SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 20, 1996
McMoRan Oil & Gas Co.
Delaware 0-23870 72-1266477
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation or Number)
organization)
1615 Poydras Street
New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
Item 5. Other Events.
------------------
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
From time to time, McMoRan Oil & Gas Co. (the "Company") may
make certain written and oral forward-looking statements. Some
important factors that could cause actual results to differ
materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements include the
following: inherent imprecision in estimating the level of the
Company's current reserves; potential inability to capitalize on
the Company's proved undeveloped reserves; substantial reliance
on the spot market price of oil and natural gas and the
substantial volatility of such prices; significant reliance on
the labor and services of independent contractors whose
availability and cost may fluctuate; operating hazards, including
the unpredictable affect of natural occurrences on operations and
the significant possibility of accidents resulting in personal
injury and property damage; effect on the Company's performance
of federal, state and local regulation of operations,
particularly environmental and occupational safety and health
regulation; timing of necessary governmental permits and approval
relating to operations; highly competitive nature of oil and gas
industry; the speculative nature of oil and gas exploration;
fluctuations in interest rates; difficulties in reaching
agreements, or resolving disputes, with joint venture partners,
government officials, suppliers or customers; and potential
disputes with property claimants.
Many of these factors are beyond the Company's ability to
control or predict. Investors are cautioned not to place undue
reliance upon forward-looking statements. The Company disclaims
any intent or obligation to update its forward-looking
statements, whether as a result of receiving new information, the
occurrence of future events or otherwise.
A more detailed discussion of certain of the foregoing
factors follows:
Dependence On and Volatility Of Oil and Natural Gas Prices
The revenues generated by the Company and estimated future
net revenue are highly dependent upon the prices of oil and
natural gas. The nature of the energy market makes it difficult
to estimate future prices of oil and natural gas. Various
factors beyond the control of the Company affect prices of oil
and natural gas, including worldwide and domestic supplies of,
and demand for, oil and natural gas, the ability of the members
of the Organization of Petroleum Exporting Countries to agree to
and maintain oil price and production controls, political
instability or armed conflict in oil-producing regions, the price
of foreign imports, the level of consumer demand, the price and
availability of alternative fuels, the availability of pipeline
capacity and changes in existing federal regulation and price
controls. It is likely that oil and natural gas prices will
continue to fluctuate in the future, which may adversely affect
the Company's business.
Speculative Nature of Oil and Gas Exploration
The search for oil and natural gas is a highly speculative
activity, involves numerous risks and frequently is unproductive.
Wells may be dry and productive wells may not produce enough oil
or natural gas to produce a profit or even return the invested
capital. Without successful drilling or acquisition ventures,
the Company's assets, properties and revenues will decline.
Imprecision in Estimating Current Reserves
In general, estimates of economically recoverable oil and
natural gas reserves are based upon a number of variable factors
and assumptions, such as historical production and the assumed
effects of regulation by governmental agencies and assumptions
concerning future oil and gas prices, future capital
expenditures, future lease operating costs and future plugging,
abandonment and salvage costs, all of which may vary considerably
from actual results. All such estimates are to some degree
speculative, and classifications of reserves are only attempts to
define the degree of speculation involved. For these reasons,
estimates of the economically recoverable oil and natural gas
reserves attributable to any particular group of properties and
classifications of such reserves based on risk of recovery,
prepared by different engineers or by the same engineers at
different sites, may vary substantially. The meaningfulness of
such estimates is highly dependent on the assumptions upon which
they are based.
Potential Inability to Capitalize on Proved Undeveloped Reserves
A portion of the Company's oil and gas reserves are proved
undeveloped reserves. Successful development and production of
such reserves, although they are categorized as "proved," cannot
be assured. Additional drilling will be necessary in future
years both to maintain production levels and to define the extent
and recoverability of existing reserves. There is no assurance
that present oil and natural gas wells of the Company will
continue to produce at current or anticipated rates of production
or that production rates achieved in early periods can be
maintained.
Operating Hazards
The Company's operations are subject to the usual hazards
incident to the drilling and production of natural gas and crude
oil, such as blowouts, cratering, explosions, uncontrollable
flows of oil, natural gas or well fluids, fires, pollution,
releases of toxic gas and other environmental hazards and risks.
Offshore oil and gas operations are subject to the additional
hazards of marine operations, such as capsizing, collision and
adverse weather and sea conditions. These hazards can cause
personal injury and loss of life, severe damage to and
destruction of property and equipment, environmental damages and
suspension of operations. The Company's drilling operations may
be curtailed, delayed or canceled as a result of numerous
factors, including, weather conditions, compliance with
governmental requirements and shortages or delays in the delivery
of equipment.
Reliance on Contractors
The Company has undertaken a policy of limiting its number
of permanent employees and, to that end, extensively utilizes the
services of independent consultants and contractors to perform
various professional services, particularly in the areas of
construction, design, well site surveillance and environmental
assessment. Field and on-site production operation services such
as pumping, maintenance, dispatching, inspection and testing, are
also extensively provided by independent contractors. The
availability and cost of such contractors may fluctuate from time
to time, particularly when the demand for such services
increases. The Company's operations may be affected
detrimentally by such fluctuations.
Federal, State and Local Regulation
The exploration, production and development operations of
the Company are subject to regulation at both the federal and
state levels. Such regulation includes requiring permits for the
drilling of wells as well as the maintenance of certain bonding
and insurance requirements in order to drill or operate wells.
The Company's exploration, production and development operations
are also subject to various conservation laws and regulations.
The Company's operations are subject to extensive federal, state
and local regulatory requirements relating to environmental
affairs, health, safety and waste management and chemical
products. Moreover, the recent trend toward stricter standards
in environmental legislation and regulations is likely to
continue. It is possible that future developments, such as
stricter environmental laws or regulations, could have a
significant impact on the Company's operating costs.
Competition
Competition in the oil and gas industry is intense. In
seeking to obtain new leases and exploration prospects, the
Company faces competition from both major and independent oil and
gas companies. Many of these competitors have financial and
other resources substantially in excess of those available to the
Company and may, accordingly, be better positioned to acquire and
exploit prospects, hire personnel and market production. In
addition, many of the Company's larger competitors may be better
able to withstand the effect of changes in factors such as
worldwide oil and natural gas prices and levels of production,
the cost and availability of alternative fuels and the
application of government regulations, which affect demand for
the Company's oil and natural gas production and are beyond the
control of the Company. Such competition also adversely affects
the Company's ability to obtain scarce drilling and completion
equipment, services and supplies, and there can be no assurance
that sufficient drilling and completion equipment, services and
supplies will be available when needed. Any such shortages could
delay the proposed exploration, development and sales activities
of the Company and could cause a material adverse affect to the
financial condition of the Company.
Joint Ventures
In order to help defray operational costs to the Company and
increase the number of available prospects, the Company has
entered into certain joint venture arrangements. Although the
Company anticipates no negative impact as a result of such
arrangements, the Company cannot guarantee that disputes in the
future will not arise. Such potential difficulties could hinder
the Company's ability to continue operations on property under
the control of such joint ventures.
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/ William J. Blackwell
------------------------------
William J. Blackwell
Controller
(authorized signatory and
Principal Accounting Officer)
Date: December 20, 1996
