21.27 per barrel, which resulted in a
recognized loss of $2.1 million. As of September 30, 2000,
McMoRan had contracts to sell 0.2 million barrels of oil at an
average price of $19.09 per barrel through December 2001. These
contracts had a fair value of approximately $(1.5) million as of
September 30, 2000. McMoRan has no contracts with respect to
natural gas sales.
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). In June 1999, the FASB issued SFAS 137 "Accounting
for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement 133," which deferred SFAS
133's effective date to fiscal years beginning after June 15,
2000. In June 2000, the FASB issued SFAS 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities,"
which amended SFAS 133. SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other
contracts) to be recorded in the balance sheet as either an asset
or liability at its fair value. The accounting for changes in
the fair value of a derivative depends on the intended use of the
derivative and the resulting designation.
McMoRan will adopt SFAS 133 effective January 1, 2001.
McMoRan expects its oil forward sales contracts to qualify for
special hedge accounting treatment under SFAS 133, whereby
changes in fair value will be recognized in other comprehensive
income (a component of stockholder's equity) until settled, when
the resulting gains and losses will be recorded in earnings. Any
hedge ineffectiveness will be charged currently to earnings;
however, McMoRan believes that any ineffectiveness will be
immaterial. McMoRan believes all other contracts will qualify for
the normal purchase and sales exemption or will be excluded
otherwise from SFAS 133's provisions.
5. RATIO OF EARNINGS TO FIXED CHARGES
McMoRan's ratio of earnings to fixed charges for the first nine
months of 2000 was 1.4 to 1. McMoRan's earnings to fixed charges
calculation resulted in a shortfall of $4.5 million for the nine
months ended September 30, 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.
<PAGE> 8
-----------------
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.
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 September
30, 2000, the related statements of operations for the three- and
nine-month periods ended September 30, 2000 and 1999 and the
statements of cash flow for the nine-month periods ended
September 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.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
October 24, 2000
<PAGE> 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.
OIL & GAS OPERATIONS
The following summarizes our recent oil and gas activities:
Brazos Blocks A-19/A26. In July 2000, we sold our 33.3 percent
working interest in Brazos Block A-19 and our 47.5 percent
working interest in the unexplored Brazos Block A-26 to Shell
Offshore Inc. for $66.5 million. We recognized a $40.1 million
gain on this transaction during the third quarter of 2000. We
are continuing to pursue our rights of recovery from insurers
for the loss associated with the premature abandonment of the
Brazos Block A-19 JC#1 well.
Ship Shoal Block 296. As previously announced, in August 2000,
as operator, we completed drilling the Ship Shoal Block 296 #2
well, which delineated the reserves previously discovered by
the #1 exploratory well in the second quarter of 2000. We are
evaluating our development alternatives for this discovery and
expect initial production to commence in 2001. We currently
own a 61.8 percent working interest and a 43.5 percent net
revenue interest in Ship Shoal Block 296, which covers 5,000
acres and is located in approximately 260 feet of water, 62
miles offshore Louisiana.
Vermilion Blocks 195/196. On August 26, 2000, as operator, we
commenced drilling the Vermilion Block 196 #2 exploratory well.
The well was drilled to a total depth of 14,798 feet. In
September 2000, the well encountered 70 feet of net hydrocarbon
pay in three sands logged between measured depths of 13,160 and
14,350 feet. The well has been saved for future production.
We currently own a 47.5 percent working interest and 34.2
percent net revenue interest in this prospect, located in
approximately 115 feet of water, 50 miles offshore Louisiana.
We control 15,000 acres in the area, which contains a number of
prospective exploration opportunities at deeper horizons.
Grand Isle Block 2 and West Delta Blocks 1/12/13. On September
19, 2000, drilling commenced at the State Lease 16033 #1
exploratory well. The well is planned to reach a total
measured depth of 20,700 feet during the fourth quarter of
2000. The well is located in 17 feet of water on a 2,788 acre
tract within the Grand Isle Block 2 and West Delta Blocks
1/12/13 prospects. We currently own a 47.5 percent working
interest and 32.1 percent net revenue interest in the prospect.
Eugene Island Blocks 96/97/109. On October 2, 2000, drilling
of the Eugene Island 97 #1 exploratory well commenced. The
well, which will explore the shallower horizons of this
exploration prospect, is planned to reach a total measured
depth of 15,400 feet during the fourth quarter of 2000. A
separate prospect at a greater depth has been identified. We
currently own a 38.0 percent working interest and a 27.4
percent net revenue interest in Eugene Island Block 97, which
is located in 27 feet of water, approximately 25 miles offshore
Louisiana. We also own a 71.3 percent working interest in
Eugene Island Block 96 and a 38 percent working interest in
Eugene Island Block 109, both of which are adjacent to Eugene
Island Block 97.
Vermilion Blocks 144/145. As previously reported, on April 18,
2000, we reached the turnkey depth of approximately 15,000 feet
at the Vermilion Block 144 #3 well. We set protective casing
and temporarily abandoned the well. We deferred additional
drilling on this prospect while we continued to review our
interpretation of the related well data, pursue other drilling
prospects in our lease inventory and negotiate with potential
industry participants concerning participation in our
exploration program. During the third quarter of 2000, we
entered into two separate agreements in which Samedan Oil
Corporation, a wholly owned subsidiary of Noble Affiliates
Inc., and Devon Energy Corporation became our joint interest
partners in the prospect. As operator, we re-commenced
drilling at the #3 well on October 11, 2000. The well is
planned to reach a total measured depth of 17,700 feet in the
fourth quarter of 2000. We currently own a 47.5 percent
working interest and a 38.2 percent net revenue interest in the
Vermilion Block 144/145 prospect, which covers 5,937 acres and
is located in approximately 90 feet of water, 42 miles offshore
Louisiana, adjacent to our producing field at Vermilion Block
159/160.
<PAGE> 10
State Lease 340- Mound Point. On October 22, 2000, as
operator, we commenced drilling the State Lease 340 #1
exploratory well. The well is planned to reach a total
measured depth of 18,500 feet. The well is located onshore
Louisiana in 8 feet of water on tracts that encompass 35,451
acres. We will acquire a 31.1 percent working interest and
23.4 percent net revenue interest in the drillsite.
Main Pass Blocks 86/97. A rig is currently on location and
drilling of the #1 exploratory well will soon commence. The
well is planned to reach a total measured depth of 10,500 feet
during the fourth quarter of 2000. We currently own a 71.3
percent working interest and a 51.3 percent net revenue interest
in the prospect, which is located in 69 feet of water,
approximately 60 miles offshore Louisiana.
Vermilion Block 408. As previously announced, in September
2000, we sold our 28.5 percent working interest and 22.9
percent net revenue interest in this prospect to The Houston
Exploration Company and Samedan for $6.2 million. We recognized
a gain of $3.1 million in our third quarter of 2000 operating
results.
Other. We drilled two unsuccessful exploratory wells during the
third quarter of 2000: the Green Canyon Block 90 #1 well and
Garden Banks Block 580 #1 well. The well costs associated with
these two wells totaled $12.1 million and were charged to
exploration expense during the third quarter of 2000.
Our working interests on the wells in progress and Vermilion
Blocks 195/196 discussed above are subject to certain
development elections by Halliburton, which if exercised would
result in 1) the reimbursement of certain of our acquisition
and exploration costs; 2) an obligation for Halliburton to pay
a disproportionate share of completion and development costs;
and 3) a reduction of our working interest and net revenue
interests.
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 and
the requirements of the successful efforts accounting method, we may
continue to report operating losses in future periods. Summary
comparative data for the third-quarter and nine-month periods
ended September 30, 2000 and 1999 follows:
<TABLE>
<CAPTION.
Third Quarter Nine Months
-------------------- ---------------------
2000 1999 2000 1999
--------- --------- --------- ----------
(Dollars in thousands,
except for realized prices)
<S> <C> <C> <C> <C>
FINANCIAL DATA:
Revenues $ 14,238 $ 13,779 $ 46,963 $ 38,705
Exploration expense 17,200 1,080 43,346 4,933
Gain (loss) on sale of oil
and gas properties a 43,202 (540) 43,202 2,550
Operating income (loss) 28,113 (1,242) 4,284 (4,593)
Sales volumes:
Gas (thousand cubic feet,
or MCF) 1,527,800 3,079,600 7,569,700 10,619,000
Oil (barrels) b 275,100 291,000 878,500 1,055,600
Average realizations:
Gas (per MCF) $ 4.43 $ 2.65 $ 3.29 $ 2.19
Oil (per barrel) b 26.59 19.05 24.70 14.39
</TABLE>
a. Reflects the sales of our interests in Brazos Blocks A-26
and A-19 ($40.1 million) and Vermilion Block 408 ($3.1 million)
during the third-quarter and nine-month periods of 2000. We
recorded a loss on the sale of our interests in West Cameron
Block 492 of approximately $0.5 million during the third quarter
of 1999 and we recorded a $3.1 million gain on the sale of our
interests in the Vermilion Block 410 field in March 1999.
b. Includes sales of sour crude oil from our Main Pass oil
operations. Main Pass 299 sales totaled approximately 228,200
barrels at an average realization of $25.45 per barrel in the
third quarter of 2000 and 244,100 barrels at an average
realization of $18.66 per barrel in the third quarter of 1999.
For the nine month periods Main Pass sales totaled 714,700
barrels at an average realization of $23.41 per barrel in 2000
and 854,400 barrels at an average realization of $14.01 per
barrel in 1999.
<PAGE> 11
A summary of increases (decreases) in our oil and gas
revenues between the periods follows (in thousands):
<TABLE>
<CAPTION>
Third Nine
Quarter Months
-------- --------
<S> <C> <C>
Oil and gas revenues - 1999 periods $ 13,779 $ 38,705
Increase (decrease)
Price realizations:
Oil 2,072 9,057
Gas 2,719 8,327
Sales volumes:
Oil (303) (2,548)
Gas (4,112) (6,678)
Other 83 100
-------- --------
Oil and gas revenues - 2000 periods $ 14,238 $ 46,963
======== ========
</TABLE>
Revenues for both the third quarter and nine months ended
September 30, 2000 benefited from substantially higher average
realizations for both oil and gas than in 1999. These increases
were largely offset by a reduction in our volumes sold during
2000 when compared to 1999. The decreases in sales volumes
resulted from normal production declines and a significant
decrease in production from West Cameron Block 616. Our
production from the Vermilion Block 159 CJ-1 well ceased during
the second quarter of 2000 and the Vermilion Block 160 BJ-1
well's production was steadily declining until production ceased
in early October 2000. We have planned remedial work for both
the Vermilion Block 160 BJ-1 well and the West Cameron Block 616
field during the fourth quarter of 2000. We are also evaluating
alternatives for restoring production to the Vermilion Block 159
CJ-1 well. If these planned remediation operations are
successful, we anticipate our net daily production will increase
by approximately 20 MMcf per day in the first quarter of 2001.
Gas sales for the nine-month 1999 period benefited from the sales
associated with the Vermilion Block 410 field, which was sold in
March 1999.
Production and delivery expense totaled $5.6 million during
the third quarter of 2000 and $18.3 million for the nine months
ended September 30, 2000 compared with $4.4 million and $11.7
million for the comparable periods in 1999. The increases
reflect the following:
1) Net profits payments earned by others totaling $1.1 million
during the third quarter and $3.1 million for the nine-month
period of 2000 associated with the Vermilion Block 160 field unit
and the Vermilion Block 160 BJ-1 well.
2) Workover costs totaling $2.7 million for the nine months
ended September 30, 2000. The workover costs primarily reflect
our activities on Eugene Island Blocks 193/208/215 during the
second quarter of 2000 and the 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 $3.5 million
during the third quarter of 2000 and $15.8 million for the nine
months ended September 30, 2000 compared to $7.3 million and
$24.1 million for the comparable periods of 1999. The decreases
primarily reflect our lower production volumes as discussed
above.
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):
<PAGE> 12
<TABLE>
<CAPTION>
Third Quarter Nine Months
------------- --------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Geological and geophysical,
including 3-D seismic purchases $ 4.2 $ 0.9 $17.2 $ 2.6
Dry hole costs 12.1a - 23.7a,b 1.6c
Other 0.9 0.2 2.4 0.7
----- ----- ----- -----
$17.2 $ 1.1 $43.3 $ 4.9
===== ===== ===== =====
</TABLE>
a. Includes the expensed exploratory well costs associated with
the Green Canyon Block 90 #1 and Garden Banks Block 580 # 1
wells.
b. Includes approximately $3.7 million of expensed exploratory
well costs associated with the State Tract 210 #6 well and $7.9
million associated with the Grand Isle Block 40/41 #1 well.
c. Represents the costs associated with the unsuccessful #5
exploratory well at Vermilion Block 162.
Our exploration expenses will fluctuate in future periods
based on the number, results and cost of our exploratory drilling
projects and the incurrence of geological and geophysical costs,
including seismic data.
General and administrative expense totaled $3.0 million for
the third quarter of 2000 and $8.4 million for the nine months
ended September 30, 2000 compared with $1.7 million and $5.1
million, respectively, for the same periods 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
Limited Partnership's 47 percent interest in the program. For
additional discussion about the $210 million program see Note 4
"Rights Offering and Exploration Program" included in our 1999
Annual Report on Form 10-K.
Interest expense totaled $0.4 million during the third
quarter of 2000 and $2.8 million for the nine months ended
September 30, 2000 compared to $0.2 million during the third
quarter of 2000 and $0.3 million for the nine months ended
September 30, 1999. The significant increase in interest expense
for the nine-month 2000 period reflects our outstanding
borrowings on our existing credit facilities during the first
seven months of 2000. These borrowings were used to fund our
lease acquisition from Shell Offshore Inc. (see "Recent
Developments" in our 1999 Annual Report on Form 10-K),
exploration expenditures, a portion of our purchase of Phosphate
Resource Partners' 47 percent interest in our $210 million
exploration program, purchases of our common stock and working
capital. As discussed in "Operating Activities" above, in July
2000, we sold our interests in Brazos Blocks A-19 and A-26 for
$66.5 million, the proceeds of which were used to repay all
outstanding borrowings on our oil and gas credit facility (see
Note 2). There were no borrowings during the nine months ended
September 30, 1999. Accordingly, interest expense during the
first nine months of 1999 reflects only the commitment fees paid
on our credit facilities.
In connection with the decision to discontinue our sulphur
operations, we recorded a $34.9 million non-cash charge to our
deferred tax valuation allowance, which eliminated our net
deferred tax asset related primarily to our sulphur
transportation, logistics and marketing business . 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.
CAPITAL RESOURCES AND LIQUIDITY
Continuing operations provided net cash of $21.0 million
during the nine months ended September 30, 2000, which was the
same amount as for the comparable period last year. Our total cash
flow from operating activities, including a use of $31.7 million
associated with our discontinued sulphur operations in the nine
months ended September 30, 2000 compared with a use of $4.5
million for the same period last year, was a use of $10.7 million
for the nine months ended September 30, 2000 compared to providing cash
of $16.5 million for the nine months ended September 30, 1999.
The use of cash in the nine-month 2000 discontinued operations
reflects the weak sulphur market and higher production costs at
the Main Pass mine, as well as the cash settlement of a certain
sulphur-related obligation. See "Discontinued Operations" below
for more information on our former sulphur segment's operations.
<PAGE> 13
Net cash used in investing activities totaled $15.3 million
for the nine months ended September 30, 2000 compared with $9.8
million for the nine months ended September 30, 1999. Our
planned capital expenditures for 2000 have been reduced from $135
million to $110 million as a result of our farming-out portions
of our near-term exploration prospects. Our nine-month 2000 cash
flow relating to investing activities consisted of the following:
. Acquisitions of oil and gas leasehold interests totaling $39.8 million;
. Exploration, development and other expenditures totaling $50.9 million;
. Proceeds from the sale of assets totaling $74.7 million; and
. Net cash provided by sale of sulphur assets totaling $0.7 million.
In January 2000, we acquired exploration rights covering
substantial exploratory acreage in the Gulf of Mexico from both
Texaco Exploration and Production Inc. and Shell (see "Recent
Developments" in our 1999 Annual Report on Form 10-K). Under the
Texaco agreement, cash expenditures are required only as
prospects are identified and drilled. Texaco retained rights to
participate in exploration drilling. In the Shell transaction,
we purchased 55 leases for approximately $37.6 million. The
remaining $2.1 million of acquisition costs during the nine
months ended September 30, 2000 relate to certain costs to
complete the aforementioned Shell acquisition, to acquire
interests in two offshore tracts in bid sales by the Mineral
Management Service and to acquire an interest in Eugene Island
Blocks 193/208/215.
Our exploration and development capital expenditures during
the nine months of 2000 included: 1) purchases of seismic and
other related geological data; 2) expensed exploratory drilling
costs related to the State Tract 210 # 6 ,Grand Isle Block 40/41
#8, Green Canyon Block 90 #1 and Garden Banks Block 580 #1 wells;
3) capitalized drilling costs primarily to the following
exploratory wells: Vermilion Block 196 #2; Vermilion Block
144/145 #3; and the Ship Shoal Block 296 #1 and the subsequent
delineation well at Ship Shoal Block 296; and 4) capitalized re-
completion costs on existing producing wells at Eugene Island 208
and the Vermilion Block 160 field unit.
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 borrowings outstanding under our amended credit
facility (Note 2). We also sold our interests in Vermilion Block
408 in September 2000 for $6.2 million. During the second
quarter of 2000 we sold various non-operating residual oil and
gas interests for $1.4 million. Other proceeds, including those
of the discontinued sulphur operations, totaled $1.3 million and
represented sales of other non-operating assets.
We believe our available cash, operating cash flows and the
$50 million of credit availability made available through our
alliance with Halliburton, provide us the capital resources
necessary to conduct our currently planned exploration
activities. We anticipate that we will require additional capital
for expected subsequent development activities associated with
success from our exploration program. After raising
approximately $50 million from our equity offering in April 2000
and over $25 million through commitments under our recent farm-
out agreements with Samedan and Devon Energy, we satisfied the
requirements under the Halliburton guarantee to raise $75 million
of additional capital by December 31, 2000. Under the
Halliburton guarantee, we are required to raise an additional $50
million to reach a cumulative $125 million of capital by December
31, 2001 (Note 2). The amount of any shortfall in our
supplementary financing efforts would reduce the $50 million
commitment from Halliburton.
During the nine months ended September 30, 1999, exploration
and development expenditures totaled $17.8 million, which
included 1) capitalized oil and gas drilling costs of $12.9
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 $3.3 million; and 3) expensed drilling costs of $1.6
million associated with the Vermilion Block 162 #5 exploratory
well. We also received $6.4 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.
<PAGE> 14
Cash provided by financing activities totaled $63.9 million
for the nine months ended September 30, 2000 compared with using
$24.0 million during the nine months ended September 30, 1999.
Continuing operations' financing activities provided cash of
$32.9 million during the nine months ended September 30, 2000
compared to using $24.0 million during the nine months ended
September 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 from the equity offering
totaled $50.3 million. The equity proceeds were partially offset
by repayments of outstanding borrowings on our existing credit
facilities, 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
$31.0 million, which represented the net borrowings necessary to
fund its operating and continuing reclamation activities and to
terminate a $9.5 million obligation that existed since its
purchase of certain sulphur assets in 1995 (see "Discontinued
Operations" below).
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. There were no purchases under
the program during the third quarter of 2000. 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. For the nine-
month period in 1999, purchases of our common stock under the
program totaled 1,379,935 shares of our common stock for $25.1
million, an average of $18.18 per share. These 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 September 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 future 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 discussed below, we plan to sell our sulphur
transportation, logistics and marketing assets and use the
expected proceeds to repay all borrowings outstanding on the
amended sulphur credit facility (Note 4). Until sale of the
sulphur transportation, logistics and marketing assets, cash
requirements related to the termination of sulphur mining
operations will be funded by our sulphur operations and by
additional borrowings under the amended sulphur bank facility.
We expect to incur approximately $29.5 million of sulphur
reclamation costs, including $27.4 million related to Main Pass
and its related facilities, within the next twelve months. For
the nine months ended September 30, 2000, we have incurred a
total of $7.9 million in reclamation costs for Main Pass and its
related facilities.
DISCONTINUED SULPHUR BUSINESS
Low sulphur prices and high natural gas prices, a
significant element of cost in sulphur mining, caused our Main
Pass sulphur mining operations to be uneconomical in the current
sulphur pricing environment. As a result, in July 2000, we
announced our plan to discontinue our sulphur operations. Under
our initial discontinuation plan, Sulphur production from the
Main Pass mine was expected to continue, at decreasing rates,
through the remainder of 2000 or the point at which production
became prohibitively uneconomical. The mine produced at a rate
of greater than 3,300 long tons per day for the period July 1,
2000 through August 31, 2000, at which time we ceased production
as a result of: 1) continued low sulphur prices; 2) an expected
increase in the price for natural gas in September to an average
of greater than $5.00 per thousand cubic feet (Mcf) and 3) the
results of a recent geologic and tectonic study concluding
that a subsurface brine cavity created as part of the sulphur
mining operations would not be sufficiently stable to continue
operations at the sulphur mine and our decision that any remedial
alternatives to enable continuing production would be prohibitively
expensive under the discontinuation plans. Oil production is
continuing at Main Pass at a gross rate of approximately 5,000
barrels per day as of September 30, 2000.
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 use proceeds from the sale of the business
to fund a portion of the cost of our discontinued sulphur operations
at Main Pass and to repay our existing sulphur debt (see below).
During the third quarter of 2000, we engaged Chase Securities Inc.
to assist us in marketing the transportation,logistics and marketing
assets.
<PAGE> 15
On August 11, 2000, we amended the sulphur credit facility
(see Note 9 "Long-Term Debt" included in our 1999 Annual Report
on Form 10-K) to provide $64.5 million of available borrowings
to fund our near-term requirements under our sulphur
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.
Because of our plans to exit the sulphur business, both
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 nine-month
period 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 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 nine-month period of
2000. Although we sustained a $2.6 million loss from our sulphur
operations during the third quarter of 2000, the operating
results relating to these discontinued operations are currently
estimated to break-even through the anticipated disposal date.
In the third quarter of 2000, we terminated a $9.5 million
sulphur-related obligation to Devon Energy Corporation. We
assumed this obligation in our 1995 purchase of sulphur assets
from Pennzoil Company, a predecessor of Devon Energy (see Note 10
"Commitment and Contingencies" in our 1999 Annual Report on Form
10-K). Under terms of this agreement, we paid Devon Energy $6.0
million and funded $3.5 million into an escrow account to be used
to fund environmental liabilities associated with its former
sulphur operations. We have assumed these liabilities and
believe the escrowed amount is sufficient to fund the related
costs. The restricted cash is considered a long-term asset and
is recorded in "Other Assets" on the balance sheet at September
30, 2000.
We have completed the shutdown of operations at the Culberson
mine in West Texas, which ceased production on June 30, 1999. We
have an agreement to sell all our remaining interests in the mine
and its related assets for approximately $3.5 million, which
would result in a $3.2 million gain. This sale is currently
anticipated to close in the fourth quarter of 2000.
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, production increases from remedial operations, the
sale of our sulphur assets 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.
Important factors that could affect the future results of our
sulphur operations include without limitation, the ability to
satisfy future cash obligations and environmental costs. 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.
<PAGE> 16
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) During the period covered by this Quarterly Report on Form
10-Q the registrant filed the following Current Reports on Form
8-K all reporting events under Item 5:
. A report dated August 31, 2000.
. A report dated September 6, 2000.
. A report dated September 15, 2000.
. A report dated September 21, 2000.
. A report dated September 29, 2000.
<PAGE> 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: October 24, 2000
<PAGE> 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 McMoRan 1999 Stock Incentive Plan.
(Incorporated by reference to Exhibit 10.5 to McMoRan's
Second-Quarter 2000 Form 10-Q).
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 McMoRan Oil & Gas Co. (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).
<PAGE> 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).
<PAGE> 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 Amendment to the amended and restated
credit facility as of November 17, 1998, dated August
11, 2000 among Freeport Sulphur, as borrower, McMoRan,
as Guarantor and, the financial institutions party
thereto.
10.27 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).
10.28 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).
10.29 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).
10.30 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 July 1, 2000.
(Incorporated by reference to Exhibit 10.30 to
McMoRan's Second-Quarter 2000 Form 10-Q).
10.32 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. (Incorporated
by reference to Exhibit 10.31 to McMoRan's Second-
Quarter 2000 Form 10-Q).
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).
10.35 Participation Agreement dated as of
June 15, 2000 but effective as of March 24, 2000
between McMoRan Oil & Gas and Halliburton Energy
Services, Inc. (Incorporated by reference to Exhibit
10.34 to McMoRan's Second-Quarter 2000 Form 10-Q).
10.36 Letter Agreement dated August 22, 2000
between Devon Energy Corporation and Freeport Sulphur.
15.1 Letter dated October 24, 2000 from
Arthur Andersen LLP regarding the unaudited financial
statements.
27.1 McMoRan Financial Data Schedule.
<PAGE> E-3
27.2 Restated McMoRan Financial Data
Schedule.
<PAGE> E-4
