SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 0-23870
McMoRan Oil & Gas Co.
(Exact name of registrant as specified in its charter)
DELAWARE 72-1266477
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1615 Poydras Street
New Orleans, Louisiana 70112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 582-4000
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
Preferred Stock Purchase Rights
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $49,350,000 on March
14, 1997.
On March 14, 1997, there were issued and outstanding 14,025,390
shares of the registrant's Common Stock, par value $0.01 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement to be filed with the
Securities and Exchange Commission in connection with the registrant's
1997 annual meeting of stockholders are incorporated by reference into
Part III hereof.
<PAGE>
McMoRan Oil & Gas Co.
Annual Report on Form 10-K for
the Fiscal Year Ended December 31, 1996
TABLE OF CONTENTS
Page
Part 1
Items 1. and 2. Business and Properties................................... 1
Item 3. Legal Proceedings................................................ 12
Item 4. Submission of Matters to a Vote of Security Holders.............. 12
Executive Officers of the Registrant............................. 13
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.......................................................... 14
Item 6. Selected Financial Data.......................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 14
Item 8. Financial Statements and Supplementary Data...................... 18
Item 9. Changes in and disagreements with Accountants on Accounting and
Financial Disclosure............................................. 26
Part III
Item 10. Directors and Executive Officers of the Registrant............... 26
Item 11. Executive Compensation........................................... 26
Item 12. Security Ownership of Certain Beneficial Owners and Management... 26
Item 13. Certain Relationships and Related Transactions................... 26
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.............................................................. 26
Signatures.................................................................S-1
Exhibit Index..............................................................E-1
<PAGE> 1
PART I
Items 1 and 2. Business and Properties.
OVERVIEW
McMoRan Oil & Gas Co. (the "Company" or "MOXY") is an independent
oil and gas company engaged in the exploration, development and
production of oil and natural gas offshore in the Gulf of Mexico (the
"Gulf") and onshore in the Gulf Coast area. The Company commenced
operations in May 1994 following the distribution of all of the
Company's common stock to the stockholders of Freeport-McMoRan Inc.
("FTX") in order to carry on substantially all of the oil and natural
gas exploration activities previously conducted by FTX for its own
account. Prior to distribution, FTX transferred to the Company $35.4
million in cash, an inventory of oil and gas exploration prospects and a
significant amount of seismic and well log data. The Company and its
predecessors have conducted exploration, development and production
operations offshore in the Gulf and onshore in the Gulf Coast area for
more than 25 years, which have provided the Company an extensive
geological and geophysical database, and extensive technical and
operational expertise in this area.
The Company's business strategy is to increase its reserves and
production through the exploration and development of oil and gas
properties by concentrating its efforts in the Gulf and onshore Gulf
Coast areas where the Company's management team has significant
exploration experience. The Company evaluates substantially all of its
exploratory prospects with 3-D seismic surveys prior to drilling. MOXY
intends to continue to generate prospects and evaluate farm-in
opportunities by using 3-D seismic data, state of the art technology and
its geological and geophysical experience and expertise. MOXY will
require substantial additional financing to continue its exploratory
drilling and development program. See "Cautionary Statement," below.
During 1995, the Company entered into a $65 million exploration
and development program with affiliates of MCN Corporation ("MCN"), a
natural gas holding company based in Detroit, Michigan (the "MOXY/MCN
Program"). The Company also formed a joint venture with Phillips
Petroleum Company ("Phillips") to explore the East Fiddler's Lake/North
Bay Junop project area in Terrebonne Parish, Louisiana. The Company
subsequently assigned a portion of its interest in the project area to
Freeport-McMoRan Resource Partners, Limited Partnership ("FRP"), a
publicly traded limited partnership of which FTX is general partner.
See "Oil and Gas Properties" and "Exploration and Development Programs,"
below.
OIL AND GAS PROPERTIES
As of March 1, 1997, the Company owned interests in 30 oil and gas
leases in the Gulf and onshore Louisiana covering approximately 106,000
gross acres (approximately 29,000 net acres to the Company). The
Company's exploratory drilling has established estimated proved reserves
attributable to the Company's interest in its leases of approximately
16.1 billion cubic feet of gas and 168,000 barrels ("Bbls") of
condensate as of December 31, 1996 based on a reserve report prepared by
Crescent Technology, Inc. ("Crescent"), an engineering firm whose
business activities principally involve services for MOXY, FRP and their
affiliated companies.
Proved Properties
Vermilion Block 160 Field Unit. Gross production from the field
unit averaged 14.9 million cubic feet ("MMCF") of natural gas and 687
Bbls of condensate per day during 1996. The MOXY/MCN Program has a 40%
working interest and an approximate 28% net revenue interest in the
Vermilion Block 160 field unit which is located offshore Louisiana in
approximately 90 feet of water. In March 1997, MOXY, as operator,
completed drilling a development well that encountered 262 feet of net
gas pay from eight sands. MOXY immediately began drilling an additional
development well. Also, in 1996 MOXY completed a farm-in of the
adjacent portion of Vermilion Block 159. This prospect is intended to
be drilled at a location remote from the existing platform. The current
working interest and the net revenue interest within the Vermilion Block
160 field unit are subject to re-determination subsequent to final
development drilling. In Vermilion Block 160, outside the field unit
area, the MOXY/MCN Program has a 53.3% working interest and an
approximate 42.5% net revenue interest. Also, in Vermilion Block 143,
outside the field unit area, the MOXY/MCN Program has a 26.67% working
interest and an approximate 19% net revenue interest. The MOXY/MCN
Program's interest in Vermilion Blocks 143 and 160, including the
portion of its interest in the field unit resulting from these two
blocks, is subject to a 30% net profits interest. The Vermilion Block
160 field unit is comprised of portions of four leases (Vermilion Blocks
143, 144, 159, and 160) totaling 5,625 acres. In addition, the MOXY/MCN
Program owns interests in, or exploration rights to, an additional 9,375
acres in the four block area, including the farm-in of 3,125 acres on
Vermilion Block 159.
<PAGE> 2
Vermilion Block 410 Field. The MOXY/MCN Program has a 37.5%
working interest and 28% net revenue interest in the Vermilion Block 410
field which is located in 360 feet of water offshore Louisiana. Ashland
Exploration, Inc., as operator, initiated production from four wells at
one platform in late December 1996. Production from four wells at the
second platform began in February 1997 and gross daily production from
both platforms combined currently approximates 85 Mmcf of gas. The
lease blocks cover a total of 11,015 acres.
Exploration Properties
Grand Isle Block 65. The MOXY/MCN Program has a 37.5% working
interest and 30.2% net revenue interest in Grand Isle Block 65, where
Nippon Oil Exploration, the operator, has drilled and saved the #1
sidetrack discovery well. The well encountered two gas bearing zones
with a total of 29 feet of net pay. Nippon Oil has obtained a
suspension of production for the initial well. The MOXY/MCN Program
acquired the adjacent Grand Isle Blocks 58 and 59 in the Central Gulf of
Mexico lease sale in 1996. MOXY has received a new 3-D survey over a
portion of the three blocks which may result in future exploratory
drilling in the second half of 1997. The prospect is located 23 miles
offshore Louisiana in a water depth of 135 feet and the blocks cover a
total of 15,000 acres.
West Cameron Block 616. The MOXY/MCN Program has a 50% working
interest and 34.4% net revenue interest in West Cameron Block 616, where
MOXY, as operator, drilled the #2 exploration well in June 1996 and
discovered 190 feet of net gas pay in multiple sands. The well was
saved for future development. A second exploratory well, the #3 well,
is planned for mid-1997. MOXY also owns an interest in the adjacent
West Cameron Block 617 lease where exploratory drilling is contemplated
in 1997. The blocks cover a total of 10,000 acres and are located
approximately 130 miles offshore Louisiana in 300 feet of water.
West Cameron Block 503. The MOXY/MCN Program has a 100% working
interest and 80% net revenue interest in West Cameron Block 503. MOXY,
as operator, drilled the #1 exploratory well which discovered two gas
reservoirs with 71 feet of net gas pay. The block is located 95 miles
offshore Louisiana in a water depth of 150 feet and covers 5,000 acres.
The MOXY/MCN Program has agreed, subject to certain conditions, to sell
its interest in this block to a third party for $7.2 million. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" included herein under Item 7.
West Cameron Block 492. The MOXY/MCN Program acquired a 100%
working interest and 80% net revenue interest in West Cameron Block 492
in the Central Gulf of Mexico lease sale in 1996. The block covers 5,000
acres and is located 90 miles offshore in 150 feet of water.
Vermilion Block 391/392/408. The MOXY/MCN Program has a 30%
working interest and 24.1% net revenue interest in Vermilion Blocks
392/408 and a 31.9% working interest and 25.7% net revenue interest in
Vermilion Block 391. Ashland Exploration, Inc., as operator, drilled
an unsuccessful exploratory well in the third quarter of 1996 on
Vermilion Block 391. The MOXY/MCN Program acquired the Vermilion Block
392 lease in the Central Gulf of Mexico lease sale in 1996 and acquired
the shallow rights on Vermilion Block 408 by trading the deep rights at
Vermilion Block 392. Vermilion Blocks 391/392/408 cover a total of
15,000 acres and are located four miles from the Vermilion Block 410
field, which is approximately 115 miles offshore Louisiana, in
approximately 360 feet of water.
<PAGE> 3
East Fiddler's Lake/North Bay Junop. MOXY has a 25% working
interest and 18% net revenue interest in approximately 8,600 acres of
leasehold in the East Fiddler's Lake/North Bay Junop prospect area in
Terrebonne Parish, Louisiana, and owns a proprietary 3-D seismic data
survey covering approximately 35,000 acres. MOXY also has an option on
approximately 16,000 additional acres in the project area. Operations
are being undertaken by a joint venture owned 50% by Phillips
(operator), 25% by FRP and 25% by MOXY. The first exploratory well at
East Fiddler's Lake was drilled to 19,177 feet in the third quarter of
1996. Although the well was unsuccessful in discovering commercial
hydrocarbons, the geological data from this well is assisting drilling
activity in the prospect area. During the fourth quarter of 1996, the
North Bay Junop well was spudded and the well is drilling to its
targeted total depth of 19,500 feet. Additional leads in the project
area have identified other potential prospects.
Lease Sale. MOXY was high bidder on seven tracts at the Central
Gulf of Mexico lease sale held in March 1997 for high bids totaling $5.5
million. MOXY has entered into an agreement with FRP whereby FRP will
bear 60% of the acquisition and exploration costs and acquire a 50%
working interest in these leases.
Oil and Gas Reserves
Estimates of the Company's total proved developed and proved
undeveloped reserves of oil and gas as of December 31, 1996 by Crescent
were as follows:
Gas(Mmcf) Oil(Bbls)
________________________________ ______________________________
Proved Proved Proved Proved
Developed Undeveloped Developed Undeveloped
_________ ___________ _________ ___________
7,530 8,524 58,000 110,000
The Company's wells at the Vermilion Block 160 field unit and
Vermilion Block 410 field have limited production history. Estimates of
proved undeveloped reserves that may be developed and produced in the
future are based upon volumetric calculations and upon analogy to
similar types of reserves rather than upon actual production history.
Estimates based on these methods are generally less reliable than those
based on actual production history. Subsequent evaluation of the same
reserves based upon production history will result in variations, which
may be substantial, in the estimated reserves. Further, the Company's
proved undeveloped reserves will require additional capital to develop
and produce. See "Cautionary Statement," below, and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" included herein under Item 7.
The following table sets forth as of December 31, 1996, the
estimated future net cash flows before income taxes and the present
value of estimated future net cash flows before income taxes, discounted
at 10% per annum, from the production and sale of the proved developed
and undeveloped reserves attributable to the Company's interest in gas
and oil properties as of such date, as determined by Crescent.
Proved Proved Total
Developed Undeveloped Proved
_________ ___________ _________
Estimated future net cash
flows before income taxes (1) $25,297,190 $20,283,640 $45,580,830
Present value of estimated
future net cash flows before
income taxes (1) 21,174,780 14,166,630 35,341,410
__________________
(1) In preparing such estimates, Crescent used prices of $26.08 per
barrel of oil and $3.85 per Mcf of gas as of December 31, 1996,
the weighted average prices that the Company estimates it would
have received, assuming production from all of its properties with
proved reserves.
______________________
In accordance with applicable requirements of the Securities and
Exchange Commission (the "Commission"), the estimated discounted future
net revenues from estimated proved reserves are based on prices and
costs at fiscal year end. Actual future prices and costs may be
materially higher or lower. See "Cautionary Statement ," below.
<PAGE> 4
In accordance with methodology approved by the Commission,
specific assumptions were applied in the computation of the reserve
evaluation estimates. Under this methodology, future net cash flows are
determined by reducing estimated future gross cash flows to the Company
for oil and gas sales by the estimated costs to develop and produce the
underlying reserves, including future capital expenditures, operating
costs, transportation costs, net profits interests, royalty and
overriding royalty burdens on certain of the Company's properties.
Future net cash flows were discounted at 10% per annum to arrive at
discounted future net cash flows. The present value of future net cash
flows shown above should not be construed as the current market value as
of December 31, 1996, or any prior date, of the estimated oil and gas
reserves attributable to the Company's properties. See "Cautionary
Statement," below.
The Company is periodically required to file estimates of its oil
and gas reserve data with various governmental regulatory authorities
and agencies. In addition, estimates are from time to time furnished to
governmental agencies in connection with specific matters pending before
such agencies. The basis for reporting estimates of reserves to these
agencies, in some cases, is not comparable to that furnished above
because of the nature of the various reports required. The major
variations include differences in when such estimates are made, in the
definition of reserves, in the requirements to report in some instances
on a gross, net or total operator basis and in the requirements to
report in terms of smaller geographical units.
Production, Unit Prices and Costs
The following table sets forth certain information regarding the
production volumes of, average sales prices received for and average
production costs for the Company's sale of oil and gas for the year
ended December 31, 1996:
Net gas production (Mcf).......................... 631,000
Net crude oil and condensate production (Bbls).... 29,000
Sales price:
Natural gas (per Mcf)............................. $ 2.72
Crude oil and condensate (per Bbl)................ $22.22
Production (lifting) costs per Mcf equivalent(1).. $ 0.94
_____________________
(1) Production costs were converted to an Mcf equivalent on the basis
of one barrel of oil being equivalent to six Mcf of natural gas.
Production costs exclude all depreciation and amortization
associated with property and equipment. The components of
production costs may vary substantially among wells depending on
the production characteristics of the particular producing
formation and method of recovery employed and other factors, but
include charges under transportation agreements and all lease
operating expenses.
____________________
The relationship between the Company's sales prices and its
production (lifting) costs depicted by the table above is not
necessarily indicative of future results of operations expected by the
Company. See "Cautionary Statement," below.
Acreage
The following table sets forth the oil and gas acreage in which
the Company held an interest as of December 31, 1996:
Developed(1) Undeveloped
________________ _______________
Gross(2) Net(3) Gross(2) Net(3)
Acres Acres Acres Acres
_____ _____ _____ _____
Offshore (federal waters) 38,651 9,074 60,000 18,038
Onshore Louisiana - - 6,860 1,715
______ _______ _______ ________
Total 38,651 9,074 66,860 19,753
====== ======= ======= ========
______________________
<PAGE> 5
(1) "Developed" acreage includes acreage by lease, unit or offshore block
in which there are one or more producing wells or shut-in wells
capable of commercial production and/or acreage with established
reserves in quantities deemed sufficient to develop.
(2) The term "Gross" refers to acres in which the Company owns a working
interest and/or operating rights.
(3) The term "Net" refers to gross acres multiplied by the percentage of
the working interest and/or operating rights owned therein.
____________________
Oil and Gas Drilling Activity
The following table sets forth the gross and net number of
productive, dry and total exploratory wells and development wells that
the Company drilled in each of the years ended December 31, 1995 and
1996:
1995 1996
_____________ _____________
Gross Net Gross Net
_____ ___ _____ ___
Exploratory
Productive............................... 1.0 0.375 4.0 0.910
Dry...................................... - - 4.0 0.948
--- ----- --- -----
Total................................. 1.0 0.375 8.0 1.858
=== ===== === =====
Development
Productive............................... 5.0 1.875 - -
Dry...................................... - - - -
___ _____ ___ ____
Total................................. 5.0 1.875 - -
=== ===== === ====
Operating Hazards and Insurance
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, 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.
Drilling activities are subject to numerous risks, including the
risk that no commercially productive hydrocarbon reserves will be
encountered. The cost of drilling, completing and operating wells and
installing production facilities and pipelines is often uncertain. 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.
The Company maintains insurance of various types that it considers
to be adequate to cover its operations. Such insurance is subject to
deductibles that the Company considers reasonable and not excessive.
Consistent with insurance coverage generally available to the industry,
the Company's insurance policies do not provide coverage for losses or
liabilities relating to pollution, except for sudden and accidental
occurrences.
Competition
Competition in the oil and gas industry is intense. In seeking to
obtain desirable 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.
<PAGE> 6
Marketing
The Company's gas sales are currently made in the "spot market"
for no more than two months at a time at then currently available
prices. Prices on the spot market fluctuate with demand. Crude oil and
condensate production is generally sold one month at a time at currently
available prices.
EXPLORATION AND DEVELOPMENT PROGRAMS
In September 1995, the Company and affiliates of MCN established
the MOXY/MCN Program to explore and develop prospects in the Gulf.
Pursuant to the agreement, the Company manages the MOXY/MCN Program,
selecting all prospects and drilling opportunities. The Company and MCN
committed $65 million to the MOXY/MCN Program, with revenues and costs
being shared 40% by MOXY and 60% by MCN. MCN is funding its 60% share
of expenditures and is loaning funds to MOXY for its 40% share. The
Company contributed to the MOXY/MCN Program its interest in the
Vermilion Block 160 and Vermilion Block 410 fields and certain
undeveloped properties. MCN reimbursed MOXY $11.7 million for prior
expenditures on the contributed properties. The Company's 40% share of
future revenues from the MOXY/MCN Program is dedicated to repaying
amounts loaned to the Company (exclusive of the $11.7 million
reimbursement of prior costs and the $3 million overhead payment) by
MCN. Funds advanced by MCN bear interest at the prime rate plus 2% per
annum. MCN also provided to the Company an $0.8 million non-interest
bearing production loan that was repaid in 1996 from net production
revenues generated from the Vermilion Block 160 field. The Company's
obligation to repay amounts financed by MCN is non-recourse other than
to the properties contributed to and developed by the MOXY/MCN Program.
The MOXY/MCN Program will terminate after MCN's initial
exploration program expenditures of $35 million have been committed or
December 31, 1997, whichever is earlier ($25.9 million had been spent at
December 31, 1996). The MOXY/MCN Program's term can be extended at
MCN's option for up to an additional one year period, subject to a
further exploration expenditure commitment of $32.5 million and the
continued availability of MOXY's line of credit from MCN. MOXY advised
MCN that MOXY believed it was necessary to implement a long-term
exploration program and in accordance with the recommendation, MOXY
entered into a multi-year seismic purchase agreement. MCN advised MOXY
that it did not wish to make such a long-term commitment, did not
participate in this seismic purchase commitment and has no right to any
interest in leases acquired as a result of this new seismic data. As a
result, MOXY believes that it is unlikely that the MOXY/MCN Program will
be extended beyond its initial term.
In June 1995, the Company and Phillips entered into a joint
venture agreement to explore a project area in Terrebonne Parish,
Louisiana containing the North Bay Junop and East Fiddler's Lake
prospects. Pursuant to the agreement, the Company conveyed one-half of
its interest in the area, with Phillips reimbursing the Company $3.8
million for previously incurred costs related to the project. In June
1996, the Company sold one-half of its remaining 50% interest in the
area to FRP for $2.1 million. This amount represented the reimbursement
for certain costs previously incurred by the Company in connection with
this project area. MOXY sold the interest to FRP on the same
proportionate basis as the sale of the interest to Phillips. The project
area, with the exception of the North Bay Junop and East Fiddler's Lake
prospects, is subject to a possible 25% participation by a mineral
rights owner.
REGULATION
General
The oil and gas industry is extensively regulated by federal and
state authorities in the United States. Legislation affecting the oil
and gas industry is under constant review and, relevant statutes are
constantly being adopted, expanded or amended. Further, numerous
departments and agencies, both federal and state, have issued rules and
regulations binding on the oil and gas industry and its individual
members, some of which carry substantial penalties for the failure to
comply. The regulatory burden on the oil and gas industry increases its
cost of doing business and, consequently, affects its profitability.
<PAGE> 7
Exploration, Production and Development
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. Such regulation also controls the
location of wells, the method of drilling and casing wells, the surface
use and restoration of properties upon which wells are drilled and the
plugging and abandoning of wells. The Company's exploration, production
and development operations are also subject to various conservation laws
and regulations. These include the regulation of the size of drilling
and spacing units or proration units, the density of wells that may be
drilled, the levels of production, and the unitization or pooling of oil
and gas properties.
The Company presently has interests in or rights to 23 offshore
leases located in federal waters on the outer continental shelf ("OCS").
Federal leases are administered by the Mineral Management Service
("MMS"). Individuals and entities must qualify with the MMS prior to
owning and operating any leasehold or right-of-way interest in federal
waters. Such qualification with the MMS generally involves filing
certain documents with the MMS and obtaining performance bonds. For
offshore operations, lessees must obtain MMS approval for exploration
plans and development and production plans prior to the commencement of
such operations. In addition to permits required from other agencies
(such as the Coast Guard, the Army Corp of Engineers and the
Environmental Protection Agency), lessees must obtain a permit from the
MMS prior to the commencement of drilling. The MMS has promulgated
regulations requiring offshore production facilities located on the OCS
to meet stringent engineering and construction specifications, and has
recently proposed and/or promulgated additional safety-related
regulations concerning the design and operating procedures of OCS
production platforms and pipelines. The MMS also has regulations
restricting the flaring or venting of natural gas, and has proposed
amendments to such regulations that would prohibit the flaring of liquid
hydrocarbons and oil without prior authorization. Similarly, the MMS
has promulgated other regulations governing the plugging and abandonment
of offshore wells and the removal of all production facilities. To
cover the various obligations of an OCS lease, the MMS generally
requires that lessees post substantial bonds or other acceptable
assurances that such obligations will be met. The cost of such bonds or
other security can be substantial and there is no assurance that bonds
or other surety can be obtained in all cases. Under certain
circumstances, the MMS may require all Company operations on federal
leases to be suspended or terminated. Any such suspension or
termination would materially adversely affect the Company's financial
condition and operations.
Certain producing states, including Louisiana, have recently
adopted or considered adopting measures that alter the methods used to
prorate gas production from wells located in these states, including
those located in their territorial waters. These measures may limit the
rate at which gas may be produced from the wells in which the Company
might acquire an interest. Congress considered, but rejected,
legislation that would have limited the rights of states to prorate
production. The Company cannot predict whether such legislation will be
reintroduced or what effect the new state rules may have on gas
production in producing states. At the present time there are no
regulatory measures which would limit the production of oil or gas
leases in which the Company presently owns an interest.
Environmental
General. 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. These laws and regulations require the acquisition of permits
before construction or drilling commences, limit or prohibit
construction and drilling activities on certain lands lying within
wilderness or wetlands and other protected areas and impose substantial
liabilities for pollution resulting from the Company's operations.
Moreover, the recent trend toward stricter standards in
environmental legislation and regulations is likely to continue. For
instance, legislation has been proposed in Congress from time to time to
reclassify oil and gas production wastes as "hazardous waste." If such
legislation were to be enacted, it could have a significant impact on
the operating costs of the Company, as well as the oil and gas industry
in general. State initiatives to further regulate the disposal of oil
and gas wastes are also pending in certain states, and these various
initiatives could have a similar impact on the Company. Management
believes that compliance with current applicable environmental laws and
regulations will not have a material adverse impact on the Company. To
the best of the Company's knowledge, its operations are in substantial
compliance, and are expected to continue to comply in all material
respects, with applicable environmental laws, regulations and
ordinances.
<PAGE> 8
It is possible, however, that future developments, such as
stricter environmental laws or regulations could affect the Company's
operations. Moreover, some risk of environmental costs and liabilities
is inherent in the Company's operations as it is with other companies
engaged in similar or related businesses, and there can be no assurance
that material costs and liabilities, including substantial fines or
criminal sanctions for violation of environmental laws and regulations,
will not be incurred by the Company.
Solid Waste. The Company's operations may generate or involve the
transport of both hazardous and nonhazardous solid wastes that are
subject to the requirements of the Federal Resource Conservation and
Recovery Act and comparable state statutes. In addition, the
Environmental Protection Agency ("EPA") is presently in the process of
developing stricter disposal standards for nonhazardous waste. Changes
in these regulations may result in additional expenditures or operating
expenses by the Company.
Hazardous Substances. The Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and comparable state statutes,
also known as "Superfund" laws, impose liability on certain classes of
persons that contribute to the release of a "hazardous substance" into
the environment. These persons include the owner or operator of a site,
and companies that transport, dispose of or arrange for the disposal of,
the hazardous substances found at the site. CERCLA also authorizes the
EPA, and in some cases, third parties to take actions in response to
threats to the public health or the environment and to recover their
costs from the responsible classes of persons. Despite the "petroleum
exclusion " of Section 101(14) of CERCLA that encompasses wastes
directly associated with crude oil and gas production, the Company may
generate or transport "hazardous substances" within the meaning of
CERCLA or comparable state statutes in the course of its ordinary
operations. Thus, the Company may be responsible under CERCLA or the
state equivalents for all or part of the costs required to clean up
sites where a release has occurred.
Air. The Company's operations may also be subject to the Clean
Air Act ("CAA") and comparable state statutes. Amendments to the CAA
were adopted in 1990 and contain provisions that may result in the
gradual imposition of certain pollution control requirements with
respect to air emissions from operations. The EPA has been developing
regulations to implement these requirements. The Company may be
required to incur certain capital expenditures in the next several years
for air pollution control equipment in connection with maintaining or
obtaining operating permits and approvals addressing other air
emission-related issues.
Water. The Federal Water Pollution Control Act ("FWPCA") strictly
regulates the unauthorized discharge of produced waters and other oil
and gas wastes into navigable waters. The FWPCA provides for civil and
criminal penalties for any unauthorized discharges of oil and other
hazardous substances in reportable quantities and imposes substantial
potential liability for the costs of removal, remediation and damages.
Similarly, the Oil Pollution Act of 1990 (the "OPA") imposes liability
for the discharge of oil into or upon navigable waters or adjoining
shorelines. Among other things, the OPA raises liability limits, narrows
defenses to liability and provides more instances in which a responsible
party is subject to unlimited liability. State laws for the control of
water pollution also provide varying civil and criminal penalties and
liabilities in the case of an unauthorized discharge of petroleum or its
derivatives into state waters. Further, the Coastal Zone Management Act
authorizes state implementation and development of programs or
management measures for nonpoint source pollution to restore and protect
coastal waters.
Endangered Species. Several federal laws impose regulations
designed to ensure that endangered or threatened plant and animal
species are not jeopardized and their critical habitats are neither
destroyed nor modified. These laws may restrict the Company's
exploration, development and production operations and impose civil or
criminal penalties for non-compliance.
Safety and Health Regulations
The Company is also subject to laws and regulations concerning
occupational safety and health. It is not anticipated that the Company
will be required in the near future to expend amounts that are material
in the aggregate to the Company's overall operations by reason of
occupational safety and health laws and regulations, but inasmuch as
such laws and regulations are frequently changed, the Company is unable
to predict the ultimate cost of compliance.
<PAGE> 9
EMPLOYEES
At February 28, 1997, the Company had 14 employees. All of the
Company's employees are devoted primarily to managerial, land,
geological and administrative functions. The Company intends to
continue its policy of limiting its number of permanent employees and,
to that end, generally 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 generally provided by independent contractors.
Currently, a major portion of the Company's geological and geophysical
services are performed by CLK Company, L.L.C. ("CLK"). Under the
Company's agreement with CLK, the Company pays CLK an annual fee of
$2.4 million, with $0.5 million of this fee paid in Company common
stock, and reimburses CLK's direct expenses incidental to its work for
the Company and for its office space. In addition, CLK receives a 3%
overriding royalty interest on all new domestic prospects accepted by
the Company. For the year ended December 31, 1996, the Company incurred
$3.1 million of expenses under its agreement with CLK.
RELATIONSHIP WITH FTX
Other than those functions performed by the Company's employees
and those provided under third party contracts since January 1, 1996,
substantially all of the services necessary for the business and
operations of the Company, including certain executive, technical,
administrative, accounting, financial, tax and other services have been
performed by FM Services Company ("FMS"), a 50%/50% subsidiary of FTX
and Freeport-McMoRan Copper & Gold Inc., pursuant to a services
agreement between FMS and the Company (the "Services Agreement"). Prior
to 1996, substantially the same services were provided by FTX. Since
September 1995 these services have been provided for a fixed annual fee
of $1.0 million, subject to annual cost of living increases beginning in
the first quarter of 1997. Prior to September 1995, the cost of such
services was provided by FTX as determined and allocated by FTX. For
the year ended December 31, 1996, the Company incurred $1.0 million of
expenses under its agreement with FMS. The Services Agreement is
terminable by the Company at any time upon 90 days notice.
CAUTIONARY STATEMENT
This report includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. All statements other than
statements of historical fact included in this report, including,
without limitation, the statements under the headings "Business and
Properties," "Market for Registrant's Common Equity and Related
Stockholder Matters," and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" regarding MOXY's
financial position and liquidity, payment of dividends, MOXY's strategic
alternatives, future capital needs, development and capital expenditures
(including the amount and nature thereof), the drilling of wells,
reserve estimates and future net revenues attributable thereto, business
strategies, and other plans and objectives of management of the Company
for future operations and activities, are forward-looking statements.
Although MOXY believes that the expectations reflected in such forward-
looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that
could cause actual results to differ materially from MOXY's expectations
are disclosed in this report including, without limitation, in
conjunction with the forward-looking statements included in this report.
These statements are based on certain assumptions and analyses made by
the Company in light of its experience and its perception of historical
trends, current conditions, expected future developments and other
factors it believes are appropriate under the circumstances. Such
statements are subject to a number of assumptions, risks and
uncertainties, including the risk factors discussed below, and in the
Company's other filings with the Commission, general economic and
business conditions, the business opportunities that may be presented to
and pursued by the Company, changes in law or regulations and other
factors, many of which are beyond the control of the Company. Readers
are cautioned that any such statements are not guarantees of future
performance and the actual results or developments may differ materially
from those projected in the forward-looking statements. All subsequent
written and oral forward-looking statements attributable to MOXY or
persons acting on its behalf are expressly qualified in their entirety
by these cautionary statements.
<PAGE> 10
Limited Operating History, Significant Historical
Operating Losses and Need for Additional Financing
The Company commenced operations in 1994. In addition, the
Company has only two producing fields, which have been on production for
only a short period of time, making proved reserves and levels of future
production attributable to these fields less susceptible to estimation.
Also, as a result of operating losses from the Company's exploratory
drilling program, the Company has incurred significant operating losses
to date. The Company's viability must be considered in light of the
risks and difficulties frequently encountered by companies engaged in
the early stages of their oil and gas exploration, development and
production activities.
The development of the Company's business will continue to require
substantial expenditures. The Company's ability to continue its
exploratory drilling program depends on obtaining additional financing.
There can be no assurance that the Company will be successful in
obtaining any additional financing or the terms on which such financing
can be obtained. The Company's future financial results will depend
primarily on its ability to obtain additional financing, economically
locate hydrocarbons in commercial quantities and on the market prices
for oil and gas. There can be no assurance that the Company will
achieve or sustain profitability or positive cash flows from operating
activities in the future.
Volatility of Oil and Gas Prices
The Company's revenues substantially depend on the prevailing
prices for oil and natural gas. In recent years, oil and natural gas
prices and, therefore, the level of drilling, exploration, development
and production, have been extremely volatile. Prices are affected by
market supply and demand factors as well as actions of state and local
agencies, U.S. and foreign governments and international cartels. All
of these factors are beyond the control of the Company. Any significant
or extended decline in oil and/or natural gas prices will have a
material adverse effect on the Company's financial condition and
operations and could impair access to sources of capital.
Exploration and Development Risks
Exploration and development of natural gas and oil involve a high
degree of risk that no commercial production will be obtained or that
the production will be insufficient to recover drilling and completion
costs. The cost of drilling, completing and operating wells is often
uncertain, and cost overruns in offshore operations can adversely affect
the economics of a project. The Company's drilling operations may be
curtailed, delayed or canceled as a result of numerous factors,
including title problems, weather conditions, compliance with
governmental requirements and shortages or delays in the delivery of
equipment. Furthermore, completion of a well does not ensure a profit
on the investment or a recovery of drilling, completion and operating
costs.
Replacement of Reserves
MOXY's future performance depends in part upon its ability to
acquire, find and develop oil and gas reserves that are economically
recoverable. Without successful exploration or development activities,
MOXY's reserves will decline. No assurances can be given that MOXY will
be able to find and develop additional reserves on an economic basis.
MOXY's business is capital intensive and to maintain its asset
base of proved oil and gas reserves a significant amount of cash flow
from operations must be reinvested in development or exploration
activities. To the extent cash flow from operations is reduced and
external sources of capital are limited or unavailable, MOXY's ability
to make the necessary capital investments to maintain or expand its
asset base will be impaired. Without such investment, MOXY's oil and
gas reserves will decline.
In order to increase reserves and production, MOXY must continue
its exploratory drilling program or undertake other replacement
activities. MOXY's operations may be curtailed, delayed or canceled as
a result of lack of the ability to obtain additional capital and other
factors, such as title problems, weather, compliance with governmental
regulations or price controls, mechanical difficulties or shortages or
delays in the delivery of equipment. Furthermore, while MOXY's revenues
may increase if prevailing gas prices increase significantly, MOXY's
finding costs for additional reserves could also increase. In addition,
the costs of exploration and development may materially exceed initial
estimates. For a discussion of MOXY's reserves, see "Business and
Properties - Reserves."
<PAGE> 11
Reserves and Future Net Cash Flow
Information relating to MOXY's proved oil and gas reserves is
based upon engineering estimates. Reserve engineering is a subjective
process of estimating the recovery from underground accumulations of oil
and natural gas that cannot be measured in an exact manner, and the
accuracy of any reserve estimate is a function of the quality of
available data and of engineering and geological interpretation and
judgment. Estimates of economically recoverable oil and gas reserves
and of future net cash flows necessarily depend upon a number of
variable factors and assumptions, such as historical production from the
area compared with production from other producing areas, the assumed
effects of regulations by governmental agencies and assumptions
concerning future oil and gas prices, future operating costs, severance
and excise taxes, development costs and workover and remedial costs, all
of which may in fact vary considerably from actual results. Because all
reserve estimates are to some degree speculative, the quantities of oil
and natural gas that are ultimately recovered, production and operation
costs, the amount and timing of future development expenditures and
future oil and natural gas sales prices may all vary from those assumed
in these estimates and such variances may be material. In addition,
different reserve engineers may make different estimates of reserve
quantities and cash flows based upon the same available data. See
"Business and Properties - Reserves."
The present values of estimated future net cash flows referred to
in this report should not be construed as the current market value of
the estimated proved oil and gas reserves attributable to MOXY's
properties. In accordance with applicable requirements of the
Commission, the estimated discounted future net cash flows from proved
reserves are generally based on prices and costs as of the date of the
estimate, while actual future prices and costs may be materially higher
or lower. Actual future net cash flows also will be affected by factors
such as the amount and timing of actual production, supply and demand
for oil and gas, curtailments or increases in consumption by gas
purchasers and changes in governmental regulations or taxation. The
timing of actual future net cash flows from proved reserves, and thus
their actual present value, will be affected by the timing of both the
production and the incurrence of expenses in connection with development
and production of oil and gas properties. In addition, the 10% discount
factor, which is required by the Commission to be used to calculate
discounted future net cash flows for reporting purposes, is not
necessarily the most appropriate discount factor based on interest rates
in effect from time to time and risks associated with MOXY's business or
the oil and gas industry in general.
Operating Hazards; Limited Insurance Coverage
MOXY's operations are subject to hazards and risks inherent in
drilling for and production and transportation of gas and oil, such as
fires, natural disasters, explosions, encountering formations with
abnormal pressures, blowouts, cratering, pipeline ruptures and spills,
any of which can result in loss of hydrocarbons, environmental
pollution, personal injury claims, and other damage to properties of
MOXY and others. These risks could result in substantial losses to MOXY
due to injury and loss of life, severe damage to and destruction of
property and equipment, pollution and other environmental damage and
suspension of operations. Moreover, MOXY's operations in the Gulf are
subject to a variety of operating risks peculiar to the marine
environment, such as to hurricanes or other adverse weather conditions,
to more extensive governmental regulation, including regulations that
may, in certain circumstances, impose strict liability for pollution
damage, and to interruption or termination of operations by governmental
authorities based on environmental or other considerations.
As protection against operating hazards, MOXY maintains insurance
coverage against some, but not all, potential losses. MOXY's coverages
include, but are not limited to, operator's extra expense, physical
damage on certain assets, employer's liability, comprehensive general
liability, automobile, workers' compensation and loss of production
income insurance and limited coverage for sudden environmental damages,
but MOXY does not believe that insurance coverage for environmental
damages that occur over time is available at a reasonable cost.
Moreover, MOXY does not believe that insurance coverage for the full
potential liability that could be caused by sudden environmental damages
is available at a reasonable cost. Accordingly, MOXY may be subject to
liability or may lose substantial portions of its properties in the
event of environmental damages. The occurrence of an event that is not
fully covered by insurance could have an adverse impact on MOXY's
financial condition and results of operations.
<PAGE> 12
Governmental Regulation
MOXY's operations are affected from time to time in varying
degrees by political developments and federal and state laws and
regulations. In particular, oil and natural gas production, operations
and economics are or have been affected by price controls, taxes and
other laws relating to the oil and natural gas industry, by changes in
such laws and by changes in administrative regulations. MOXY cannot
predict how existing laws and regulations may be interpreted by
enforcement agencies or court rulings, whether additional laws and
regulations will be adopted, or the effect such changes may have on its
business or financial condition.
MOXY's operations are subject to numerous laws and regulations
governing the discharge of materials into the environment or otherwise
relating to environmental protection. These laws and regulations
require the acquisition of a permit before drilling commences, restrict
the types, quantities and concentration of various substances that can
be released into the environment in connection with drilling and
production activities, limit or prohibit drilling activities on certain
lands lying within wilderness, wetlands and other protected areas, and
impose substantial liabilities for pollution which might result from
MOXY's operations. Moreover, the recent trend toward stricter standards
in environmental legislation and regulation is likely to continue. MOXY
could incur substantial costs to comply with environmental laws and
regulations. In addition to compliance costs, government entities and
other third parties may assert substantial liabilities against owners
and operators of oil and gas properties for oil spills, discharges of
hazardous materials, remediation and cleanup costs and other
environmental damages, including damages caused by previous property
owners. The imposition of any such liabilities on MOXY could have a
material adverse effect on MOXY's financial condition and results of
operations.
Shortages of Supplies and Equipment
The Company's ability to conduct its operations in a timely and
cost effective manner is subject to the availability of oil and gas
field supplies, equipment and service crews. The industry is currently
experiencing a shortage of certain types of drilling rigs and work boats
in the Gulf . This shortage could result in delays in the Company's
operations as well as higher operating and capital costs. Shortages of
other drilling equipment, tubular goods, drilling service crews and
seismic crews could occur from time to time further hindering the
Company's ability to conduct its operations as planned.
Competition
MOXY operates in the highly competitive areas of natural gas and
oil production, development and exploration with other companies.
Factors affecting MOXY's ability to compete in the marketplace include
the availability of funds and information relating to a property, the
standards established by MOXY for the minimum projected return on
investment, the availability of alternate fuel sources and the
intermediate transportation of gas. MOXY's competitors include major
integrated oil companies and a substantial number of independent energy
companies, many of which may have substantially larger financial
resources, staffs and facilities than MOXY.
Item 3. Legal Proceedings
Although the Company may from time to time be involved in various
legal proceedings of a character normally incident to the ordinary
course of its businesses, the Company believes that potential liability
from any such pending or threatened proceedings will not have a material
adverse effect on the financial condition or results of operations of
the Company. The Company maintains liability insurance to cover some,
but not all, of the potential liabilities normally incident to the
ordinary course of its businesses as well as other insurance coverages
customary in its business, with such coverage limits as management deems
prudent.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
<PAGE> 13
Executive Officers of the Registrant
Listed below are the names and ages, as of March 1, 1997, of the
present executive officers of the Company together with the principal
positions and offices with the Company held by each. All officers of
the Company serve at the pleasure of the Board of Directors of the
Company.
Name Age Position or Office
____ ___ __________________
James R. Moffett 58 Co-Chairman of the Board
Richard C. Adkerson 50 Co-Chairman of the Board and
Chief Executive Officer
C. Howard Murrish 56 President and Chief Operating
Officer
John G. Amato 53 General Counsel
Glenn A. Kleinert 54 Senior Vice President
James H. Lee 39 Senior Vice President
James R. Moffett has served as Co-Chairman of the Board of the
Company since 1994. Mr. Moffett is Chairman of the Board of FTX. Mr.
Moffett is also Chairman of the Board and Chief Executive Officer of
Freeport-McMoRan Copper & Gold Inc. ("FCX").
Richard C. Adkerson has served as Co-Chairman of the Board and
Chief Executive Officer of the Company since 1994. Mr. Adkerson is Vice
Chairman of the Board of FTX and has held that position since August
1995. In addition, Mr. Adkerson is Chairman of the Board and Chief
Executive Officer of FM Properties Inc. ("FMPO"). He is also an
Executive Vice President of FCX. From 1992 to August 1995, Mr. Adkerson
was a Senior Vice President of FTX and a Vice President of FTX prior to
1992.
C. Howard Murrish has served as President and Chief Operating
Officer of the Company since 1994. He was a partner in CLK until
September 1994. He was a Senior Executive Vice President of the oil and
gas division of FTX from 1986 until February 1992. Prior thereto, since
July 1977, Mr. Murrish served as an officer of various FTX affiliates.
John G. Amato has served as General Counsel of the Company since
1994. Mr. Amato is the General Counsel of FMPO. Prior to August 1995,
Mr. Amato served as General Counsel of FTX and FCX. Mr. Amato currently
provides legal and business advisory services to FTX and FCX under a
consulting arrangement.
Glenn A. Kleinert has served as Senior Vice President of the
Company since 1994. Mr. Kleinert is a Senior Vice President of the oil
and gas division of FTX and has held that position since December 1990.
James H. Lee has served as Senior Vice President of the Company
since November 1996. Mr. Lee has been a Director of Finance and
Business Development for FTX since August 1993 and a Vice President of
the oil and gas division of FTX since 1994.
<PAGE> 15
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is listed on the Nasdaq National Market under the
symbol "MOXY." The following table sets forth, for the periods
indicated, the range of high and low closing bid prices, as reported by
the Nasdaq National Market. The quotes represent "inter-dealer" prices
without adjustment or mark-ups, mark-downs or commissions and may not
represent actual transactions.
High Low
------ -------
1995
----
First Quarter $3 1/8 $2 1/2
Second Quarter 4 1/8 2 3/8
Third Quarter 3 5/8 2 5/16
Fourth Quarter 3 7/16 2 9/16
1996
----
First Quarter $3 3/4 $2 13/16
Second Quarter 3 7/8 2 1/2
Third Quarter 2 15/16 1 3/4
Fourth Quarter 3 1/16 1 1/2
1997
----
First Quarter $3 15/16 $2 1/16
(through March 14, 1997)
As of March 14, 1997 there were 11,954 record holders of the
Company's Common Stock.
The Company has not in the past, and does not anticipate in the
future, paying cash dividends on its Common Stock. The Company
currently intends to reinvest its available cash in the identification,
exploration and development of additional oil and gas properties. The
decision whether or not to pay dividends and in what amounts is solely
within the discretion of the Company's board of directors.
Item 6. Selected Financial Data
Information regarding the selected financial data called for by
this item is included under Item 8 and reference is made thereto.
Item 7. 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.
Prior to distribution, FTX transferred to MOXY $35 million in cash, an
inventory of oil and gas exploration prospects and a significant amount
of seismic and well log data. MOXY intends to concentrate its
activities primarily in the Gulf of Mexico and the onshore Gulf Coast
region.
During 1995, MOXY established two separate joint venture
arrangements (Note 3) through which substantially all of its operations
have taken place. MOXY's activities in the Gulf of Mexico have been
conducted primarily through its 40 percent owned exploration and
development program with MCN Corporation (MCN). During 1996, the
MOXY/MCN program had the following operational activities:
* Daily gross production at the Vermilion Block 160 field unit
averaged 14.9 million cubic feet (Mmcf) of gas and 687
barrels of condensate during 1996. During the fourth
quarter of 1996, a development well discovered new reserves
(Note 7) from eight gas sands with approximately 215 feet of
net pay. Drilling on this well was completed in the first
quarter of 1997, discovering an additional 47 feet of net
pay. MOXY immediately began drilling an additional well to
develop the shallower reserves which were discovered. After
completion of all drilling activity from the platform, the
wells will be completed and could be on stream as early as
mid-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.
* Installation of the platforms and facilities at the
Vermilion Block 410 field was completed and production began
in late December 1996 from one of the two platforms.
Production from the second platform began in early 1997 and
daily gross production from both platforms combined
currently approximates 85 Mmcf of gas. The MOXY/MCN program
has a 28 percent revenue interest in this field.
* An exploratory well discovered gas on West Cameron Block 616
during the year. Drilling is scheduled on West Cameron
Blocks 616 and 617 during 1997. Gas was also discovered on
West Cameron Block 503 and Grand Isle Block 65 during 1996.
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. MOXY would recognize a $2.3 million
gain upon the completion of the sale and the proceeds would
be used to repay borrowings from MCN. MOXY is currently
evaluating options for future activities at Grand Isle Block
65.
* Drilling on the East Cameron Block 119 and Vermilion Block
391 prospects during the year did not result in the
discovery of commercial hydrocarbons.
MOXY's activities in the onshore Gulf Coast region have taken
place through its 25 percent owned joint venture with Phillips Petroleum
Company (Phillips), which covers a project area in south Louisiana, as
follows:
* Drilling operations on the North Bay Junop prospect were
initiated during the fourth quarter. The well is expected
to reach its total depth of 19,500 feet in the second
quarter of 1997.
* MOXY completed its first exploratory well at the East
Fiddler's Lake prospect. Although the well was unsuccessful
in discovering commercial hydrocarbons, the geological data
from this well is assisting drilling activity in the project
area.
* Interpretation of the 3-D seismic survey performed over the
project area continues and has identified additional leads
that may develop into potential prospects.
Activity outside of the joint venture arrangements during 1996
included MOXY drilling an exploratory well at its West Cameron Block 519
prospect which did not encounter commercial hydrocarbons. In addition,
MOXY relinquished its interest in the Tungkal prospect, a 1.7 million
acre concession area in Indonesia, where previous drilling results had
not discovered hydrocarbons in commercial quantities.
RESULTS OF OPERATIONS
MOXY reported a net loss of $9.9 million ($0.71 per share) for
1996 compared with losses of $14.6 million ($1.06 per share) for 1995
and $15.2 million ($1.10 per share) for the eight-month period of 1994.
MOXY's 1996 revenues, totaling $4.1 million, 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 $1.6 million
from administrative fees earned on the MOXY/MCN program. The
commencement of production at the Vermilion Block 410 field, discussed
earlier, will benefit MOXY's future revenue levels.
<PAGE> 16
Exploration expenses consist of the following (in millions):
1996 1995 1994
---- ---- ----
Geological and geophysical $6.3 $9.8 $ 6.0
Exploratory drilling and leasehold costs 5.6 2.0 9.5
Reimbursement of previously expensed
costs (Note 3) (2.1) - -
----- ------ -----
$9.8 $11.8 $15.5
===== ====== =====
General and administrative expenses totaled $2.6 million in 1996
compared with $3.7 million in 1995 and $2.3 million in 1994. The
decline from 1995 resulted from steps taken in the third quarter of 1995
to reduce costs. These actions included reducing MOXY's staff of
employees, the costs of consulting arrangements and the costs of
administrative and managerial services (Note 4).
Because of anticipated future exploration expenditures, MOXY
expects to report losses for at least the near future.
CAPITAL RESOURCES AND LIQUIDITY
The MCN and Phillips joint ventures resulted in MOXY receiving a
significant inflow of funds, as well as achieving important reductions
to its future capital commitments, which enabled MOXY to secure funding
for its contemplated exploration and development activities for 1996 and
1997. These agreements also enabled MOXY to assess additional
prospects, thereby increasing its opportunities for success. However,
with the anticipated conclusion of the exploration portion of the
MOXY/MCN program, discussed below, MOXY must secure alternative sources
of funding to finance its future exploration activities. Management
believes the opportunities for MOXY to discover meaningful oil and gas
reserves are significant and that these opportunities can best be
achieved through the use of advanced 3-D seismic technology, applied in
conjunction with a larger, longer-term exploration program. As such,
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.
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.
The $35 million exploration portion of the MOXY/MCN program's
funding is expected to be completed in mid-1997 ($25.9 million had been
spent at December 31, 1996). The MOXY/MCN program agreement contains an
option for MCN to extend the program by joining in for an additional
commitment of $32.5 million in exploration expenditures and the
continued availability of MOXY's line of credit. However, 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 did not wish to enter into the type of long-term
agreement MOXY believes is necessary to best pursue its future
exploration activities. MCN will continue to provide funding for future
development costs on the MOXY/MCN program's properties without any
extension of the program agreement. At December 31, 1996, MOXY had
$12.8 million of borrowings outstanding from MCN, with an additional
$6.6 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, is dedicated to the repayment of
the loan from MCN.
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, and is expected to commence by March 31, 1997.
MOXY's seven high bids totaled $5.5 million. Freeport-McMoRan Resource
Partners, Limited Partnership (FRP), a 51.6 percent owned affiliate of
FTX, entered into an agreement with MOXY 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 any of these new leases.
Although MOXY has sufficient resources to fund its commitments
through 1997, 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 current MOXY/MCN program and its present working
capital depends on securing additional funding and achieving success in
its operations. No payment of dividends to MOXY shareholders is
presently contemplated.
<PAGE> 17
MOXY incurred $20.7 million of cash exploration and development
expenditures during 1996, consisting principally of $7.0 million for
development at Vermilion Block 410, $2.8 million for capitalized
drilling costs, $5.7 million of geological and geophysical costs and
$5.0 million in expensed drilling and leasehold costs. Cash
expenditures for 1995 totaled $21.0 million and consisted principally of
$6.7 million for development at Vermilion Block 410, $1.8 million for
development at Vermilion Block 160 and $9.8 million of geological and
geophysical costs. MOXY has committed expenditures of approximately
$8.7 million for 1997 which will be funded by the remaining available
borrowings under the MOXY/MCN program and MOXY's working capital.
ENVIRONMENTAL
Although MOXY has no known environmental liabilities, increasing
emphasis on environmental matters could result in additional costs,
which would be charged against MOXY's operations in future periods.
Present and future environmental laws and regulations applicable to
MOXY's operations could require substantial capital expenditures or
could adversely affect its operations in other ways that cannot be
accurately predicted at this time.
CAUTIONARY STATEMENT
Management's discussion and analysis contains certain forward-
looking statements. Important factors that might cause future results
to differ from these projections are described in more detail under
Items 1 and 2 above.
-----------------------
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
REPORT OF MANAGEMENT
McMoRan Oil & Gas Co. (MOXY) is responsible for the preparation of
the financial statements and all other information contained in this
Annual Report. The financial statements have been prepared in
conformity with generally accepted accounting principles and include
amounts that are based on management's informed judgments and estimates.
MOXY maintains a system of internal accounting controls designed
to provide reasonable assurance at reasonable costs that assets are
safeguarded against loss or unauthorized use, that transactions are
executed in accordance with management's authorization and that
transactions are recorded and summarized properly. The system is tested
and evaluated on a regular basis by MOXY's internal auditors, Price
Waterhouse LLP. In accordance with generally accepted auditing
standards, MOXY's independent public accountants, Arthur Andersen LLP,
have developed an overall understanding of our accounting and financial
controls and have conducted other tests as they consider necessary to
support their opinion on the financial statements.
The Board of Directors, through its Audit Committee composed
solely of non-employee directors, is responsible for overseeing the
integrity and reliability of MOXY's accounting and financial reporting
practices and the effectiveness of its system of internal controls.
Arthur Andersen LLP and Price Waterhouse LLP meet regularly with, and
have access to, this committee, with and without management present, to
discuss the results of their audit work.
James R. Moffett Richard C. Adkerson
Co-Chairman of the Board Co-Chairman of the Board and
Chief Executive Officer
<PAGE> 18
McMoRan OIL & GAS CO.
BALANCE SHEETS
December 31,
_______________________
1996 1995
___________ __________
(In Thousands)
ASSETS
Current assets:
Cash and cash equivalents $10,500 $10,323
Accounts receivable and other 2,249 1,432
___________ __________
Total current assets 12,749 11,755
___________ __________
Oil and gas properties - successful efforts method:
Unevaluated 2,173 1,869
Proved 17,341 8,661
___________ __________
19,514 10,530
Less accumulated depreciation and amortization 1,283 652
___________ __________
Net oil and gas properties 18,231 9,878
___________ __________
Total assets $30,980 $21,633
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $9,411 $ 3,405
Current portion of production loan 366 93
___________ __________
Total current liabilities 9,777 3,498
Production loan, less current portion 12,391 530
Other liabilities 566 -
Stockholders' equity:
Preferred stock, par value $0.01, 50,000,000 shares
authorized and unissued - -
Common stock, par value $0.01, 150,000,000 shares
authorized, 13,989,317 shares and 13,798,784 shares 140 138
issued and outstanding
Capital in excess of par value of common stock 47,803 47,302
Accumulated deficit (39,697) (29,835)
___________ __________
8,246 17,605
___________ __________
Total liabilities and stockholders' equity $30,980 $21,633
=========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE> 19
McMoRan OIL & GAS CO.
STATEMENTS OF OPERATIONS
Years Ended Inception
December 31, through
_____________________ December 31,
1996 1995 1994
_________ _________ __________
(In Thousands, Except Per Share Amounts)
Revenues:
Oil and gas sales $ 2,434 $ 2,722 $ 174
Management fees 1,636 545 -
___________ ___________ ___________
Total revenues 4,070 3,267 174
___________ ___________ ___________
Costs and expenses:
Production and delivery, including
depreciation and amortization 1,500 2,623 -
Exploration expenses 9,818 11,756 15,518
General and administrative expenses 2,635 3,687 2,338
___________ ___________ ___________
Total costs and expenses 13,953 18,066 17,856
___________ ___________ ___________
Operating loss (9,883) (14,799) (17,682)
Other income, net 21 164 2,482
___________ ___________ ___________
Net loss $(9,862) $(14,635) $(15,200)
=========== =========== ===========
Net loss per share $ (0.71) $ (1.06) $ (1.10)
=========== =========== ===========
Average shares outstanding 13,898 13,772 13,770
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE> 20
McMoRan OIL & GAS CO.
STATEMENTS OF CASH FLOW
Years Ended Inception
December 31, through
_____________________ December 31,
1996 1995 1994
_________ _________ __________
(In Thousands)
Cash flow from operating activities:
Net loss $ (9,862) $(14,635) $(15,200)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 741 1,525 -
Exploration expenses 9,818 11,756 15,518
Gain on sale of Canadian oil and
gas interests - - (1,691)
(Increase) decrease in working
capital:
Accounts receivable and other (988) (1,347) -
Accounts payable and accrued
liabilities 6,954 1,555 340
__________ __________ __________
Net cash provided by (used in)
operating activities 6,663 (1,146) (1,033)
__________ __________ __________
Cash flow from investing activities:
Exploration and development
expenditures (20,678) (20,957) (18,768)
Proceeds from joint venture
arrangements 2,059 14,472 -
Proceeds from sale of Canadian oil - - 1,691
and gas interests
__________ __________ __________
Net cash used in investing activities (18,619) (6,485) (17,077)
__________ __________ __________
Cash flow from financing activities:
Proceeds from production loan 12,927 750 -
Payments on production loan (794) (127) -
Cash transferred from Freeport-
McMoRan Inc. - - 35,441
__________ __________ __________
Net cash provided by financing
activities 12,133 623 35,441
__________ __________ __________
Net increase (decrease) in cash and
cash equivalents 177 (7,008) 17,331
Cash and cash equivalents at
beginning of year 10,323 17,331 -
__________ __________ __________
Cash and cash equivalents at end of
year $10,500 $10,323 $17,331
========== ========== ==========
Interest paid $ 304 $ - $ -
========== ========== ==========
The accompanying notes, which include information in Notes 1, 3, 4 and 5
regarding noncash transactions, are an integral part of these financial
statements.
<PAGE> 21
1. ORGANIZATION
McMoRan Oil & Gas Co. (MOXY) was formed in 1994 as a wholly owned
subsidiary of Freeport-McMoRan Inc. (FTX). In May 1994, FTX distributed
one MOXY common share for each ten FTX common shares. The net assets
transferred, at FTX's historical cost, follow (in thousands):
Cash and cash equivalents $35,441
Property, plant and equipment 13,052
Current liabilities (1,138)
_______
$47,355
=======
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents. Highly liquid investments purchased with a
maturity of three months or less are considered cash equivalents.
Exploration and Development Costs. MOXY follows the successful efforts
method of accounting for its oil and gas operations. Costs of
exploratory wells are capitalized pending determination of whether the
wells find proved reserves. Costs of leases, productive exploratory
wells and development activities are also capitalized. Other
exploration costs are expensed. Depreciation and amortization is
determined on a field-by-field basis using the unit-of-production
method. Gains or losses are included in earnings when properties are
sold.
In 1995, the Financial Accounting Standards Board issued Statement No.
121 (FAS 121) which requires a reduction of the carrying amount of long-
lived assets to fair value when events indicate that the carrying amount
may not be recoverable. Measurement of the impairment loss is based on
the fair value of the asset. Generally, MOXY determines fair value
using valuation techniques such as expected future cash flows. MOXY
adopted FAS 121 effective January 1, 1995, and since that time has not
incurred any impairment losses.
Financial Instruments. The carrying amounts of receivables, other
current assets and accounts payable reported in the balance sheet
approximate fair value. The production loan's interest rate is variable
(Note 3) and thus approximates fair value.
3. EXPLORATION AGREEMENTS
In September 1995, MOXY entered into an agreement with MCN establishing
a $65 million oil and gas exploration and development program in the
offshore Gulf of Mexico area. Revenues and costs are shared 40 percent
by MOXY and 60 percent by MCN. MCN is funding its 60 percent share of
the expenditures and is loaning funds for MOXY's 40 percent share at
prime plus two percent. MOXY's share of future net revenues from
program properties is dedicated to repay borrowings. MOXY is not
otherwise obligated to repay these borrowings. As of December 31, 1996,
MOXY had $12.8 million of borrowings outstanding from MCN, with an
additional $6.6 million of borrowings available for past expenditures.
In June 1995, MOXY and Phillips Petroleum Company (Phillips) entered
into an exploration agreement covering a project area in south Louisiana.
MOXY conveyed one-half of its interest in the area to Phillips for $3.8
million. In June 1996, MOXY sold one-half of its remaining 50 percent
leasehold interest to Freeport-McMoRan Resource Partners, Limited Partnership
(FRP), an affiliate of MOXY, for $2.1 million. This amount represented
the reimbursement for certain costs previously incurred by MOXY in connection
with this project area and was recorded as a reduction to exploration
expenses. MOXY sold the interest to FRP on the same proportionate basis
as the prior Phillips sale. The project area, with the exception of the
North Bay Junop and the East Fiddler's Lake prospects (discussed
earlier), is subject to a possible 25 percent participation by a mineral
rights owner.
<PAGE> 22
4. TRANSACTIONS WITH FTX AND EMPLOYEE BENEFITS
Management Services. FTX provides certain management and administrative
services for MOXY. During 1995, MOXY restructured its management
services agreement with FTX to provide specified services for an annual
fee of $1.0 million. Costs of services provided by FTX, included in
general and administrative expenses, totaled $1.0 million in 1996, $1.3
million in 1995 and $1.2 million in the 1994 period.
MOXY's contract for geological and geophysical services with CLK
Company (CLK) was amended during 1997 to provide for an annual retainer
fee of $2.4 million ($0.5 million of the annual fee paid in MOXY common
stock), plus certain expenses and an overriding royalty interest in
prospects accepted by MOXY. Costs of services provided by CLK, included
in exploration expenses, totaled $3.1 million in 1996, $3.5 million in
1995 and $3.9 million in 1994.
Stock Options. MOXY's Stock Option Plan and Stock Option Plan for Non-
Employee Directors (the Plans) authorize MOXY to grant stock options to
purchase up to 1.25 million shares of MOXY stock at no less than market
value at time of grant. Generally, stock options are exercisable in 25
percent annual increments beginning one year from the date of grant and
expire 10 years after the date of grant. Also, in connection with the
FTX distribution of MOXY shares, stock options were granted to employees
and directors of FTX. A summary of stock options outstanding follows:
1996 1995
___________________ _____________________
Number Average Number Average
of Option of Option
Options Price Options Price
__________ _________ __________ __________
Beginning of year 2,257,828 $3.92 1,829,867 $4.26
Granted 24,904 2.54 529,028 2.85
Exercised (581) 3.03 - -
Expired/forfeited (142,457) 4.33 (101,067) 4.39
___________ ___________
End of year 2,139,694 3.88 2,257,828 3.92
=========== ===========
At December 31, 1996, options for approximately 550,000 shares were
available for new grants under the Plans. Summary information of fixed
stock options outstanding at December 31, 1996 follows:
Options Outstanding Options Exercisable
______________________________ ___________________
Weighted Weighted Weighted
Number Average Average Number Average
of Remaining Option of Option
Range of Exercise Prices Options Life Price Options Price
________________________ __________ _________ ________ _________ __________
$1.94 to $2.81 515,000 9 years $2.80 126,250 $2.81
$2.94 to $3.88 214,394 8 years 3.58 98,718 3.66
$4.66 to $5.50 1,410,300 7 years 4.32 1,300,305 4.67
_________ _________
2,139,694 1,525,273
========= =========
MOXY has adopted the disclosure-only provisions of FAS 123 and
continues to apply APB Opinion No. 25 and related interpretations in
accounting for its stock-based compensation plans. Accordingly, no
compensation cost has been recognized for MOXY's fixed stock option
grants. Had compensation cost for MOXY's fixed stock option grants been
determined based on the fair value at the grant dates for awards under
those plans consistent with FAS 123, MOXY's pro forma net loss would
have been $10.1 million ($0.73 per share) in 1996 and $14.7 million
($1.06 per share) in 1995. For the pro forma computations, the fair
values of the fixed option grants were estimated on the dates of grant
using the Black-Scholes option pricing model. The weighted average fair
value for fixed stock option grants was $1.69 per option in 1996 and
$2.15 per option in 1995. The weighted average assumptions used include
a risk-free interest rate of 6.6 percent in 1996 and 6.4 percent in
1995, expected volatility of 45 percent in 1996 and 60 percent in 1995
and expected lives of 10 years. The pro forma effects on net income for
1996 and 1995 are not representative of future years because they do not
take into consideration grants made prior to 1995. No other discounts
or restrictions related to vesting or the likelihood of vesting of fixed
stock options were applied.
<PAGE> 23
5. INCOME TAXES
MOXY has $26.5 million of net deferred tax assets as of December 31,
1996 resulting from temporary differences related to MOXY's and its
predecessor entities' exploration activities. MOXY has provided a
valuation allowance equal to these tax assets because of the expectation
of incurring tax losses for at least the near future.
6. COMMITMENTS AND CONTINGENCIES
Commitments. MOXY has expenditure commitments of approximately $8.7
million in 1997.
Environmental. Although MOXY has no known environmental liabilities,
increasing emphasis on environmental matters could result in additional
costs, which would be charged against MOXY's operations in future
periods. Present and future environmental laws and regulations
applicable to MOXY's operations could require substantial capital
expenditures or could adversely affect its operations in other ways that
cannot be accurately predicted at this time.
7. SUPPLEMENTARY OIL AND GAS INFORMATION (Unaudited)
The supplementary information presented below is prepared in accordance
with requirements prescribed by the Financial Accounting Standards
Board.
Proved Oil and Gas Reserves. Proved oil and gas reserves at December
31, 1996, have been estimated by independent petroleum engineers in
accordance with guidelines established by the Securities and Exchange
Commission (SEC). Thus, the following reserve estimates are based upon
existing economic and operating conditions; they are only estimates and
should not be construed as being exact. MOXY's 1996 proved reserves are
located in offshore United States waters. Oil, including condensate and
plant products, is stated in thousands of barrels and natural gas is in
millions of cubic feet.
Oil Gas
__________ _____________
1996 1995 1996 1995
____ ____ ____ ____
Proved reserves:
Beginning of year 94 262 8,521 9,714
Revisions of previous
estimates 31 54 1,155 88
Discoveries and extensions 72 - 7,009 4,999
Production (29) (45) (631) (1,093)
Transfer to MCN - (177) - (5,187)
______ _____ _______ ______
End of year 168 94 16,054 8,521
====== ===== ======= ======
Proved developed reserves:
End of year 58 20 7,530 779
====== ===== ======= =======
<PAGE> 24
Standardized Measure of Discounted Future Net Cash Flows From Proved Oil
and Gas Reserves.
MOXY's standardized measure of discounted future net cash flows and
changes therein relating to proved oil and gas reserves were computed
using reserve valuations based on regulations prescribed by the SEC.
These regulations provide for the use of current oil and gas prices
(escalated only when known and determinable price changes are provided
by contract and law) in the projection of future net cash flows.
December 31,
________________
1996 1995
_______ _______
(In Thousands)
Future cash flows $66,260 $22,397
Future costs applicable to future cash flows:
Production costs (7,805) (3,834)
Development and abandonment costs (12,874) (7,155)
________ ________
Future net cash flows before income taxes 45,581 11,408
Future income taxes - -
________ ________
Future net cash flows 45,581 11,408
Discount for estimated timing of net cash flows
(10% discount rate) (10,240) (3,078)
________ ________
$35,341 $ 8,330
======== ========
The reserve and cash flow information above includes amounts
attributable to MOXY's interest in West Cameron Block 503, which in March
1997 MOXY agreed to sell for $2.9 million. Proved undeveloped reserves
applicable to MOXY's interest in this field totaled approximately 16
thousand barrels of oil and 3,300 million cubic feet of gas with estimated
discounted net cash flows of $3.4 million. MOXY would recognize a gain of
approximately $2.3 million upon completion of this sale.
Changes in Standardized Measure of Discounted Future Net Cash Flows From
Proved Oil and Gas Reserves.
Years Ended December 31,
_________________________
1996 1995
________ ________
(In Thousands)
Beginning of year $ 8,330 $ 6,413
Discoveries and extensions, less related costs 10,837 3,368
Development costs incurred during the year 6,985 1,750
Revisions:
Changes in prices 12,894 7,815
Accretion of discount 833 641
Other changes, including revised estimates of
development costs and rates of production (2,863) (3,083)
Revenues, less production costs (1,675) (1,589)
Transfer to MCN - (6,985)
_________ __________
End of year $35,341 $ 8,330
========= ==========
<PAGE> 25
8. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Net
Operating Net Income
Income Income (Loss)
Revenues (Loss) (Loss) Per Share
__________ ___________ __________ ___________
(In Thousands, Except Per Share Amounts)
1996
1st Quarter $ 1,073 $(4,453) $(4,330) $(0.31)
2nd Quarter 949 418a 525a 0.04a
3rd Quarter 919 (2,087) (2,148) (0.15)
4th Quarter 1,129 (3,761) (3,909) (0.28)
_________ __________ __________
$ 4,070 $(9,883)b $(9,862) (0.71)
========= ========== ==========
1995
1st Quarter $ 55 $(4,051) $(3,764) $(0.27)
2nd Quarter 1,351 (6,134) (6,251) (0.45)
3rd Quarter 1,029 (2,439)c (2,621)c (0.19)c
4th Quarter 832 (2,175) (1,999) (0.15)
_________ __________ __________
$ 3,267 $(14,799)b $(14,635) (1.06)
========= ========== ==========
a.Includes a reduction to exploration expense of $2.1 million ($0.15 per
share) resulting from the reimbursement of previously expensed costs.
b.Foreign exploration costs totaled $0.4 million in 1996 and $0.5
million in 1995.
c.Includes $0.4 million ($0.03 per share) for personnel severance and
other costs.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE STOCKHOLDERS AND BOARD OF DIRECTORS OF McMoRan OIL & GAS CO.:
We have audited the accompanying balance sheets of McMoRan Oil &
Gas Co. (a Delaware Corporation) as of December 31, 1996 and 1995 and
the related statements of operations and cash flow for the years ended
December 31, 1996 and 1995 and for the period from inception through
December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of McMoRan Oil
& Gas Co. as of December 31, 1996 and 1995 and the results of its
operations and its cash flow for the years ended December 31, 1996 and
1995 and for the period from inception through December 31, 1994 in
conformity with generally accepted accounting principles.
New Orleans, Louisiana, Arthur Andersen LLP
January 21, 1997
<PAGE> 26
Item 9. Changes in and disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning the Company's directors and officers called
for by this item will be included in the Company's definitive Proxy
Statement prepared in connection with the 1997 Annual Meeting of
Stockholders and is incorporated herein by reference.
Item 11. Executive Compensation
Information concerning the compensation of the Company's
executives called for by this item will be included in the Company's
definitive Proxy Statement prepared in connection with the 1997 Annual
Meeting of Stockholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial
owners and management called for by this item will be included in the
Company's definitive Proxy Statement prepared in connection with the
1997 Annual Meeting of Stockholders and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related
transactions called for by this item will be included in the Company's
definitive Proxy Statement prepared in connection with the 1997 Annual
Meeting of Stockholders and is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1).Financial Statements. Reference is made to Item 8 hereof.
(a)(2).Financial Statement Schedules. Schedules have not been
included because they are not required, not applicable or the
information required has been included elsewhere herein.
(a)(3).Exhibits. Reference is made to the Exhibit Index beginning
on page E-1 hereof.
(b). Reports on Form 8-K. The Company filed a current report on
Form 8-K under Item 5 dated as of December 20, 1996.
<PAGE> S-1
SIGNATURES
Pursuant to the requirements of Section 13 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, on
March 19, 1997.
McMoRan OIL & GAS Co.
By: /s/ Richard C. Adkerson
______________________________
Richard C. Adkerson
Co-Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated, on March 19,
1997.
* Co-Chairman of the Board and Director
__________________________
James R. Moffett
/s/ Richard C. Adkerson Co-Chairman of the Board, Chief
__________________________ Executive Officer and Director
Richard C. Adkerson (Principal Executive Officer)
(Principal Financial Officer)
* Controller
___________________________ (Principal Accounting Officer)
William J. Blackwell
*
__________________________ Director
Robert W. Bruce III
* Director
__________________________
Robert A. Day
* Director
___________________________
William B. Harrison, Jr.
* Director
__________________________
Bobby Lee Lackey
* Director
__________________________
Gabrielle K. McDonald
* Director
___________________________
George Putnam
* Director
___________________________
R. M. Rankin, Jr.
* Director
___________________________
J. Taylor Wharton
*By: /s/ Richard C. Adkerson
____________________________
Richard C. Adkerson
Attorney-in-Fact
McMoRan OIL & GAS CO.
EXHIBIT INDEX
Exhibit
Number
2.1 Distribution Agreement dated as of May 1, 1994 between
Freeport McMoRan Inc. and the Company. Incorporated by
reference to Exhibit 2.1 to Amendment No. 2 to Form 10 as
filed with the Commission on May 16, 1994 ("Amendment No.
2").
3.1 Amended and Restated Certificate of Incorporation of the
Company. Incorporated by reference to Exhibit 3.1 to the
Company's Annual Report for the year ended December 31, 1994
on Form 10-K (the "1994 10-K").
3.2 Bylaws of the Company. Incorporated by reference to Exhibit
3.2 to the Company's 1994 10-K.
4.1 Form of the Company's Certificate of Designation of Series A
Participating Cumulative Preferred Stock. Incorporated by
reference to Exhibit 4.1 to Amendment No. 2.
4.2 Rights Agreement dated as of May 19, 1994 between the
Company and Mellon Securities Trust Company, as Rights
Agent. Incorporated by reference to Exhibit 4.2 to the
Company's 1994 10-K.
10.1 Amended and Restated Services Agreement, dated as of January
1, 1997, between FM Services Company and the Company.
Executive Compensation Plans and Arrangements
(Exhibits 10.2 through 10.6)
10.2 McMoRan Oil & Gas Co. Adjusted Stock Award Plan, as amended.
10.3 McMoRan Oil & Gas Co. 1994 Stock Option Plan, as amended.
10.4 McMoRan Oil & Gas Co. 1994 Stock Option Plan for
Non-Employee Directors, as amended.
10.5 McMoRan Oil & Gas Co. Performance Incentive Awards Program,
as amended. Incoporated by reference to Exhibit 10.5 to the
Company's 1995 10-K.
10.6 Financial Counseling and Tax Return Preparation and
Certification Program of McMoRan Oil & Gas Co. Incorporated
by reference to Exhibit 10.6 to the Company's 1995 10-K.
10.7 MOXY Participation & Exploration Program Agreement dated as
of July 1, 1995 between McMoRan Oil & Gas Co. (MOXY),
CoEnergy Central Exploration, Inc. (Central) and MCN
Investment Corporation (MCNIC). Incorporated by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K
dated as of September 19, 1995.
10.8 Security Agreement and Conveyance of Production Payment
dated as of September 27, 1995 between MOXY and MCNIC.
Incorporated by reference to Exhibit 2.2 to the Company's
Current Report on Form 8-K dated as of September 19, 1995.
10.9 Exploration Agreement dated as of June 13, 1995, between
MOXY and Phillips Petroleum Company. Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for
the quarter ending June 30, 1995.
10.10 Exploration Agreement effective July 1, 1996, between MOXY
and Freeport-McMoRan Resource Partners, Limited Partnership
("FRP"). Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ending June
30, 1996.
10.11 Letter Agreement dated February 28, 1997 between MOXY and
FRP.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Crescent Technology, Inc.
24.1 Certified resolution of the Board of Directors of the
Company authorizing this report to be signed on behalf of
any officer or director pursuant to a Power of Attorney.
24.2 Powers of Attorney pursuant to which this report has been
signed on behalf of certain officers and directors of the
Company.
27.1 Financial Data Schedule.
Exhibit 10.1
AMENDED AND RESTATED SERVICES AGREEMENT
THIS AMENDED AND RESTATED SERVICES AGREEMENT (this
"Agreement") is dated as of January 1, 1997, by and between
FM Services Company, a Delaware corporation ("FMS"), and
McMoRan Oil & Gas Inc., a Delaware corporation ("MOXY").
WHEREAS, the parties entered into a Services Agreement
dated as of January 1, 1996 (the "Original Agreement")
pursuant to which FMS furnished MOXY and its affiliates, as
that term is defined in Rule 405 under the Securities Act of
1933 (collectively, the "MOXY Group"), with Services, as
defined below, to support and complement the services
provided by the MOXY Group's officers, employees and other
available resources;
WHEREAS, the parties desire to amend the Original
Agreement to provide for a cost of living adjustment to the
Annual Fee, as defined below, and to restate the Original
Agreement as so amended.
NOW THEREFORE, in consideration of the covenants and
agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
Section 1.Services. During the term of this Agreement
FMS shall furnish the following services (collectively, the
"Services") to the MOXY Group: (a) accounting, treasury and
financial, (b) tax, (c) insurance and risk management
(including the purchase and maintenance on behalf of MOXY of
such insurance as MOXY deems necessary or appropriate), (d)
human resources (including employee benefit services), (e)
management information and system support, (f) governmental
relations, (g) community relations, (h) investor relations,
(i) facilities management and security, (j) marketing, (k)
business development, (l) executive support, (m) aviation,
(n) contract administration and (o) such other services as
may mutually be agreed upon by the parties hereto. Services
shall be provided directly by FMS or, in the discretion of
FMS, by affiliated or non-affiliated third parties.
Section 2.Administration of Services. FMS shall keep
the appropriate officers and employees of MOXY and other
members of the MOXY Group fully informed and shall cooperate
with such officers and employees with respect to the
performance of Services by FMS. Each member of the MOXY
Group shall have complete and full access to all data,
records, files, statements, invoices, billings and other
information generated by or in the custody of FMS relating
to Services provided to such entity.
Section 3.Compensation and Reimbursement.
(a) As compensation for the performance of the
Services, MOXY shall pay to FMS an annual fee of $1.0
million, subject to the adjustment set forth in Section 10
hereof (the "Annual Fee"). The Annual Fee shall be payable
in four equal payments on or before the tenth (10th) day of
each calendar quarter in each year during the term of this
Agreement.
(b) MOXY shall reimburse FMS for all costs of goods,
services or other items purchased from third parties by FMS
for the MOXY Group, to the extent such costs are paid by FMS
("Third Party Charges").
Section 4.Use of FMS Facilities. FMS shall provide the
MOXY Group with a non-exclusive right to utilize its
properties and facilities, subject to such limitations, if
any, as may be imposed by leases and other agreements and
instruments governing the use of such properties and
facilities.
Section 5.Term of Agreement; Termination. (a) This
Agreement shall commence as of the date first above written
and shall continue in effect until (i) the parties mutually
agree in writing to terminate this Agreement or (ii) 90 days
after receipt by FMS of written notice from MOXY of its
request to terminate this Agreement. Upon termination of
this Agreement MOXY shall be liable for a pro rata portion
of the Annual Fee and all Third Party Charges incurred in
accordance with Section 3 prior to termination.
Section 6.Limitation of Liability.
(a) FMS makes no representation or warranty
whatsoever, express or implied, with respect to the
Services. In no event shall FMS be liable to MOXY for (i)
any loss, cost or expense resulting from any act or omission
taken at the express direction of any member of the MOXY
Group or (ii) any special, indirect or consequential damages
resulting from any error or omission in the performance of
the Services or from the breach of this Agreement.
(b) Neither FMS nor MOXY shall be liable for any loss
or damage or any nonperformance, partial or whole, under
this Agreement, caused by any strike, labor troubles, riot
act of a public enemy, insurrection, act of God, or any law,
rule or regulation promulgated by any governmental body or
agency, or any demand or requisition of any governmental
body or agency, or any other cause beyond the control of the
parties hereto.
Section 7.Confidentiality. FMS will hold and will use
its best efforts to cause its officers, directors, employees
and other agents (collectively, its "Agents") to hold, in
confidence, all confidential documents and information
concerning the MOXY Group furnished to such party in
connection with this Agreement, except to the extent that
such information can be shown to have been (a) previously
known by such party on a nonconfidential basis, (b) in the
public domain through no fault of such party or (c) later
lawfully acquired by such party on a nonconfidential basis
from a source other than the MOXY Group; provided that FMS
may disclose such information in connection with this
Agreement to its Agents so long as such persons are informed
by FMS of the confidential nature of such information and
are directed by FMS to keep such information confidential
and not to use it for any purpose other than its intended
use. Notwithstanding the foregoing, FMS or its Agents may
disclose such information if (i) compelled to disclose by
judicial or administrative process or by other requirements
of law or (ii) necessary to establish such party's position
in any litigation or any arbitration or other proceeding
based upon or in connection with the subject matter of this
Agreement. Prior to any disclosure pursuant to the
preceding sentence, FMS or its Agent(s) shall give
reasonable prior notice to MOXY of such intended disclosure,
and if requested by MOXY, FMS shall use all reasonable
efforts to obtain a protective order or similar protection
for such information and shall otherwise disclose only such
information as is legally required. If all or any part of
the Services are terminated, FMS will, and will use its best
efforts to cause its Agents to, destroy or deliver to MOXY,
upon request, all documents and other materials, and all
copies thereof, containing confidential information obtained
from the MOXY Group in connection with the Services so
terminated.
Section 8.Technology. FMS hereby grants to MOXY a
royalty free, non-exclusive right and license to use (but
not to sublicense outside of the MOXY Group) any and all
technology, whether or not patented, developed by or on
behalf of FMS, relating to the business of MOXY; provided
that the license hereby granted shall not extend to (i) any
technology developed for a person not affiliated with FMS,
pursuant to an arrangement granting such person exclusive
rights to such technology, or (ii) any technology developed
after the termination of this Agreement.
Section 9.Dispute Resolution. MOXY and FMS shall use
all reasonable efforts to amicably resolve all disputes
arising under this Agreement. If despite such efforts any
matter cannot be amicably resolved the matter shall be
referred to the Presidents of MOXY and FMS who shall
promptly meet for the purpose of resolving such dispute. If
despite such efforts and meetings the matter remains
unresolved, then any affected party may refer the matter to
arbitration for final resolution in accordance with the
commercial rules of the American Arbitration Association.
Any matter submitted to arbitration shall be decided by a
single arbitrator selected by mutual agreement of the
parties (or if the parties cannot agree then such arbitrator
shall be selected by the appropriate official or designee of
the American Arbitration Association). Any such arbitration
proceeding shall be held in New Orleans, Louisiana. Each
party shall bear its own costs and expenses, and the
arbitrator's fees and expenses and the costs and expenses of
the proceeding itself shall be borne by the parties in such
proportions as the arbitrator shall decide. The decision of
the arbitrator shall be final and non-appealable, and may be
enforced in any court of competent jurisdiction.
Section 10.Cost of Living Adjustment.
(a) Prior to the end of the first calendar quarter of
each year during the term of this Agreement, beginning with
the first calendar quarter of 1997, the Annual Fee shall be
adjusted to reflect any cost of living increase (the "Cost
of Living Adjustment"), as provided for in this Section 10.
(b) The Cost of Living Adjustment factor is:
1 + ( (Actual inflation - Base Year inflation) /
Base Year inflation)
where Actual inflation = CPI-U for the December
preceding the year for which the Cost of
Living Adjustment is being calculated; Base
Year inflation = CPI-U for December 1995; and
CPI-U = the Consumer Price Index, as
published by the Bureau of Labor Statistics,
U.S. Department of Labor, For All Urban
Consumers, U.S.C. City Average, All Items,
1982-84=100.
(c) The Annual Fee shall be multiplied by the Cost of
Living Adjustment factor as determined above if such factor
is greater than one. The Cost of Living Adjustment factor
shall be determined as soon as practicable after the end of
each calendar year.
(d) In the event the Bureau of Labor Statistics stops
publishing the CPI-U or substantially changes its content
and format, FMS will substitute another comparable index
published at least annually by a mutually agreeable source.
If the Bureau of Labor Statistics merely redefines the base
year for the CPI-U from 1982-84 to another year, MOXY and
FMS will continue to use the CPI-U, but will convert the
Base Year to the new base year by using the appropriate
conversion formula.
Section 11.Miscellaneous.
(a) The parties hereto are independent contractors.
Nothing in this Agreement is intended or shall be deemed to
constitute a partnership, agency, franchise or joint venture
relationship between the parties. Neither party shall incur
any debts or make any commitments upon the other, except to
the extent specifically provided herein.
(b) This Agreement constitutes the entire agreement
between the parties hereto with respect to the matters set
forth in this Agreement. This Agreement shall not be
amended, modified or supplemented except by an instrument in
writing executed by each of the parties hereto.
(c) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery,
certified or registered mail, return receipt requested or
telecopy transmission with confirmation of receipt to the
address of each of the parties set forth opposite the
signature of such party on the signature page hereof. All
notices and communications shall be deemed given upon
receipt thereof.
(d) This Agreement shall be governed by and construed
in accordance with the internal laws of the State of
Louisiana without the application of any conflicts of laws
principles.
(e) This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be
assignable by any party hereto without the prior written
consent of the other party.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first above written.
Address for Notices: FM SERVICES COMPANY
1615 Poydras Street
New Orleans, LA 70112 By: /s/ Michael J. Arnold
___________________________
Attention: General Counsel Michael J. Arnold
President
Address for Notices: McMoRan OIL & GAS INC.
1615 Poydras Street
New Orleans, LA 70112 By: /s/ Richard C. Adkerson
_____________________________
Attention: General Counsel Richard C. Adkerson
Co-Chairman of the Board and
Chief Executive Officer
Exhibit 10.2
McMoRan OIL & GAS CO.
ADJUSTED STOCK AWARD PLAN
SECTION 1
Purpose. The purpose of the McMoRan Oil & Gas Co.
Adjusted Stock Award Plan (the "Plan") is to provide for the
issuance and administration of certain awards relating to
common stock of the Company issued to employees, officers
and directors of Freeport-McMoRan Inc. ("FTX"), the
Company's parent, in connection with FTX's distribution to
FTX stockholders of all of the common stock of the Company.
SECTION 2
Definitions. As used in the Plan, the following
terms shall have the meanings set forth below:
"Award" shall mean any Option, Limited Right or
Stock Incentive Unit granted under this Plan.
"Award Agreement" shall mean any written
agreement, contract or other instrument or document
evidencing any Award, which may, but need not, be executed
or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the
Company.
"Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
"Committee" shall mean a committee of the Board
designated by the Board to administer the Plan and composed
of not fewer than two directors, each of whom, to the extent
necessary to comply with Rule 16b-3 only, is a "non-employee
director" within the meaning of Rule 16b-3 and, to the
extent necessary to comply with Section 162(m) only, is an
"outside director" under Section 162(m). In the absence of
such a designation, "Committee" shall mean the Board.
"Company" shall mean McMoRan Oil & Gas Co.
"Designated Beneficiary" shall mean the
beneficiary designated by the Participant, in a manner
determined by the Committee, to receive the benefits due the
Participant under the Plan in the event of the Participant's
death. In the absence of an effective designation by the
Participant, Designated Beneficiary shall mean the
Participant's estate.
"Distribution" shall mean the distribution by FTX
of all the then outstanding Shares to the holders of FTX
common stock, as described in the Information Statement.
"Distribution Date" shall mean the Distribution
Date, as disclosed in the Information Statement.
"Eligible Individual" shall mean any present or
former employee, officer or director of FTX who on the
Distribution Date holds an FTX Award.
"Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
"FTX Award" shall mean any of the FTX Options, FTX
Director Options, FTX SARs and FTX SIUs.
"FTX Director Option" shall mean an option to
purchase FTX common stock granted under the FTX 1988 Stock
Option Plan for Non-Employee Directors that is outstanding
and unexercised on the Distribution Date.
"FTX Option" shall mean an option to purchase FTX
common stock granted by FTX to a present or former officer
or employee of FTX that is outstanding and unexercised on
the Distribution Date.
"FTX SAR" shall mean a stock appreciation right
granted to a present or former officer or employee of FTX
that is outstanding and unexercised on the Distribution
Date.
"FTX SIU" shall mean a stock incentive unit
granted under the FTX 1992 Stock Incentive Unit Plan that is
outstanding and unexercised on the Distribution Date.
"Information Statement" shall mean the Information
Statement dated May 18, 1994 included in the Registration
Statement on Form 10A-2 filed by the Company under the
Exchange Act with respect to the Shares.
"Limited Right" shall mean any right granted under
Section 8 of the Plan.
"Offer" shall mean any tender offer, exchange
offer or series of purchases or other acquisitions, or any
combination of those transactions, as a result of which any
person, or any two or more persons acting as a group, and
all affiliates of such person or persons, shall own
beneficially more than 40% of the Shares outstanding
(exclusive of Shares held in the Company's treasury or by
the Company's Subsidiaries).
"Offer Price" shall mean the highest price per
Share paid in any Offer that is in effect at any time during
the period beginning on the ninetieth day prior to the date
on which a Limited Right is exercised and ending on and
including the date of exercise of such Limited Right. Any
securities or property that comprise all or a portion of the
consideration paid for Shares in the Offer shall be valued
in determining the Offer Price at the higher of (i) the
valuation placed on such securities or property by the
person or persons making such Offer, or (ii) the valuation,
if any, placed on such securities or property by the
Committee or the Board.
"Option" shall mean an Option granted under
Section 6 of the Plan.
"Participant" shall mean any Eligible Individual
granted an Award under the Plan.
"Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust,
unincorporated organization, government or political
subdivision thereof or other entity.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by
the SEC under the Exchange Act, or any successor rule or
regulation thereto as in effect from time to time.
"SEC" shall mean the Securities and Exchange
Commission, including the staff thereof, or any successor
thereto.
"Section 162(m)" shall mean Section 162(m) of the
Code and all regulations promulgated thereunder as in effect
from time to time.
"SIU" shall mean a Stock Incentive Unit.
"Shares" shall mean the shares of common stock,
par value $.01 per share, of the Company (including any
attached Preferred Stock Purchase Rights), and such other
securities of the Company or a Subsidiary as the Committee
may from time to time designate.
"Stock Incentive Unit" shall mean any award of
stock incentive units granted under Section 7 of the Plan.
"Subsidiary" shall mean any corporation or other
entity in which the Company possesses directly or indirectly
equity interests representing at least 50% of the total
ordinary voting power or at least 50% of the total value of
all classes of equity interests of such corporation or other
entity.
SECTION 3
Administration. The Plan shall be administered by
the Committee. Subject to the terms of the Plan and
applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the
Committee shall have full power and authority to interpret
and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; establish,
amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and make any other
determination and take any other action that the Committee
deems necessary or desirable for the administration of the
Plan. The Committee shall have no discretion relating to
the timing, pricing and size of Awards granted under the
Plan, which shall be determined in accordance with the
provisions of Sections 6, 7 and 8. Unless otherwise
expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or
with respect to the Plan or any Award shall be within the
sole discretion of the Committee, may be made at any time
and shall be final, conclusive and binding upon all Persons,
including the Company, any Subsidiary, any Participant, any
holder or beneficiary of any Award, any stockholder of the
Company and any Eligible Individual.
SECTION 4
Eligibility. Each Eligible Individual shall be
granted an Award in accordance with the provisions of the
Plan.
SECTION 5
(a) Shares Available for Awards. Subject to
adjustment as provided in paragraph 5(b):
(i) Calculation of Number of Shares Available.
The number of Shares with respect to which Awards may
be granted under the Plan shall be such number of
Shares as results from the application of the award
formulas set forth in Sections 6 and 8. Such number of
Shares shall not be reduced by the number of Shares
with respect to which SIUs shall be granted, which
shall be determined in accordance with Section 7. If,
after the effective date of the Plan, an Award granted
under the Plan expires or is exercised, forfeited,
canceled or terminated without the delivery of Shares,
then the Shares covered by such Award or to which such
Award relates, or the number of Shares otherwise
counted against the aggregate number of Shares with
respect to which Awards may be granted, to the extent
of any such expiration, exercise, forfeiture,
cancellation or termination, shall not thereafter be
available for grants or Awards under the Plan.
(ii) Sources of Shares Deliverable Under Awards.
Any Shares delivered pursuant to an Award may consist
of authorized and unissued Shares or of treasury
Shares, including Shares held by the Company or a
Subsidiary and acquired in the open market or otherwise
obtained by the Company or a Subsidiary.
(b) Adjustments. In the event that the Committee
determines that any dividend or other distribution (whether
in the form of cash, Shares, Subsidiary securities, other
securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase
or exchange of Shares or other securities of the Company,
issuance of warrants or other rights to purchase Shares or
other securities of the Company, or other similar corporate
transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate
to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the
Plan, then the Committee may, in its sole discretion and in
such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or other securities or
property) subject to outstanding Awards, and (ii) the grant
or exercise price with respect to any Award or, if deemed
appropriate, make provision for a cash payment to the holder
of an outstanding Award; provided, that the number of Shares
subject to any Award denominated in Shares shall always be a
whole number.
SECTION 6
(a) Stock Options. Immediately prior to the
Distribution, each holder of an FTX Option, an FTX SAR or an
FTX Director Option shall receive an Option to purchase such
number of Shares (disregarding any fractional Share) as
such holder would be eligible to receive in the Distribution
with respect to the number of shares of FTX common stock
subject to such FTX Award if such holder were the owner of
record of such FTX shares on the record date for the
Distribution. Except as set forth in paragraphs 6(b) and
6(c), each such Option shall have the same remaining term
and other terms and conditions (whether such terms and
conditions are contained in the related FTX Award agreement
or in the plan under which such FTX Award was made) and
shall be exercisable to the same extent as the FTX Award
from which they were derived, with such changes and
modifications as are necessary to substitute the Company for
FTX as the issuer of the Option.
(b) Exercise Price. The per Share exercise price
of each Option granted pursuant to paragraph 6(a) shall be
the per share exercise price or grant price of the FTX Award
from which such Option was derived multiplied by a fraction,
the numerator of which is the per Share fair market value of
the Shares at the time of the Distribution, determined as
set forth below, and the denominator of which is the per
share fair market value of FTX common stock at the time of
the Distribution, determined as set forth below. For
purposes of this paragraph 6(b), the per Share fair market
value at the time of the Distribution shall be the weighted
average when-issued per Share price of the Shares on the
NASDAQ National Market System on the first trading date on
which the Shares are traded on a when-issued basis on the
NASDAQ National Market System, and the per share fair market
value of FTX common stock at the time of the Distribution
shall be the weighted average per share price of the FTX
common stock on the New York Stock Exchange on such trading
date.
(c) Tax-Offset Right Adjustment. Notwithstanding
the foregoing, if the FTX Award from which the Option
granted under this Section 6 derives contained a right to
receive a cash payment upon exercise of such FTX Award
related to and intended to defray the income tax liability
associated therewith, the number of Shares to be subject to
the Option, determined according to the provisions of
paragraph 6(a) (without disregarding fractional Shares),
shall be multiplied by 1.6556 and any fractional Share
resulting from such adjustment shall be disregarded. Such
adjustment shall not affect the calculation of the per Share
exercise price of the Option as set forth in paragraph 6(b).
(d) Payment. No Shares shall be delivered
pursuant to any exercise of an Option until payment in full
of the option price therefor is received by the Company.
Such payment may be made in cash, or its equivalent, or, if
and to the extent permitted by the Committee, by applying
cash amounts payable by the Company upon the exercise of
such Option or other Awards by the holder thereof or by
exchanging whole Shares owned by such holder (which are not
the subject of any pledge or other security interest), or by
a combination of the foregoing, provided that the combined
value of all cash, cash equivalents, cash amounts so payable
by the Company upon exercises of Awards and the fair market
value of any such whole Shares so tendered to the Company,
valued (in accordance with procedures established by the
Committee) as of the effective date of such exercise, is at
least equal to such option price.
SECTION 7
(a) Stock Incentive Units. Immediately prior to
the Distribution, each holder of an FTX SIU shall receive a
Stock Incentive Unit relating to such number of Shares
(disregarding any fractional Share) as such holder would be
eligible to receive in the Distribution with respect to the
number of shares of FTX common stock to which such FTX SIU
relates if such holder were the owner of record of such FTX
shares on the record date for the Distribution. Except as
set forth in paragraphs 7(b) and 7(c), each such SIU shall
have the same remaining term and other terms and conditions
(whether such terms and conditions are contained in the
related FTX SIU agreement or in the plan under which such
FTX SIU was made) and shall be exercisable to the same
extent as the FTX SIU from which they were derived, with
such changes and modifications as are necessary to
substitute the Company for FTX as the issuer of the SIU.
The per Share exercise price of each SIU shall be determined
in the same manner as the exercise price of Options granted
pursuant to Section 6, as described in paragraph 6(b).
(b) A Stock Incentive Unit shall entitle the
holder thereof to receive an amount equal to the excess, if
any, of the fair market value of a Share on the date of
exercise of the SIU over the exercise price. In the event
that the SIU is exercised during a period beginning not
earlier than one day after the expiration date of an Offer
and ending not more than ninety days after the expiration
date of such Offer, an SIU shall entitle the holder thereof
to receive upon exercise the higher of (i) the amount
described in the first sentence of this paragraph 7(b) and
(ii) an amount in cash equal to the excess, if any, of the
Offer Price on the date of exercise of the SIU over the
exercise price.
SECTION 8
(a) Limited Rights. Each holder of an FTX Option
or FTX SAR shall receive, at the same time as and in tandem
with each Option granted to such holder under Section 6,
Limited Rights equal in number to the number of Shares
subject to such Option with which such Limited Rights are in
tandem. Such Limited Rights shall have a grant price equal
to the exercise price of the Option under Section 6 with
which it is in tandem, and shall in all other respects
contain the same terms and conditions as the agreement
pertaining to the FTX Award from which they derived.
(b) A Limited Right shall entitle the holder
thereof to receive an amount equal to the excess, if any, of
the Offer Price on the date of exercise of the Limited Right
over the grant price. Any Limited Right may be settled in
cash, Shares or a combination of cash and Shares, as
determined by the Committee or the Board at the time of
exercise, and shall only be exercisable during a period
beginning not earlier than one day and ending not more than
ninety days after the expiration date of an Offer.
SECTION 9
(a) Amendments to the Plan. The Board may amend,
suspend or terminate the Plan or any portion thereof at any
time, provided that no amendment shall be made without
stockholder approval if such approval is necessary to comply
with any tax or regulatory requirement. Notwithstanding
anything to the contrary contained herein, (i) the Committee
may amend the Plan in such manner as may be necessary for
the Plan to conform with local rules and regulations in any
jurisdiction outside the United States and (ii) any
amendment, suspension or termination made in accordance with
this paragraph 9(a) that would adversely affect a holder's
rights under an Award made under the Plan may not be made
without such holder's consent.
(b) Amendments to Awards. The Committee may
amend, modify or terminate any outstanding Award with the
holder's consent at any time prior to payment or exercise in
any manner not inconsistent with the terms of the Plan,
including without limitation, (i) to change the date or
dates as of which an Award becomes exercisable, or (ii) to
cancel an Award and grant a new Award in substitution
therefor under such different terms and conditions as it
determines in its sole and complete discretion to be
appropriate.
(c) Adjustment of Awards Upon the Occurrence of
Certain Unusual or Nonrecurring Events. The Committee is
hereby authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including,
without limitation, the events described in paragraph 5(b)
hereof) affecting the Company, or the financial statements
of the Company or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are
appropriate to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available
under the Plan.
(d) Cancellation. Any provision of this Plan or
any Award Agreement to the contrary notwithstanding, the
Committee may cause any Award granted hereunder to be
canceled in consideration of a cash payment or alternative
Award made to the holder of such canceled Award equal in
value to such canceled Award. The determinations of value
under this subparagraph shall be made by the Committee in
its sole discretion.
SECTION 10
(a) Award Agreements. Each Award hereunder shall
be evidenced by a writing delivered to the Participant that
shall specify the terms and conditions thereof and any rules
applicable thereto and that shall, in accordance with the
provisions of the Plan, replicate as closely as possible the
terms, conditions and other contractual attributes of the
FTX Award from which the Award is derived, as in effect on
the Distribution Date.
(b) Transferability. No Awards granted hereunder
may be transferred, pledged, assigned or otherwise
encumbered by a Participant except: (i) by will; (ii) by the
laws of descent and distribution; (iii) pursuant to a
domestic relations order, as defined in the Code, if
permitted by the Committee and so provided in the Award
Agreement or an amendment thereto; or (iv) as to Options
only, if permitted by the Committee and so provided in the
Award Agreement or an amendment thereto, (a) to Immediate
Family Members, (b) to a partnership in which Immediate
Family Members, or entities in which Immediate Family
Members are the sole owners, members or beneficiaries, as
appropriate, are the only partners, (c) to a limited
liability company in which Immediate Family Members, or
entities in which Immediate Family Members are the sole
owners, members or beneficiaries, as appropriate, are the
only members, or (d) to a trust for the sole benefit of
Immediate Family Members. "Immediate Family Members" shall
be defined as the spouse and natural or adopted children or
grandchildren of the Participant and their spouses. Any
attempted assignment, transfer, pledge, hypothecation or
other disposition of Awards, or levy of attachment or
similar process upon Awards not specifically permitted
herein, shall be null and void and without effect. The
designation of a Designated Beneficiary shall not be a
violation of this Section 10(b).
(c) Share Certificates. All certificates for
Shares or other securities delivered under the Plan pursuant
to any Award or the exercise thereof shall be subject to
such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the SEC, any stock
exchange upon which such Shares or other securities are then
listed, and any applicable federal or state laws, and the
Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such
restrictions.
(d) No Limit on Other Compensation Arrangements.
Nothing contained in the Plan shall prevent the Company from
adopting or continuing in effect other compensation
arrangements, which may, but need not, provide for the grant
of options, stock appreciation rights and other types of
Awards provided for hereunder (subject to stockholder
approval of any such arrangement if approval is required),
and such arrangements may be either generally applicable or
applicable only in specific cases.
(e) No Right to Employment. The grant of an
Award shall not be construed as giving a Participant the
right to be engaged or employed by or retained in the employ
of FTX, the Company or any Subsidiary. FTX, the Company or
any Subsidiary may at any time dismiss a Participant from
engagement or employment, free from any liability or any
claim under the Plan, unless otherwise expressly provided in
the Plan or in any Award Agreement or any agreement relating
to the engagement or employment of the Participant by FTX,
the Company or any Subsidiary.
(f) Governing Law. The validity, construction,
and effect of the Plan, any rules and regulations relating
to the Plan and any Award Agreement shall be determined in
accordance with the laws of the State of Delaware.
(g) Severability. If any provision of the Plan
or any Award is or becomes or is deemed to be invalid,
illegal, or unenforceable in any jurisdiction or as to any
Person or Award, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award,
such provision shall be stricken as to such jurisdiction,
Person or Award and the remainder of the Plan and any such
Award shall remain in full force and effect.
(h) No Trust or Fund Created. Neither the Plan
nor any Award shall create or be construed to create a trust
or separate fund of any kind or a fiduciary relationship
between the Company and a Participant or any other Person.
To the extent that any Person acquires a right to receive
payments from the Company pursuant to an Award, such right
shall be no greater than the right of any unsecured general
creditor of the Company.
(i) No Fractional Shares. No fractional Shares
shall be issued or delivered pursuant to the Plan or any
Award, and the Committee shall determine, in accordance with
the terms of the Plan, as applicable, whether cash, other
securities or other property shall be paid or transferred in
lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be canceled, terminated,
or otherwise eliminated.
(j) Headings. Headings are given to the
subsections of the Plan solely as a convenience to
facilitate reference. Such headings shall not be deemed in
any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 11
Effective Date of the Plan. The Plan shall be
effective as of the date of its approval by the stockholder
of the Company.
SECTION 12
Term of the Plan. Subject to paragraph 5(b), no
Award shall be granted under the Plan except the Awards
provided for in Sections 6, 7 and 8. Awards granted
hereunder shall continue until their respective expiration
dates, and the authority of the Committee to administer,
interpret, amend, alter, adjust, suspend, discontinue, or
terminate, in accordance with the provisions of the Plan,
any such Award or to waive any conditions or rights under
any such Award shall extend until the latest such date.
As amended effective December 10, 1996
Exhibit 10.3
McMoRan OIL & GAS CO.
1994 STOCK OPTION PLAN
SECTION 1
Purpose. The purpose of the McMoRan Oil & Gas Co.
1994 Stock Option Plan (the "Plan") is to motivate and
reward key personnel by giving them a proprietary interest
in the Company's continued success.
SECTION 2
Definitions. As used in the Plan, the following
terms shall have the meanings set forth below:
"Award" shall mean any Option, Stock Appreciation
Right, Limited Right or Other Stock-Based Award.
"Award Agreement" shall mean any written
agreement, contract or other instrument or document
evidencing any Award, which may, but need not, be executed
or acknowledged by a Participant.
"Board" shall mean the Board of Directors of
McMoRan Oil & Gas Co.
"Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
"Committee" shall mean a committee of the Board
designated by the Board to administer the Plan and composed
of not fewer than two directors, each of whom, to the extent
necessary to comply with Rule 16b-3 only, is a "non-employee
director" within the meaning of Rule 16b-3 and, to the
extent necessary to comply with Section 162(m) only, is an
"outside director" under Section 162(m). Until otherwise
determined by the Board, the Committee shall be the
Corporate Personnel Committee of the Board.
"Company" shall mean McMoRan Oil & Gas Co.
"Designated Beneficiary" shall mean the
beneficiary designated by the Participant, in a manner
determined by the Committee, to receive the benefits due the
Participant under the Plan in the event of the Participant's
death. In the absence of an effective designation by the
Participant, Designated Beneficiary shall mean the
Participant's estate.
"Employee" shall mean (i) any person providing
services as an officer of the Company or a Subsidiary,
whether or not employed by such entity, (ii) any employee of
the Company or a Subsidiary, including any director who is
also an employee of the Company or a Subsidiary, (iii) any
officer or employee of an entity with which the Company has
contracted to receive management services who provides
services to the Company or a Subsidiary through such
arrangement and (iv) any person who has agreed in writing to
become a person described in clauses (i), (ii) or (iii)
within not more than 30 days following the date of grant of
such person's first Award under the Plan.
"Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
"Incentive Stock Option" shall mean an option
granted under Section 6 of the Plan that is intended to meet
the requirements of Section 422 of the Code or any successor
provision thereto.
"Limited Right" shall mean any right granted under
Section 8 of the Plan.
"Nonqualified Stock Option" shall mean an option
granted under Section 6 of the Plan that is not intended to
be an Incentive Stock Option.
"Offer" shall mean any tender offer, exchange
offer or series of purchases or other acquisitions, or any
combination of those transactions, as a result of which any
person, or any two or more persons acting as a group, and
all affiliates of such person or persons, shall own
beneficially more than 40% of the Shares outstanding
(exclusive of Shares held in the Company's treasury or by
the Company's Subsidiaries).
"Offer Price" shall mean the highest price per
Share paid in any Offer that is in effect at any time during
the period beginning on the ninetieth day prior to the date
on which a Limited Right is exercised and ending on and
including the date of exercise of such Limited Right. Any
securities or property that comprise all or a portion of the
consideration paid for Shares in the Offer shall be valued
in determining the Offer Price at the higher of (i) the
valuation placed on such securities or property by the
person or persons making such Offer, or (ii) the valuation,
if any, placed on such securities or property by the
Committee or the Board.
"Option" shall mean an Incentive Stock Option or a
Nonqualified Stock Option.
"Other Stock-Based Award" shall mean any right or
award granted under Section 9 of the Plan.
"Participant" shall mean any Employee granted an
Award under the Plan.
"Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust,
unincorporated organization, government or political
subdivision thereof or other entity.
"Rule 16b-3" shall mean Rule 16b-3 promulgated by
the SEC under the Exchange Act, or any successor rule or
regulation thereto as in effect from time to time.
"SAR" shall mean any Stock Appreciation Right.
"SEC" shall mean the Securities and Exchange
Commission, including the staff thereof, or any successor
thereto.
"Section 162(m)" shall mean Section 162(m) of the
Code and all regulations promulgated thereunder as in effect
from time to time.
"Shares" shall mean the shares of common stock,
par value $0.01 per share, of McMoRan Oil & Gas Co.
(including any attached Preferred Stock Purchase Rights),
and such other securities of the Company or a Subsidiary as
the Committee may from time to time designate.
"Stock Appreciation Right" shall mean any right
granted under Section 7 of the Plan.
"Subsidiary" shall mean (i) any corporation or
other entity in which the Company possesses directly or
indirectly equity interests representing at least 50% of the
total ordinary voting power or at least 50% of the total
value of all classes of equity interests of such corporation
or other entity and (ii) any other entity in which the
Company has a direct or indirect economic interest that is
designated as a Subsidiary by the Committee.
SECTION 3
Administration. The Plan shall be administered by
the Committee. Subject to the terms of the Plan and
applicable law, and in addition to other express powers and
authorizations conferred on the Committee by the Plan, the
Committee shall have full power and authority to: (i)
designate Participants; (ii) determine the type or types of
Awards to be granted to an eligible Employee; (iii)
determine the number of Shares to be covered by, or with
respect to which payments, rights or other matters are to be
calculated in connection with, Awards; (iv) determine the
terms and conditions of any Award; (v) determine whether, to
what extent, and under what circumstances Awards may be
settled or exercised in cash, whole Shares, other whole
securities, other Awards, other property or other cash
amounts payable by the Company upon the exercise of that or
other Awards, or cancelled, forfeited or suspended and the
method or methods by which Awards may be settled, exercised,
cancelled, forfeited or suspended; (vi) determine whether,
to what extent, and under what circumstances cash, Shares,
other securities, other Awards, other property, and other
amounts payable by the Company with respect to an Award
shall be deferred either automatically or at the election of
the holder thereof or of the Committee; (vii) interpret and
administer the Plan and any instrument or agreement relating
to, or Award made under, the Plan; (viii) establish, amend,
suspend or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other
determination and take any other action that the Committee
deems necessary or desirable for the administration of the
Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other
decisions under or with respect to the Plan or any Award
shall be within the sole discretion of the Committee, may be
made at any time and shall be final, conclusive and binding
upon all Persons, including the Company, any Subsidiary, any
Participant, any holder or beneficiary of any Award, any
stockholder of the Company and any Employee.
SECTION 4
Eligibility. Any Employee who is not a member of
the Committee shall be eligible to be granted an Award.
SECTION 5
(a) Shares Available for Awards. Subject to
adjustment as provided in Section 5(b):
(i) Calculation of Number of Shares Available.
The number of Shares with respect to which Awards may be
granted under the Plan shall be 1,000,000. If, after the
effective date of the Plan, an Award granted under the Plan
expires or is exercised, forfeited, cancelled or terminated
without the delivery of Shares, then the Shares covered by
such Award or to which such Award relates, or the number of
Shares otherwise counted against the aggregate number of
Shares with respect to which Awards may be granted, to the
extent of any such expiration, exercise, forfeiture,
cancellation or termination without the delivery of Shares,
shall again be, or shall become, Shares with respect to
which Awards may be granted.
(ii) Substitute Awards. Any Shares delivered by
the Company, any Shares with respect to which Awards are
made by the Company, or any Shares with respect to which the
Company becomes obligated to make Awards, through the
assumption of, or in substitution for, outstanding awards
previously granted by an acquired company or a company with
which the Company combines, shall not be counted against the
Shares available for Awards under the Plan.
(iii) Sources of Shares Deliverable Under Awards.
Any Shares delivered pursuant to an Award may consist of
authorized and unissued Shares or of treasury Shares,
including Shares held by the Company or a Subsidiary and
acquired in the open market or otherwise obtained by the
Company or a Subsidiary.
(iv) Individual Limit. Any provision of the Plan
to the contrary notwithstanding, no individual may receive
in any year Awards under the Plan that relate to more than
200,000 Shares.
(b) Adjustments. In the event that the Committee
determines that any dividend or other distribution (whether
in the form of cash, Shares, Subsidiary securities, other
securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase
or exchange of Shares or other securities of the Company,
issuance of warrants or other rights to purchase Shares or
other securities of the Company, or other similar corporate
transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate
to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the
Plan, then the Committee may, in its sole discretion and in
such manner as it may deem equitable, adjust any or all of
(i) the number and type of Shares (or other securities or
property) with respect to which Awards may be granted, (ii)
the number and type of Shares (or other securities or
property) subject to outstanding Awards, and (iii) the grant
or exercise price with respect to any Award or, if deemed
appropriate, make provision for a cash payment to the holder
of an outstanding Award or, if deemed appropriate, adjust
outstanding Awards to provide the rights contemplated by
Section 9(b) hereof; provided, in each case, that with
respect to Awards of Incentive Stock Options no such
adjustment shall be authorized to the extent that such
authority would cause the Plan to violate Section 422(b)(1)
of the Code or any successor provision thereto and, with
respect to all Awards under the Plan, no such adjustment
shall be authorized to the extent that such authority would
be inconsistent with the requirements for full deductibility
under Section 162(m) of the Code and the regulations
thereunder; and provided further, that the number of Shares
subject to any Award denominated in Shares shall always be a
whole number.
SECTION 6
(a) Stock Options. Subject to the provisions of
the Plan, the Committee shall have sole and complete
authority to determine the Employees to whom Options shall
be granted, the number of Shares to be covered by each
Option, the option price therefor and the conditions and
limitations applicable to the exercise of the Option. The
Committee shall have the authority to grant Incentive Stock
Options, Nonqualified Stock Options or both. In the case
of Incentive Stock Options, the terms and conditions of such
grants shall be subject to and comply with such rules as may
be required by Section 422 of the Code, as from time to time
amended, and any implementing regulations. Except in the
case of an Option granted in assumption of or substitution
for an outstanding award of a company acquired by the
Company or with which the Company combines, the exercise
price of any Option granted under this Plan shall not be
less than 100% of the fair market value of the underlying
Shares on the date of grant.
(b) Exercise. Each Option shall be exercisable
at such times and subject to such terms and conditions as
the Committee may, in its sole discretion, specify in the
applicable Award Agreement or thereafter, provided, however,
that in no event may any Option granted hereunder be
exercisable after the expiration of 10 years after the date
of such grant. The Committee may impose such conditions
with respect to the exercise of Options, including without
limitation, any condition relating to the application of
Federal or state securities laws, as it may deem necessary
or advisable.
(c) Payment. No Shares shall be delivered
pursuant to any exercise of an Option until payment in full
of the option price therefor is received by the Company.
Such payment may be made in cash, or its equivalent, or, if
and to the extent permitted by the Committee, by applying
cash amounts payable by the Company upon the exercise of
such Option or other Awards by the holder thereof or by
exchanging whole Shares owned by such holder (which are not
the subject of any pledge or other security interest), or by
a combination of the foregoing, provided that the combined
value of all cash, cash equivalents, cash amounts so payable
by the Company upon exercises of Awards and the fair market
value of any such whole Shares so tendered to the Company,
valued (in accordance with procedures established by the
Committee) as of the effective date of such exercise, is at
least equal to such option price.
SECTION 7
(a) Stock Appreciation Rights. Subject to the
provisions of the Plan, the Committee shall have sole and
complete authority to determine the Employees to whom Stock
Appreciation Rights shall be granted, the number of Shares
to be covered by each Stock Appreciation Right, the grant
price thereof and the conditions and limitations applicable
to the exercise thereof. Stock Appreciation Rights may be
granted in tandem with another Award, in addition to another
Award, or freestanding and unrelated to any other Award.
Stock Appreciation Rights granted in tandem with or in
addition to an Option or other Award may be granted either
at the same time as the Option or other Award or at a later
time. Stock Appreciation Rights shall not be exercisable
after the expiration of 10 years after the date of grant.
Except in the case of a Stock Appreciation Right granted in
assumption of or substitution for an outstanding award of a
company acquired by the Company or with which the Company
combines, the grant price of any Stock Appreciation Right
granted under this Plan shall not be less than 100% of the
fair market value of the Shares covered by such Stock
Appreciation Right on the date of grant or, in the case of a
Stock Appreciation Right granted in tandem with a then
outstanding Option or other Award, on the date of grant of
such related Option or Award.
(b) A Stock Appreciation Right shall entitle the
holder thereof to receive an amount equal to the excess, if
any, of the fair market value of a Share on the date of
exercise of the Stock Appreciation Right over the grant
price. Any Stock Appreciation Right shall be settled in
cash, unless the Committee shall determine at the time of
grant of a Stock Appreciation Right that it shall or may be
settled in cash, Shares or a combination of cash and Shares.
SECTION 8
(a) Limited Rights. Subject to the provisions
of the Plan, the Committee shall have sole and complete
authority to determine the Employees to whom Limited Rights
shall be granted, the number of Shares to be covered by each
Limited Right, the grant price thereof and the conditions
and limitations applicable to the exercise thereof. Limited
Rights may be granted in tandem with another Award, in
addition to another Award, or freestanding and unrelated to
any Award. Limited Rights granted in tandem with or in
addition to an Award may be granted either at the same time
as the Award or at a later time. Limited Rights shall not
be exercisable after the expiration of 10 years after the
date of grant and shall only be exercisable during a period
determined at the time of grant by the Committee beginning
not earlier than one day and ending not more than ninety
days after the expiration date of an Offer. Except in the
case of a Limited Right granted in assumption of or
substitution for an outstanding award of a company acquired
by the Company or with which the Company combines, the grant
price of any Limited Right granted under this Plan shall not
be less than 100% of the fair market value of the Shares
covered by such Limited Right on the date of grant or, in
the case of a Limited Right granted in tandem with a then
outstanding Option or other Award, on the date of grant of
such related Option or Award.
(b) A Limited Right shall entitle the holder
thereof to receive an amount equal to the excess, if any, of
the Offer Price on the date of exercise of the Limited Right
over the grant price. Any Limited Right shall be settled in
cash, unless the Committee shall determine at the time of
grant of a Limited Right that it shall or may be settled in
cash, Shares or a combination of cash and Shares.
SECTION 9
(a) Other Stock-Based Awards. The Committee is
hereby authorized to grant to eligible Employees an "Other
Stock-Based Award", which shall consist of an Award, the
value of which is based in whole or in part on the value of
Shares, that is not an instrument or Award specified in
Sections 6 through 8 of this Plan. Other Stock-Based Awards
may be awards of Shares or may be denominated or payable in,
valued in whole or in part by reference to, or otherwise
based on or related to, Shares (including, without
limitation, securities convertible or exchangeable into or
exercisable for Shares), as deemed by the Committee
consistent with the purposes of the Plan. The Committee
shall determine the terms and conditions of any such Other
Stock-Based Award. Except in the case of an Other
Stock-Based Award granted in assumption of or in
substitution for an outstanding award of a company acquired
by the Company or with which the Company combines, the price
at which securities may be purchased pursuant to any Other
Stock-Based Award granted under this Plan, or the provision,
if any, of any such Award that is analogous to the purchase
or exercise price, shall not be less than 100% of the fair
market value of the securities to which such Award relates
on the date of grant.
(b) Dividend Equivalents. In the sole and
complete discretion of the Committee, an Award, whether made
as an Other Stock-Based Award under this Section 9 or as an
Award granted pursuant to Sections 6 through 8 hereof, may
provide the holder thereof with dividends or dividend
equivalents, payable in cash, Shares, Subsidiary securities,
other securities or other property on a current or deferred
basis.
SECTION 10
(a) Amendments to the Plan. The Board may
amend, suspend or terminate the Plan or any portion thereof
at any time, provided that no amendment shall be made
without stockholder approval if such approval is necessary
to comply with any tax or regulatory requirement.
Notwithstanding anything to the contrary contained herein,
the Committee may amend the Plan in such manner as may be
necessary for the Plan to conform with local rules and
regulations in any jurisdiction outside the United States.
(b) Amendments to Awards. The Committee may
amend, modify or terminate any outstanding Award with the
holder's consent at any time prior to payment or exercise in
any manner not inconsistent with the terms of the Plan,
including without limitation, (i) to change the date or
dates as of which an Award becomes exercisable, or (ii) to
cancel an Award and grant a new Award in substitution
therefor under such different terms and conditions as it
determines in its sole and complete discretion to be
appropriate.
(c) Adjustment of Awards Upon the Occurrence of
Certain Unusual or Nonrecurring Events. The Committee is
hereby authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including,
without limitation, the events described in Section 5(b)
hereof) affecting the Company, or the financial statements
of the Company or any Subsidiary, or of changes in
applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are
appropriate to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available
under the Plan.
(d) Cancellation. Any provision of this Plan or
any Award Agreement to the contrary notwithstanding, the
Committee may cause any Award granted hereunder to be
cancelled in consideration of a cash payment or alternative
Award made to the holder of such cancelled Award equal in
value to such cancelled Award. The determinations of value
under this subparagraph shall be made by the Committee in
its sole discretion.
SECTION 11
(a) Delegation. Subject to the terms of the Plan
and applicable law, the Committee may delegate to one or
more officers of the Company the authority, subject to such
terms and limitations as the Committee shall determine, to
grant Awards to, or to cancel, modify or waive rights with
respect to, or to alter, discontinue, suspend, or terminate
Awards held by, Employees who are not officers or directors
of the Company for purposes of Section 16 of the Exchange
Act, or any successor section thereto, or who are otherwise
not subject to such Section.
(b) Award Agreements. Each Award hereunder
shall be evidenced by a writing delivered to the Participant
that shall specify the terms and conditions thereof and any
rules applicable thereto, including but not limited to the
effect on such Award of the death, retirement or other
termination of employment of the Participant and the effect
thereon, if any, of a change in control of the Company.
(c) Withholding. A Participant may be required
to pay to the Company, and the Company shall have the right
to deduct from all amounts paid to a Participant (whether
under the Plan or otherwise), any taxes required by law to
be paid or withheld in respect of Awards hereunder to such
Participant. The Committee may provide for additional cash
payments to holders of Awards to defray or offset any tax
arising from the grant, vesting, exercise or payment of any
Award.
(d) Transferability. No Awards granted hereunder
may be transferred, pledged, assigned or otherwise
encumbered by a Participant except: (i) by will; (ii) by the
laws of descent and distribution; (iii) pursuant to a
domestic relations order, as defined in the Code, if
permitted by the Committee and so provided in the Award
Agreement or an amendment thereto; or (iv) as to Options
only, if permitted by the Committee and so provided in the
Award Agreement or an amendment thereto, (a) to Immediate
Family Members, (b) to a partnership in which Immediate
Family Members, or entities in which Immediate Family
Members are the sole owners, members or beneficiaries, as
appropriate, are the only partners, (c) to a limited
liability company in which Immediate Family Members, or
entities in which Immediate Family Members are the sole
owners, members or beneficiaries, as appropriate, are the
only members, or (d) to a trust for the sole benefit of
Immediate Family Members. "Immediate Family Members" shall
be defined as the spouse and natural or adopted children or
grandchildren of the Participant and their spouses. To the
extent that an Incentive Stock Option is permitted to be
transferred during the lifetime of the Participant, it shall
be treated thereafter as a Nonqualified Stock Option. Any
attempted assignment, transfer, pledge, hypothecation or
other disposition of Awards, or levy of attachment or
similar process upon Awards not specifically permitted
herein, shall be null and void and without effect. The
designation of a Designated Beneficiary shall not be a
violation of this Section 11(d).
(e) Share Certificates. All certificates for
Shares or other securities delivered under the Plan pursuant
to any Award or the exercise thereof shall be subject to
such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules,
regulations, and other requirements of the SEC, any stock
exchange upon which such Shares or other securities are then
listed, and any applicable federal or state laws, and the
Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such
restrictions.
(f) No Limit on Other Compensation Arrangements.
Nothing contained in the Plan shall prevent the Company from
adopting or continuing in effect other compensation
arrangements, which may, but need not, provide for the grant
of options, stock appreciation rights and other types of
Awards provided for hereunder (subject to stockholder
approval of any such arrangement if approval is required),
and such arrangements may be either generally applicable or
applicable only in specific cases.
(g) No Right to Employment. The grant of an
Award shall not be construed as giving a Participant the
right to be retained in the employ of the Company or any
Subsidiary or in the employ of any other entity providing
services to the Company. The Company or any Subsidiary or
any such entity may at any time dismiss a Participant from
employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in
any Award Agreement. No Employee, Participant or other
person shall have any claim to be granted any Award, and
there is no obligation for uniformity of treatment of
Employees, Participants or holders or beneficiaries of
Awards.
(h) Governing Law. The validity, construction,
and effect of the Plan, any rules and regulations relating
to the Plan and any Award Agreement shall be determined in
accordance with the laws of the State of Delaware.
(i) Severability. If any provision of the Plan
or any Award is or becomes or is deemed to be invalid,
illegal, or unenforceable in any jurisdiction or as to any
Person or Award, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be construed or deemed
amended without, in the determination of the Committee,
materially altering the intent of the Plan or the Award,
such provision shall be stricken as to such jurisdiction,
Person or Award and the remainder of the Plan and any such
Award shall remain in full force and effect.
(j) No Trust or Fund Created. Neither the Plan
nor any Award shall create or be construed to create a trust
or separate fund of any kind or a fiduciary relationship
between the Company and a Participant or any other Person.
To the extent that any Person acquires a right to receive
payments from the Company pursuant to an Award, such right
shall be no greater than the right of any unsecured general
creditor of the Company.
(k) No Fractional Shares. No fractional Shares
shall be issued or delivered pursuant to the Plan or any
Award, and the Committee shall determine whether cash, other
securities or other property shall be paid or transferred in
lieu of any fractional Shares or whether such fractional
Shares or any rights thereto shall be cancelled, terminated,
or otherwise eliminated.
(l) Headings. Headings are given to the
subsections of the Plan solely as a convenience to
facilitate reference. Such headings shall not be deemed in
any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 12
Effective Date of the Plan. The Plan shall be
effective as of the date of its approval by the stockholder
of the Company.
SECTION 13
Term of the Plan. No Award shall be granted under
the Plan after the tenth anniversary of the effective date
of the Plan; however, unless otherwise expressly provided in
the Plan or in an applicable Award Agreement, any Award
theretofore granted may, and the authority of the Committee
to amend, alter, adjust, suspend, discontinue, or terminate
any such Award or to waive any conditions or rights under
any such Award shall, extend beyond such date.
As amended effective December 10, 1996
Exhibit 10.4
McMoRan OIL & GAS CO.
1994 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
PURPOSE OF THE PLAN
The purpose of the 1994 Stock Option Plan for
Non-Employee Directors (the "Plan") is to align more closely
the interests of the non-employee directors of McMoRan Oil &
Gas Co. (the "Company") with that of the Company's
stockholders by providing for the automatic grant to such
directors of stock options ("Options") to purchase Shares
(as hereinafter defined), in accordance with the terms of
the Plan.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following terms
shall have the meanings indicated:
Board: The Board of Directors of the Company.
Change in Control: A Change in Control shall be
deemed to have occurred if either (a) any person, or any two
or more persons acting as a group, and all affiliates of
such person or persons, shall own beneficially more than 20%
of the Common Stock outstanding (exclusive of shares held in
the Company's treasury or by the Company's Subsidiaries)
pursuant to a tender offer, exchange offer or series of
purchases or other acquisitions, or any combination of those
transactions, or (b) there shall be a change in the
composition of the Board at any time within two years after
any tender offer, exchange offer, merger, consolidation,
sale of assets or contested election, or any combination of
those transactions (a "Transaction"), so that (i) the
persons who were directors of the Company immediately before
the first such Transaction cease to constitute a majority of
the Board of Directors of the corporation which shall
thereafter be in control of the companies that were parties
to or otherwise involved in such Transaction, or (ii) the
number of persons who shall thereafter be directors of such
corporation shall be fewer than two-thirds of the number of
directors of the Company immediately prior to such first
Transaction. A Change in Control shall be deemed to take
place upon the first to occur of the events specified in the
foregoing clauses (a) and (b).
Code: The Internal Revenue Code of 1986, as
amended from time to time.
Committee: A committee of the Board designated by
the Board to administer the Plan and composed of not fewer
than two directors, each of whom, to the extent necessary to
comply with Rule 16b-3 only, is a "non-employee director"
within the meaning of Rule 16b-3 and, to the extent
necessary to comply with Section 162(m) only, is an "outside
director" under Section 162(m). Until otherwise determined
by the Board, the Committee shall be the Corporate Personnel
Committee of the Board.
Election Period: The period beginning on the
third business day following a date on which the Company
releases for publication its quarterly or annual summary
statements of sales and earnings, and ending on the twelfth
business day following such date.
Eligible Director: A director of the Company who
is not, and within the preceding one year has not been, an
officer or an employee of the Company or a Subsidiary, an
officer or an employee of an entity with which the Company
has contracted to receive Management Services, or otherwise
eligible for selection to participate in any plan of the
Company or any Subsidiary that entitles the participants
therein to acquire stock, stock options or stock
appreciation rights of the Company or its Subsidiaries.
Exchange Act: The Securities Exchange Act of
1934, as amended from time to time.
Fair Market Value: The average of the per Share
high and low quoted sale prices on the date in question (or,
if there is no reported sale on such date, on the last
preceding date on which any reported sale occurred) on the
principal exchange or market on which such Shares are
quoted.
Option Cancellation Gain: With respect to the
cancellation of an Option pursuant to Section 3 of Article
IV hereof, the excess of the Fair Market Value as of the
Option Cancellation Date (as that term is defined in Section
3 of Article IV hereof) of all the outstanding Shares
covered by such Option, whether or not then exercisable,
over the purchase price of such Shares under such Option.
Rule 16b-3: Rule 16b-3 promulgated by the SEC
under the Exchange Act, or any successor rule or regulation
thereto as in effect from time to time.
SEC: The Securities and Exchange Commission,
including the staff thereof, or any successor thereto.
Section 162(m): Section 162(m) of the Code and
all regulations promulgated thereunder as in effect from
time to time.
Shares: Shares of common stock, par value $0.01
per share, of the Company (including any attached Preferred
Stock Purchase Rights).
Subsidiary: Any corporation of which stock
representing at least 50% of the ordinary voting power is
owned, directly or indirectly, by the Company; and any other
entity of which equity securities or interests representing
at least 50% of the ordinary voting power or 50% of the
total value of all classes of equity securities or interests
of such entity are owned, directly or indirectly, by the
Company.
ARTICLE III
ADMINISTRATION OF THE PLAN
This Plan shall be administered by the Board. The
Board will interpret this Plan and may from time to time
adopt such rules and regulations for carrying out the terms
and provisions of this Plan as it may deem best; however,
the Board shall have no discretion with respect to the
selection of directors who receive Options, the timing of
the grant of Options, the number of Shares subject to any
Options or the purchase price thereof. Notwithstanding the
foregoing, the Committee shall have the authority to make
all determinations with respect to the transferability of
Options in accordance with Article VIII hereof. All
determinations by the Board or the Committee shall be made
by the affirmative vote of a majority of its respective
members, but any determination reduced to writing and signed
by a majority of its respective members shall be fully as
effective as if it had been made by a majority vote at a
meeting duly called and held. Subject to any applicable
provisions of the Company's By-Laws or of this Plan, all
determinations by the Board and the Committee pursuant to
the provisions of this Plan, and all related orders or
resolutions of the Board and the Committee, shall be final,
conclusive and binding on all persons, including the Company
and its stockholders, employees, directors and optionees.
In the event of any conflict or inconsistency between
determinations, orders, resolutions, or other actions of the
Committee and the Board taken in connection with this Plan,
the action of the Board shall control.
ARTICLE IV
STOCK SUBJECT TO THE PLAN
SECTION 1. The Shares to be issued or delivered
upon exercise of Options shall be made available, at the
discretion of the Board, either from the authorized but
unissued Shares of the Company or from Shares reacquired by
the Company, including Shares purchased by the Company in
the open market or otherwise obtained; provided, however,
that the Company, at the discretion of the Board, may, upon
exercise of Options granted under this Plan, cause a
Subsidiary to deliver Shares held by such Subsidiary.
SECTION 2. Subject to the provisions of Section 3
of this Article IV, the aggregate number of Shares which may
be purchased pursuant to Options shall not exceed 250,000.
SECTION 3. In the event of the payment of any
dividends payable in Shares, or in the event of any
subdivision or combination of the Shares, the number of
Shares which may be purchased under this Plan, and the
number of Shares subject to each Option granted in
accordance with Section 2 of Article VII, shall be increased
or decreased proportionately, as the case may be, and the
number of Shares deliverable upon the exercise thereafter of
any Option theretofore granted (whether or not then
exercisable) shall be increased or decreased
proportionately, as the case may be, without change in the
aggregate purchase price. In the event the Company is
merged or consolidated into or with another corporation in a
transaction in which the Company is not the survivor, or in
the event that substantially all of the Company's assets are
sold to another entity not affiliated with the Company, any
holder of an Option, whether or not then exercisable, shall
be entitled to receive (unless the Company shall take such
alternative action as may be necessary to preserve the
economic benefit of the Option for the optionee) on the
effective date of any such transaction (the "Option
Cancellation Date"), in cancellation of such Option, an
amount in cash equal to the Option Cancellation Gain
relating thereto, determined as of the Option Cancellation
Date.
ARTICLE V
PURCHASE PRICE OF OPTIONED SHARES
The purchase price per Share under each Option
shall be 100% of the Fair Market Value of a Share at the
time such Option is granted, but in no case shall such price
be less than the par value of the Shares subject to such
Option.
ARTICLE VI
ELIGIBILITY OF RECIPIENTS
Options will be granted only to individuals who
are Eligible Directors at the time of such grant.
ARTICLE VII
GRANT OF OPTIONS
SECTION 1. Each Option shall constitute a
nonqualified stock option which is not intended to qualify
under Section 422 of the Code.
SECTION 2. On June 1, 1994 and June 1 of each
subsequent year through and including 2003, each Eligible
Director, as of each such date, shall be granted an Option
to purchase 1,656 Shares. Each Option shall become
exercisable with respect to 414 Shares on each of the first,
second, third and fourth anniversaries of the date of grant
and may be exercised by the holder thereof with respect to
all or any part of the Shares comprising each installment as
such holder may elect at any time after such installment
becomes exercisable but no later than the termination date
of such Option; provided that each Option shall become
exercisable in full upon a Change in Control.
SECTION 3. The purchase price of Shares subject
to any Option shall be the Fair Market Value thereof on the
respective date of grant.
ARTICLE VIII
TRANSFERABILITY OF OPTIONS
No Options granted hereunder may be transferred,
pledged, assigned or otherwise encumbered by an optionee
except:
(a) by will;
(b) by the laws of descent and distribution; or
(c) if permitted by the Committee and so provided
in the Option or an amendment thereto, (i) pursuant to
a domestic relations order, as defined in the Code,
(ii) to Immediate Family Members, (iii) to a
partnership in which Immediate Family Members, or
entities in which Immediate Family Members are the sole
owners, members or beneficiaries, as appropriate, are
the only partners, (iv) to a limited liability company
in which Immediate Family Members, or entities in which
Immediate Family Members are the sole owners, members
or beneficiaries, as appropriate, are the only members,
or (v) to a trust for the sole benefit of Immediate
Family Members. "Immediate Family Members" shall be
defined as the spouse and natural or adopted children
or grandchildren of the optionee and their spouses.
Any attempted assignment, transfer, pledge, hypothecation or
other disposition of Options, or levy of attachment or
similar process upon Options not specifically permitted
herein, shall be null and void and without effect.
ARTICLE IX
EXERCISE OF OPTIONS
SECTION 1. Each Option shall terminate 10 years
after the date on which it was granted.
SECTION 2. Except in cases provided for in
Article X hereof, each Option may be exercised by the holder
thereof only while the optionee to whom such Option was
granted is an Eligible Director.
SECTION 3. Each Option shall provide that the
Option or any portion thereof may be exercised only during
an Election Period. Each Option shall provide, however,
that in the event of a Change in Control, the Election
Period exercise requirement is waived.
SECTION 4. A person electing to exercise an
Option or any portion thereof then exercisable shall give
written notice to the Company of such election and of the
number of Shares such person has elected to purchase, and
shall at the time of purchase tender the full purchase price
of such Shares, which tender shall be made in cash or cash
equivalent (which may be such person's personal check) or in
Shares already owned by such person (which Shares shall be
valued for such purpose on the basis of their Fair Market
Value on the date of exercise), or in any combination
thereof. The Company shall have no obligation to deliver
Shares pursuant to the exercise of any Option, in whole or
in part, until such payment in full of the purchase price of
such Shares is received by the Company. No optionee, or
legal representative, legatee, distributee, or assignee of
such optionee shall be or be deemed to be a holder of any
Shares subject to such Option or entitled to any rights of a
stockholder of the Company in respect of any Shares covered
by such Option distributable in connection therewith until
such Shares have been paid for in full and certificates for
such Shares have been issued or delivered by the Company.
SECTION 5. Each Option shall be subject to the
requirement that if at any time the Board shall be advised
by counsel that the listing, registration or qualification
of the Shares subject to such Option upon any securities
exchange or under any state or federal law, or the consent
or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection
with, the granting of such Option or the issue or purchase
of Shares thereunder, such Option may not be exercised in
whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected
or obtained free from any conditions not reasonably
acceptable to such counsel for the Board.
SECTION 6. The Company may establish appropriate
procedures to provide for payment or withholding of such
income or other taxes as may be required by law to be paid
or withheld in connection with the exercise of Options, and
to ensure that the Company receives prompt advice concerning
the occurrence of any event which may create, or affect the
timing or amount of, any obligation to pay or withhold any
such taxes or which may make available to the Company any
tax deduction resulting from the occurrence of such event.
ARTICLE X
TERMINATION OF SERVICE
AS AN ELIGIBLE DIRECTOR
SECTION 1. If and when an optionee shall cease to
be an Eligible Director for any reason other than death or
retirement from the Board, all of the Options granted to
such optionee shall be terminated except that any Option,
to the extent then exercisable, may be exercised by the
holder thereof within three months after such optionee
ceases to be an Eligible Director, but not later than the
termination date of the Option.
SECTION 2. If and when an optionee shall cease to
be an Eligible Director by reason of the optionee's
retirement from the Board, all of the Options granted to
such optionee shall be terminated except that any Option, to
the extent then exercisable or exercisable within one year
thereafter, may be exercised by the holder thereof within
three years after such retirement, but not later than the
termination date of the Option.
SECTION 3. Should an optionee die while serving
as an Eligible Director, all the Options granted to such
optionee shall be terminated, except that any Option to the
extent exercisable by the holder thereof at the time of
such death, together with the unmatured installment (if any)
of such Option which at that time is next scheduled to
become exercisable, may be exercised within one year after
the date of such death, but not later than the termination
date of the Option, by the holder thereof, the optionee's
estate, or the person designated in the optionee's last will
and testament, as appropriate.
SECTION 4. Should an optionee die after ceasing
to be an Eligible Director, all of the Options granted to
such optionee shall be terminated, except that any Option,
to the extent exercisable by the holder thereof at the time
of such death, may be exercised within one year after the
date of such death, but not later than the termination date
of the Option, by the holder thereof, the optionee's estate,
or the person designated in the optionee's last will and
testament, as appropriate.
ARTICLE XI
AMENDMENTS TO PLAN AND OPTIONS
The Board may at any time terminate or from time
to time amend, modify or suspend this Plan; provided,
however, that no such amendment or modification without the
approval of the stockholders shall:
(a) except pursuant to Section 3 of Article IV,
increase the maximum number (determined as provided in
this Plan) of Shares which may be purchased pursuant to
Options, either individually or in aggregate;
(b) permit the granting of any Option at a
purchase price other than 100% of the Fair Market Value
of the Shares at the time such Option is granted,
subject to adjustment pursuant to Section 3 of
Article IV;
(c) permit the exercise of an Option unless the
full purchase price of the Shares as to which the
Option is exercised is paid at the time of exercise;
(d) extend beyond June 1, 2003 the period during
which Options may be granted;
(e) modify in any respect the class of
individuals who constitute Eligible Directors; or
(f) materially increase the benefits accruing to
participants hereunder.
As amended effective December 10,1996
Exhibit 10.11
[McMoRan Letterhead]
February 28, 1997
Mr. Robert M. Wohleber
Freeport-McMoRan Resource Partners
1615 Poydras Street
New Orleans, LA 70112
re: OCS Lease Sale No. 166
Dear Mr. Wohleber:
This will confirm our telephone conversation whereby we
discussed the participation of Freeport-McMoRan Resource
Partners ("FMRP") in the several bids that McMoRan Oil & Gas
Co. ("MOXY") proposes to submit at the captioned lease sale
to be held on March 5, 1997. This letter agreement will not
apply to any blocks that lie within an area of mutual
interest between MOXY and CoEnergy Central Exploration, Inc.
FMRP has agreed to participate in such proposed bids on the
following basis:
1. Any lease acquired by such bids will be owned
equally by MOXY and FMRP.
2. FMRP will bear 60% and MOXY will bear 40% of all
costs involved in generating such bids and/or
acquiring leases thereon. Such costs will include
related general and administrative costs,
geological and geophysical costs and the bonus
cost and first year rental of any leases so
acquired at such lease sale.
3. The expenditure anticipated to be incurred in
attempting to acquire these leases is estimated to
be in the range of $9,000,000.00 and such
expenditure shall not exceed $10,000,000.00
without further review by FMRP.
4. The cost and ownership relating to these leases
will be handled in substantially the same manner
as set forth in the proposed MOXY 1997
Participating Agreement for the acquisition of
leasehold interests, copy of which agreement we
recently provided to Roger Baker.
5. FMRP will promptly reimburse MOXY for its 60%
share of the costs and expenses described above.
6. Notwithstanding the foregoing, if MOXY acquires a
lease with a third party, the rights and
obligations of FMRP as to such lease will be
reduced in proportion to the interest acquired by
such third party.
If this is in accordance with your understanding,
please so indicate by signing and returning to us one copy
of this letter agreement.
McMoRan Oil & Gas Co.
By: /s/ Glenn A. Kleinert
__________________________
Glenn A. Kleinert
Agreed to and accepted this 1st
day of March 1997
Freeport-McMoRan Resource Partners
By: /s/ Robert M. Wohleber By: /s/ Rene Latiolais
_____________________________ __________________________
Robert M. Wohleber Rene Latiolais
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporated by reference of our reports included herein or incorporated
by reference in this Form 10-K, into McMoRan Oil & Gas Co.'s previously
filed Registration Statements on Form S-8 (File Nos. 33-82866, 33-80369,
33-80371, and 33-99828).
/s/ Arthur Andersen LLP
Arthur Andersen LLP
New Orleans, Louisiana
March 24, 1997
Exhibit 23.2
CONSENT OF INDEPENDENT RESERVE ENGINEER
We consent to the use in this Form 10-K by McMoRan Oil & Gas Co. of our
reserve report as of December 31, 1996 and to the references made to us in the
Form 10-K.
CRESCENT TECHNOLOGY, INC.
/s/ James A. Glanzer
By:__________________________
3/19/97
Date: _________________________
Exhibit 24.1
McMoRan OIL & GAS Co.
Certificate of Secretary
________________________
I, Michel C. Kilanowski, Jr., Secretary of McMoRan Oil & Gas Co. (the
"Corporation"), a Delaware corporation, do hereby certify that the following
resolution was duly adopted by the Board of Directors of the Corporation at a
meeting held on January 31, 1995, and that such resolution has not been
amended, modified or rescinded and is in full force and effect:
RESOLVED, that any report, registration statement or
other form filed on behalf of this corporation pursuant
to the Securities and Exchange Act of 1934, or any
amendment to any such report, registration statement or
other form, may be signed on behalf of any director or
officer of this corporation pursuant to a power of
attorney executed by such director or officer.
IN WITNESS WHEREOF, I have hereunto set my name and the seal of the
Corporation this 19th day of March, 1996.
/s/ Michael C. Kilanowski, Jr.
_______________________________
Michael C. Kilanowski, Jr.
Secretary
Exhibit 24.2
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint RICHARD C. ADKERSON and C. HOWARD MURRISH, and
each of them acting individually, his true and lawful
attorney-in-fact with power to act without the others and
with full power of substitution, to execute, deliver and
file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the
Company on Form 10-K for the year ended December 31, 1996,
and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of
them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and
things which said attorney or attorneys may do or cause to
be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ James R. Moffett
_____________________
James R. Moffett
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint JAMES R. MOFFETT and C. HOWARD MURRISH, and each
of them acting individually, his true and lawful attorney-
in-fact with power to act without the others and with full
power of substitution, to execute, deliver and file, for and
on behalf of him, in his name and in his capacity or
capacities as aforesaid, an Annual Report of the Company on
Form 10-K for the year ended December 31, 1996, and any
amendment or amendments thereto and any other document in
support thereof or supplemental thereto, and the undersigned
hereby grants to said attorneys, and each of them, full
power and authority to do and perform each and every act and
thing whatsoever that said attorney or attorneys may deem
necessary or advisable to carry out fully the intent of the
foregoing as the undersigned might or could do personally or
in the capacity or capacities as aforesaid, hereby ratifying
and confirming all acts and things which said attorney or
attorneys may do or cause to be done by virtue of this Power
of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Richard C. Adkerson
________________________
Richard C. Adkerson
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint JAMES R. MOFFETT and RICHARD C. ADKERSON and
each of them acting individually, his true and lawful
attorney-in-fact with power to act without the others and
with full power of substitution, to execute, deliver and
file, for and on behalf of him, in his name and in his
capacity or capacities as aforesaid, an Annual Report of the
Company on Form 10-K for the year ended December 31, 1996,
and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of
them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and
things which said attorney or attorneys may do or cause to
be done by virtue of this Power of Attorney.
EXECUTED this 4TH day of February, 1997.
/s/ C. Howard Murrish
______________________
C. Howard Murrish
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint JAMES R. MOFFETT, RICHARD C. ADKERSON and C.
HOWARD MURRISH, and each of them acting individually, his
true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and
in his capacity or capacities as aforesaid, an Annual Report
of the Company on Form 10-K for the year ended December 31,
1996, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of
them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and
things which said attorney or attorneys may do or cause to
be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ William J. Blackwell
_________________________
William J. Blackwell
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint JAMES R. MOFFETT, RICHARD C. ADKERSON and C.
HOWARD MURRISH, and each of them acting individually, his
true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and
in his capacity or capacities as aforesaid, an Annual Report
of the Company on Form 10-K for the year ended December 31,
1996, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of
them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and
things which said attorney or attorneys may do or cause to
be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Robert W. Bruce III
________________________
Robert W. Bruce III
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint JAMES R. MOFFETT, RICHARD C. ADKERSON and C.
HOWARD MURRISH, and each of them acting individually, his
true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and
in his capacity or capacities as aforesaid, an Annual Report
of the Company on Form 10-K for the year ended December 31,
1996, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of
them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and
things which said attorney or attorneys may do or cause to
be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Robert A. Day
______________________
Robert A. Day
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint JAMES R. MOFFETT, RICHARD C. ADKERSON and C.
HOWARD MURRISH, and each of them acting individually, his
true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and
in his capacity or capacities as aforesaid, an Annual Report
of the Company on Form 10-K for the year ended December 31,
1996, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of
them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and
things which said attorney or attorneys may do or cause to
be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ William B. Harrison, Jr.
______________________________
William B. Harrison, Jr.
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint JAMES R. MOFFETT, RICHARD C. ADKERSON and C.
HOWARD MURRISH, and each of them acting individually, his
true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and
in his capacity or capacities as aforesaid, an Annual Report
of the Company on Form 10-K for the year ended December 31,
1996, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of
them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and
things which said attorney or attorneys may do or cause to
be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Bobby Lee Lackey
________________________
Bobby Lee Lackey
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in her
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint JAMES R. MOFFETT, RICHARD C. ADKERSON and C.
HOWARD MURRISH, and each of them acting individually, her
true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute,
deliver and file, for and on behalf of her, in her name and
in her capacity or capacities as aforesaid, an Annual Report
of the Company on Form 10-K for the year ended December 31,
1996, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of
them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and
things which said attorney or attorneys may do or cause to
be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ Gabrielle K. McDonald
___________________________
Gabrielle K. McDonald
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint JAMES R. MOFFETT, RICHARD C. ADKERSON and C.
HOWARD MURRISH, and each of them acting individually, his
true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and
in his capacity or capacities as aforesaid, an Annual Report
of the Company on Form 10-K for the year ended December 31,
1996, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of
them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and
things which said attorney or attorneys may do or cause to
be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ George Putnam
_____________________
George Putnam
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint JAMES R. MOFFETT, RICHARD C. ADKERSON and C.
HOWARD MURRISH, and each of them acting individually, his
true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and
in his capacity or capacities as aforesaid, an Annual Report
of the Company on Form 10-K for the year ended December 31,
1996, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of
them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and
things which said attorney or attorneys may do or cause to
be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ B.M. Rankin, Jr.
________________________
B.M. Rankin, Jr.
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN: That the undersigned, in his
capacity or capacities as an officer and/or a member of the
Board of Directors of McMoRan Oil & Gas Co., a Delaware
corporation (the "Company"), does hereby make, constitute
and appoint JAMES R. MOFFETT, RICHARD C. ADKERSON and C.
HOWARD MURRISH, and each of them acting individually, his
true and lawful attorney-in-fact with power to act without
the others and with full power of substitution, to execute,
deliver and file, for and on behalf of him, in his name and
in his capacity or capacities as aforesaid, an Annual Report
of the Company on Form 10-K for the year ended December 31,
1996, and any amendment or amendments thereto and any other
document in support thereof or supplemental thereto, and the
undersigned hereby grants to said attorneys, and each of
them, full power and authority to do and perform each and
every act and thing whatsoever that said attorney or
attorneys may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or
could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and
things which said attorney or attorneys may do or cause to
be done by virtue of this Power of Attorney.
EXECUTED this 4th day of February, 1997.
/s/ J. Taylor Wharton
__________________________
J. Taylor Wharton
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 10,500,000
<SECURITIES> 0
<RECEIVABLES> 1,244,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,749,000
<PP&E> 19,514,000
<DEPRECIATION> (1,283,000)
<TOTAL-ASSETS> 30,980,000
<CURRENT-LIABILITIES> 9,777,000
<BONDS> 12,391,000
0
0
<COMMON> 140,000
<OTHER-SE> 8,106,000
<TOTAL-LIABILITY-AND-EQUITY> 30,980,000
<SALES> 4,070,000
<TOTAL-REVENUES> 4,070,000
<CGS> 1,500,000
<TOTAL-COSTS> 1,500,000
<OTHER-EXPENSES> 9,818,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 403,000
<INCOME-PRETAX> (9,862,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,862,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,862,000)
<EPS-PRIMARY> (0.71)
<EPS-DILUTED> 0
</TABLE>
