SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1998
Commission File Number: 0-23870
McMoRan Oil & Gas Co.
Incorporated in Delaware 72-1266477
(IRS Employer Identification No.)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
On June 30, 1998, there were issued and outstanding 42,887,380
shares of the registrant's Common Stock, par value $0.01 per
share.
McMoRan Oil & Gas Co.
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets 3
Statements of Operations 4
Statements of Cash Flow 5
Notes to Financial Statements 6
Remarks 6
Report of Independent Public Accountants 7
Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
Part II. Other Information 12
Signature 14
Exhibit Index E-1
<PAGE> 2
McMoRan Oil & Gas Co.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
McMoRan OIL & GAS CO.
CONDENSED BALANCE SHEETS (Unaudited)
June 30, December 31,
1998 1997
-------- ----------
(In Thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 19,355 $ 29,149
Accounts receivable and other 11,488 14,065
-------- ----------
Total current assets 30,843 43,214
Property, plant and equipment, net 67,489 57,705
Other assets 166 169
-------- ----------
Total assets $ 98,498 $ 101,088
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 19,777 $ 9,465
Other long-term liabilities 2,348 925
Stockholders' equity 76,373 90,698
-------- ----------
Total liabilities and stockholders' equity $ 98,498 $ 101,088
======== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 3
<TABLE>
<CAPTION>
McMoRan OIL & GAS CO.
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
(In Thousands,Except Per Share Amounts)
<S> <C> <C> <C> <C>
Revenues:
Oil and Gas Revenue $ 5,999 $ 1,839 $ 11,778 $ 4,203
Other - 409 - 818
-------- -------- -------- --------
Total revenues 5,999 2,248 11,778 5,021
Costs and expenses:
Depreciation and amortization 5,763 2,965 10,970 4,822
Production and delivery costs 832 387 1,811 490
Exploration expenses 6,174 1,822 12,258 4,272
General and administrative expenses 1,419 555 2,349 1,178
Gain on sale of oil and gas property - (2,289) - (2,289)
-------- -------- -------- --------
Total costs and expenses 14,188 3,440 27,388 8,473
-------- -------- -------- --------
Operating loss (8,189) (1,192) (15,610) (3,452)
Interest Expense - (321) - (681)
Other Income, net 331 118 732 249
-------- -------- -------- --------
Net Loss $ (7,858) $ (1,395) $(14,878) $ (3,884)
======== ======== ======== ========
Basic and diluted, net loss per share $(0.18) $(0.10) $(0.35) $(0.28)
====== ====== ====== ======
Basic and diluted, average shares
outstanding 42,862 14,063 42,816 14,044
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 4
<TABLE>
<CAPTION>
McMoRan OIL & GAS CO.
STATEMENTS OF CASH FLOW (Unaudited)
Six Months Ended
June 30,
----------------------
1998 1997
-------- --------
(In Thousands)
<S> <C> <C>
Cash flow from operating activities:
Net loss $(14,878) $ (3,884)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 10,970 4,822
Exploration expenses 12,258 4,272
Gain on sale of oil and gas property - (2,289)
Net decrease in working capital and other 9,796 1,427
-------- --------
Net cash provided by operating activities 18,146 4,348
-------- --------
Cash flow from investing activities:
Exploration and development expenditures (27,940) (10,454)
Proceeds from sale of oil and gas interest - 2,884
-------- --------
Net cash used in investing activities (27,940) (7,570)
-------- --------
Cash flow from financing activities:
Proceeds from production loan - 4,741
Payments on production loan - (4,877)
-------- --------
Net cash used by financing activities - (136)
-------- --------
Net decrease in cash and cash equivalents (9,794) (3,358)
Cash and cash equivalents at beginning of year 29,149 10,500
-------- --------
Cash and cash equivalents at end of period $ 19,355 $ 7,142
======== ========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 5
McMoRan OIL & GAS CO.
NOTES TO FINANCIAL STATEMENTS
1.NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) 128,
"Earnings Per Share," which simplifies the computation of
earnings per share (EPS). McMoRan Oil & Gas Co. (MOXY) adopted
SFAS 128 in the fourth quarter of 1997 and restated prior years'
EPS data as required by SFAS 128.
Basic net loss per share of common stock was calculated by
dividing net loss applicable to common stock by the weighted-
average number of common shares outstanding during the period.
MOXY had approximately 1,348,000 and 99,000 options outstanding
during the second quarter of 1998 and 1997, respectively, and
1,050,000 and 94,000 options outstanding during the six-month
periods ended June 30, 1998 and 1997, respectively, that
otherwise would have been includable in the calculation of
diluted earnings per share but were excluded as anti-dilutive
considering the losses incurred during the periods presented.
Outstanding options to purchase approximately 286,000 and
1,530,000 shares of common stock at average exercise prices of
$5.06 and $4.24 for the second quarter of 1998 and 1997,
respectively, and outstanding options to purchase 328,000 and
1,544,000 shares of common stock at average exercise prices of
$4.94 and $4.23 for the six months ended June 30, 1998 and 1997,
respectively, were not included in the computation of diluted EPS
because exercise prices were greater than the average market
price for the periods presented.
In June 1998, the FASB issued SFAS 133, "Accounting for
Derivative Instruments and Hedging Activity," which establishes
accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. SFAS 133
is effective for fiscal years beginning after June 15, 1999 with
earlier application permitted beginning as early as July 1, 1998.
As MOXY does not currently have any derivative instruments
adoption of this standard would not have any impact on its
financial statements, financial position or results of
operations.
2. SUBSEQUENT EVENT
On August 3, 1998 MOXY and Freeport-McMoRan Sulphur Inc. (FSC)
announced that they had signed a definitive agreement to combine
their operations. In the proposed transaction, a new holding
company, McMoRan Exploration Co.(McMoRan), would issue approximately
6.1 million McMoRan common shares in exchange for all of FSC's
common shares and approximately 8.6 million McMoRan common shares
in exchange for all of MOXY's common shares. FSC shareholders
would receive 0.625 McMoRan shares for each common share of FSC
outstanding and MOXY shareholders would receive 0.20 McMoRan shares
for each common share of MOXY outstanding. Immediately following
the transaction, McMoRan would have approximately 14.7 million
common shares outstanding that would be owned approximately 58.5
percent by MOXY's existing common shareholders and approximately
41.5 percent by FSC's existing common shareholders. McMoRan's Board of
Directors and executive management will include current members
of the Board of Directors and executive management of both MOXY
and FSC. The transaction would be tax-free with respect to both
MOXY and FSC shareholders and will be reported on the basis of
purchase accounting, reflecting MOXY as the acquiring entity.
The completion of the merger transaction is subject to approval
by MOXY and FSC shareholders and applicable regulatory approvals.
-----------------
Remarks
The information furnished herein should be read in conjunction
with MOXY's financial statements contained in its 1997 Annual
Report to stockholders and included in its Annual Report on Form
10-K.
The information furnished herein reflects all adjustments which
are, in the opinion of management, necessary for a fair statement
of the results for the periods. All such adjustments are, in the
opinion of management, of a normal recurring nature.
<PAGE> 6
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of McMoRan Oil & Gas
Co.:
We have reviewed the accompanying condensed balance sheet of
McMoRan Oil & Gas Co. (a Delaware corporation) as of June 30,
1998, and the related statements of operations for the three and
six-month periods ended June 30, 1998 and 1997 and the statements
of cash flow for the six-month periods ended June 30, 1998 and
1997. These financial statements are the responsibility of the
company's management.
We conducted our reviews in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the financial statements
referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the balance sheet of McMoRan Oil & Gas Co. as
of December 31, 1997, and the related statements of operations,
stockholders' equity and cash flow for the year then ended (not
presented herein), and, in our report dated January 20, 1998, we
expressed an unqualified opinion on those financial statements.
In our opinion, the information set forth in the accompanying
condensed balance sheet as of December 31, 1997, is fairly
stated, in all material respects, in relation to the balance
sheet from which it has been derived.
ARTHUR ANDERSEN LLP
New Orleans, Louisiana
July 21, 1998 (except with
respect to Note 2, as to which
the date is August 3, 1998)
<PAGE> 7
Item 2.Management's Discussion and Analysis of Financial
Condition and Results of Operations.
OVERVIEW
McMoRan Oil & Gas Co. (MOXY) is engaged in the exploration,
development and production of oil and natural gas. MOXY and its
predecessors have conducted exploration, development and
production operations offshore in the Gulf of Mexico and onshore
in the Gulf Coast region and other areas for more than 25 years,
which has provided MOXY an extensive geological and geophysical
data base and significant technical and operational expertise.
MOXY expects to continue to concentrate its efforts in this
selected geographic area where its management team has
significant exploration experience.
MOXY's business strategy is to create value for its
stockholders through the discovery of oil and gas reserves in its
exploration and development activities. Management believes
MOXY's significant opportunities to discover meaningful oil and
gas reserves can best be achieved through the use of advanced 3-D
seismic technology, applied in conjunction with a multi-year
exploration program (see "Capital Resources and Liquidity"
below). Moreover, MOXY believes that its acquisitions of 3-D
seismic data will continue to improve its ability to interpret
subsurface geology and allow it to continue to develop an
inventory of high-quality prospects which it can pursue at lease
sales and through farm-in opportunities offshore in the Gulf of
Mexico and onshore in the Gulf Coast area.
OPERATIONAL ACTIVITIES
Recent operational activities are as follows:
. MOXY's net daily production at the Vermilion Block 160 field
unit averaged approximately 12 million cubic feet (Mmcf) of
gas and 306 barrels of oil per day during the second quarter
of 1998. MOXY has a 25.5 percent net revenue interest,
subject to an approximate 2.6 percent net profits interest, in
the Vermilion 160 field unit. The Vermilion Block 160 field
unit is located in approximately 100 feet of water, 42 miles
offshore Louisiana.
. A substructure was installed in late June 1998, and the
fabrication of a deck with processing facilities continue for
the Vermilion Block 160 #4 sidetrack development well, located
outside the currently producing Vermilion Block 160 field
unit. The processing facilities are being designed to handle
up to 60 Mmcf/day in order to accommodate production from both
the Vermilion Block 160 #4 sidetrack well and the Vermilion
Block 159 #3 exploratory well (discussed below). Production
from these wells are anticipated to commence by early 1999 at
a combined gross rate of approximately 40 equivalent Mmcf/day.
MOXY has a 58 percent net revenue interest in the #4 sidetrack
well, subject to a 12.7 percent net profits interest. The
Vermilion Block 160 #4 sidetrack well is located in approximately
100 feet of water, 42 miles offshore Lousiana.
. MOXY's net daily production at the Vermilion Block 410 field
averaged 15 Mmcf of gas during the second quarter of 1998.
MOXY has a 28.4 percent net revenue interest in the Vermilion
Block 410 field which includes portions of multiple blocks
totaling 11,015 acres and is located in approximately 360 feet
of water, 115 miles offshore Louisiana.
. Development of West Cameron Block 616 is proceeding as
scheduled. The offshore production platform, with facilities
designed for 75 Mmcf/day, is scheduled for installation in
early August 1998, with initial production anticipated in
November 1998, at a gross rate of approximately 70 Mmcf/day
from five well completions. MOXY, the operator, has a 50
percent working interest and an approximate 38 percent net
revenue interest in West Cameron Block 616, which covers 5,000
acres located in approximately 300 feet of water, 130 miles
offshore Louisiana.
. MOXY announced in April 1998 that the Brazos Block A-19 #2
well encountered hydrocarbons in a separate reservoir
compartment within the larger Picaroon Field area. The field
extension was defined by a 3-D seismic survey. Platform and
facility design work has begun with production expected in the
second half of 1999. The operator continues to evaluate the
field to determine the need for additional drilling. The #2
well was drilled to a total depth of 18,790 feet. MOXY has a
16.8 percent working interest and a 13.3 percent net revenue
interest in the field. Additionally, MOXY has a 48 percent
working interest in the adjacent Brazos Block A-26. The two
blocks cover 11,520 acres located in approximately 135 feet of
water, 35 miles offshore Texas.
<PAGE> 8
. In April 1998, drilling commenced on the Vermilion Block 159
#3 exploratory well. In May 1998, MOXY announced that the
well had encountered 80 true vertical feet of net hydrocarbon
pay in two sands logged between 13,566 feet and 13,870 feet.
MOXY, as operator, set protective pipe and continued drilling
to test additional objectives. The deeper drilling resulted in
discoveries of an additional 93 true vertical feet of net
hydrocarbon pay in three sands logged between 13,982 feet and
14,702 feet, bringing the well total to 173 true vertical feet
of net hydrocarbon pay in five sands. A substructure, deck
and test facility are planned to be installed to allow initial
production to commence by early 1999. Production will be
processed at the Vermilion Block 160 #4 sidetrack facility, as
discussed above. MOXY has a 48 percent working interest and a
33.8 percent net revenue interest in the Vermilion Block 159
#3 area, encompassing 3,438 acres located in approximately 90
feet of water, 42 miles offshore Louisiana.
. In April 1998, MOXY's West Cameron Block 617 #1 exploratory
well encountered approximately 306 true vertical feet of net
gas pay in eight sands logged above 7,919 feet true vertical
depth. The West Cameron Block 617 #2 exploratory well
commenced drilling in April 1998 to test an adjacent fault
block. The well was drilled to a measured depth of 9,670 feet
and was plugged and abandoned. Related costs of approximately
$0.7 million were charged to income in the second-quarter.
Evaluation of the field continues. MOXY has a 24 percent
working interest and a 19.2 percent net revenue interest in
West Cameron Block 617, which encompasses 5,000 acres located
in approximately 300 feet of water, 130 miles offshore
Louisiana.
. In May 1998, the Atchafalaya Bay exploratory well and the
Grand Isle Block 54 #1 exploratory well were plugged and
abandoned. As a result, charges to income in the second-quarter
were $2.4 million and $1.7 million, respectively, for these two
wells.
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS
Second Quarter Six Months
------------------- ---------------------
1998a 1997 1998a 1997
--------- ------- --------- ----------
<S> <C> <C> <C> <C>
Production volumes:
Gas (Mcf or
thousand cubic feet) 2,441,200 828,700 5,022,500 1,621,000
Oil (barrels) 27,900 3,800 62,600 9,400
Average realizations
Gas (per Mcf) $ 2.27 $ 2.11 $ 2.20 $ 2.44
Oil (per barrel) 12.58 19.61 14.52 21.89
</TABLE>
a. MOXY's net ownership interest in Vermilion Block 160
field unit revenues was reduced during the 1998 first
quarter as a result of a redetermination of
participants' interest in the unit. The 1998 production
quantities shown above reflect MOXY's adjusted net
revenue interest for the periods. Additionally, six-
month 1998 revenues were reduced by $486,000 to reflect
reductions to MOXY's share of production volumes
recorded prior to 1998 (150,400 mcf of gas and 6,200
barrels of oil). These volume adjustments are not
reflected in the table above.
MOXY's revenues for the second quarter and six months of
1998 increased to $6.0 million and $11.8 million, respectively,
compared to revenues of $2.2 million and $5.0 million for the
same periods of 1997. The significant increases are primarily
because MOXY purchased additional net revenue interests in
Vermilion Blocks 160 and 410 (see "Capital Resources and
Liquidity" below) and from a substantial increase in production
of natural gas and oil over last year's levels at Vermilion Block
160 as a result of three additional wells commencing production
during the fourth quarter of 1997. The increases in revenues
were partially offset by declining natural gas and oil market
prices throughout the first six months of 1998, as well as
recording the cumulative adjustment for production prior to 1998
for the redetermination of ownership interest in Vermilion Block
160, which reduced combined revenues from gas and oil by
approximately $486,000 during the first quarter of 1998.
Depreciation and amortization increased to $5.8 million and
$11.0 million for the second quarter and six month periods of
1998, from $3.0 million and $4.8 million for the comparable
periods of 1997. The increase resulted from the increased
production volumes, together with increased depreciable
capitalized costs incurred since the 1997 first quarter.
<PAGE> 9
Production and delivery cost for the second quarter and six
months ended June 30, 1998 increased to $0.8 million and $1.8
million from $0.4 million and $0.5 million during the second
quarter and six months ended June 30, 1997 largely as a result of
the increased production volumes.
MOXY's exploration expenses fluctuate from period to period
based on the level, results and costs of exploratory drilling
activity. MOXY charged $4.8 million to expense for exploratory
drilling and leasehold costs associated with the Atchafalaya Bay,
the Grand Isle Block 54 #1 and the West Cameron Block 617 #2
exploratory wells during the second quarter of 1998, compared
with $0.1 million of exploratory drilling and leasehold costs
charged to expense in the second quarter of 1997. Exploratory
drilling and leasehold expense for the six months ended June 30,
1998 were $9.3 million, primarily from costs associated with
three exploratory wells mentioned above and the cost of the West
Cameron Block 157 #1 exploratory well charged to expense during
the first quarter of 1998, compared to $1.0 million of
exploratory drilling and leasehold cost charged to expense for
the six months ended June 30, 1997.
MOXY's interest expense decreased from $0.3 million and $0.7
million for the second quarter and six months of 1997,
respectively, to zero for the comparable periods of 1998. The
reduction reflects the repayment of the outstanding debt upon
completion of a rights offering in November 1997.
As a result of anticipated future exploration expenditures,
MOXY expects to continue to report operating losses for at least
the near future.
CAPITAL RESOURCES AND LIQUIDITY
Upon completion of the rights offering in November 1997,
MOXY realized net proceeds of $92.2 million from the sale of 28.6
million common shares, of which 3.8 million shares were purchased
by Phosphate Resource Partners Limited Partnership (PLP) for
$13.5 million pursuant to a stand-by agreement. MOXY used these
proceeds to retire all its existing debt ($20 million) and to
purchase additional interests in the Vermilion Blocks 160 and 410
fields ($24.5 million). The remaining proceeds provided MOXY with
a portion of the funding necessary to participate in the multi-
year $210 million MOXY Exploration Program. MOXY serves as
operator and selects all prospects and drilling opportunities
associated with the MOXY Exploration Program. Most of the
exploration expenses related to the MOXY Exploration Program will
be shared 37.6 percent by MOXY, 56.4 percent by PLP and 6 percent
by an individual investor, who is also a director of MOXY. All
revenues and other costs are shared 48 percent by MOXY, 47
percent by PLP and 5 percent by the individual investor.
The MOXY Exploration Program's annual budget imposes a $60
million limitation on exploratory costs. As of June 30, 1998,
the MOXY Exploration Program incurred or committed to
approximately $60 million of exploratory costs, as a result of
numerous drilling opportunities that became available during the
period. Accordingly, MOXY has no additional budgeted program
funds available for the remainder of 1998, unless it obtains the
written consent of the Exploration Program's other participants.
MOXY's operational activities during the second half of 1998
will focus primarily on developing its recent discoveries and
identifying new exploration prospects for 1999.
On May 18, 1998, IMC Global Inc. (IGL) and PLP filed suit
against four former directors of Freeport-McMoRan Inc. (FTX) and
MOXY. The plaintiffs alleged the defendants breached fiduciary
duties in the approval by FTX of the MOXY Exploration Program
discussed above. The plaintiffs seek unspecified monetary
damages and recission or equitable reformation of the program
agreement. Currently PLP continues to participate in the MOXY
Exploration Program, pursuant to its contractual agreement and is
current on payment due on its joint interest billings. For
further discussion on this and other litigation matters see Part
II, Item 1, "Legal Proceedings."
Cash provided by operating activities amounted to $18.1
million for the six months ended June 30, 1998 compared to $4.3
million for the comparable period last year. The operating cash
flow in 1998 reflects the significant accrued costs incurred with
the development of West Cameron Block 616, the exploratory
drilling costs associated with the successful wells at Brazos
Block A-19, Vermilion Block 159 and the unsuccessful Grand Isle
Block 54 well. Additionally, operating cash flow for the six
months ending June 30,1998 reflects the collection of outstanding
joint interest receivables.
<PAGE> 10
MOXY incurred $27.9 million of cash exploration and
development expenditures during the six months ended June 30,
1998, principally consisting of $15.5 million for capitalized
drilling costs primarily for the West Cameron Block 616 #5
development well, the facility costs associated with West Cameron
Block 616, platform and facility costs associated with the
Vermilion Block 160 #4 sidetrack; $9.3 million in drilling and
leasehold costs charged to expense, primarily relating to the
Atchafalaya Bay, the Grand Isle 54 #1, West Cameron Block 617 #2
and the West Cameron Block 157 #1 exploratory wells; and $3.1
million of geological and geophysical costs. MOXY has remaining
committed exploration and development expenditures of
approximately $18.5 million as of June 30, 1998, which are
expected to be funded by available cash, cash from operating
activities and by bank financing (see discussion below).
MOXY is currently negotiating a one-year, unsecured $15.0
million bank line of credit. The credit facility would be
available for general corporate purposes, and is intended
primarily to provide funding for any portion of MOXY's
development activities in excess of its available cash generated
from operations. Under the terms of the proposed agreement, MOXY
would be able to increase the size of the facility to $20 million
and extend its term subject to certain conditions, including
providing security for the facility. Borrowings under the
facility would be subject to a borrowing based to be redetermined
semiannually and interest rates would vary based on prevailing
rates and the amounts borrowed. MOXY expects to close the
facility during the third quarter.
On August 3, 1998, MOXY and Freeport-McMoRan Sulphur Inc.
announced they had signed a definitive agreement to combine their
operations (see Note 2). MOXY's merger with FSC is expected to
be completed during the fourth quarter of 1998, subject to
approval by shareholders of MOXY and FSC and applicable
regulatory agencies.
CAUTIONARY STATEMENT
Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements
regarding plans and objectives of MOXY's management for future
operations and MOXY's exploration and development activities.
Important factors that may cause actual results to differ
materially from MOXY's expectations include drilling results,
unanticipated fluctuations in flow rates of producing wells,
depletion rates, economic and business conditions, general
development risks and hazards and risks inherent with the
production of oil and gas, such as fires, natural disasters,
blowouts and the encountering of formations with abnormal
pressures, changes in laws or regulations and other factors, many
of which are beyond the control of MOXY and other factors as
described in more detail under the heading "Cautionary
Statements" in MOXY's Form 10-K for the year ended December 31,
1997.
_________________________
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
<PAGE> 11
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
IMC Global Inc. and Phosphate Resource Partners Limited Partnership
vs. James R. Moffett, Richard C. Adkerson, B.M. Rankin, Henry A.
Kissinger and McMoRan Oil & Gas Co., Civ. Act No. 16387-NC (Del.
Ch. filed May 18, 1998). On May 18, 1998 IMC Global Inc. (IGL)
and Phosphate Resource Partners Limited Partnership (PLP) filed a
lawsuit in the Delaware Chancery Court of New Castle County against
MOXY, and four former directors of Freeport-McMoRan (FTX), which
merged into IGL in December of 1997. The plaintiffs allege that
the individual defendants breached fiduciary duties in the approval
by FTX of a joint oil and gas exploration program between MOXY and
PLP, entered into pursuant to an agreement dated July 14, 1997. At
the time of that approval, FTX was the administrative managing
general partner of PLP, the individual defendants were directors of
FTX, and three of those individuals were directors of MOXY. The suit
also alleges that MOXY conspired with the individual defendants
and aided and abetted their alleged breach of fiduciary duty. The
plaintiffs seek unspecified monetary damages and recision or
equitable reformation of the program agreement. MOXY intends to
vigorously defend itself and enforce its contract rights. Currently
PLP continues to participate in the joint oil and gas exploration
program pursuant to its contractual agreements and is current on
payments due on its joint interest billings.
Jacob Gottlieb vs. James R. Moffett,Richard C. Adkerson, B. M.
Rankin, Henry A. Kissinger, Phosphate Resource Partners Limited
Partnership, McMoRan Oil & Gas Co. and IMC Global Inc., Civ. Act.
No. 16393 (Del. Ch. Filed May 19, 1998). On May 19, 1998,
plaintiff filed an action on behalf of a purported class of
plaintiffs who own depository units of Phosphate Resource
Partners Limited Partnership (PLP). The lawsuit alleges
allegations substantially identical to those in the complaint
described above, as well as allegations that IMC Global Inc. and
Freeport-McMoRan Inc. breached fiduciary duties to PLP and PLP's
public unitholders. The plaintiff seeks unspecified monetary
damages and other relief. MOXY intends to vigorously defend itself
and enforce its contract rights.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders of MOXY was held on
May 12, 1998 (the "Annual Meeting"). Proxies were solicited
pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended.
(b) At the Annual Meeting, James R. Moffett and B.M.
Rankin, Jr. were elected to serve until the 2001 annual meeting
of stockholders. In addition to the directors elected at the
Annual Meeting, the terms of the following directors continued
after the Annual Meeting: Richard C. Adkerson, Robert A. Day and
Gerald J. Ford.
(c) At the Annual Meeting, holders of shares of MOXY's
Common Stock elected two directors with the number of votes cast
for or withheld from each nominee as follows:
Name For Withheld
James R. Moffett 40,198,854 202,279
B.M. Rankin, Jr. 40,204,061 197,072
With respect to the election of directors, there were no
abstentions or broker non-votes.
At the Annual Meeting, the stockholders also voted on and
approved a proposal to ratify the appointment of Arthur Andersen
LLP to act as the independent public accountants to audit the
financial statements of MOXY and its subsidiaries for the year 1998.
Holders of 40,275,797 shares voted for, holders of 64,364 shares
voted against and holders of 60,972 shares abstained from voting
on, such proposal. There were no broker non-votes with respect
to such proposal.
At the Annual Meeting, the stockholders also voted on and
approved MOXY's 1998 Stock Option Plan. Holders of
37,094,261 shares voted for, holders of 3,072,404 shares voted
against and holders of 234,468 shares abstained from voting on,
such proposal. There were no broker non-votes with respect to
such proposal.
<PAGE> 12
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits to this report are listed in the Exhibit Index
appearing on page E-1 hereof.
(b) One Current Report on Form 8-K, under Items 5 and 7, was filed
by the registrant on May 29, 1998.
<PAGE> 13
McMoRan Oil & Gas Co.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
McMoRan Oil & Gas Co.
By: /s/ C. Donald Whitmire Jr.
--------------------------
C. Donald Whitmire, Jr.
Controller
(authorized signatory and
Principal Accounting Officer)
Date: August 11, 1998
<PAGE> 14
McMoRan OIL & GAS CO.
EXHIBIT INDEX
Exhibit Number
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.
4.3 Amendment No. 1 dated July 14, 1997 to
the Rights Agreement dated as of May
19, 1994 between McMoRan Oil & Gas Co.
and Mellon Securities Trust Company, as
Rights Agent. Incorporated by
reference to Exhibit 10.7 to the
Company's Current Report on Form 8-K
dated as of July 14, 1997 (the "July
14, 1997 8-K").
10.1 Master Agreement dated July 14, 1997
between McMoRan Oil & Gas Co. and
Freeport-McMoRan Resource Partners,
Limited Partnership, now named
Phosphate Resource Partners Limited
Partnership ("PLP"). Incorporated by
reference to Exhibit 10.1 to the July
14, 1997 8-K.
10.2 Purchase and Sale Agreement dated July
11, 1997 by and among PLP, MCNIC Oil & Gas
Properties, Inc., MCN Investment
Corporation and MOXY. Incorporated by
reference to Exhibit 10.4 to the July 14,
1997 8-K.
10.3 Agreement for Purchase and Sale
dated as of August 1, 1997 between FM
Properties Operating Co. and McMoRan Oil
& Gas Co. Incorporated by reference to
Exhibit 10.1 to the Company's Current
Report on Form 8-K dated as of
September 2, 1997.
10.4 Participation Agreement between McMoRan
Oil & Gas Co. and PLP dated as of April
1, 1997. Incorporated by reference to
Exhibit 10.4 to the Company's 1997 Form
10-K.
10.5 Amendment to Participation Agreement
between McMoRan Oil & Gas Co. and PLP
dated December 15, 1997. Incorporated
by reference to Exhibit 10.5 to the
Company's 1997 Form 10-K.
10.6 Participation Agreement between McMoRan
Oil & Gas Co. and Gerald J. Ford dated
as of December 15, 1997. Incorporated
by reference to Exhibit 10.6 to the
Company's 1997 Form 10-K.
10.7 Amended and Restated Services
Agreement, dated as of December 23,
1997, between FM Services Company and
the Company. Incorporated by reference
to Exhibit 10.7 to the Company's 1997
Form 10-K.
<PAGE> E-1
Exhibit Number
10.8 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.
10.9 Exploration Agreement effective July 1,
1996, between MOXY and PLP.
Incorporated by reference to the
Company's Quarterly Report on Form 10-Q
for the quarter ending June 30, 1996.
Executive Compensation Plans and Arrangements
(Exhibits 10.10 through 10.14)
10.10 McMoRan Oil & Gas Co. Adjusted Stock
Award Plan, as amended. Incorporated by
reference to Exhibit 10.10 to the
Company's 1997 Form 10-K.
10.11 McMoRan Oil & Gas Co. 1994 Stock Option
Plan, as amended. Incorporated by
reference to Exhibit 10.11 to the
Company's 1997 Form 10-K.
10.12 McMoRan Oil & Gas Co. 1994 Stock Option
Plan for Non-Employee Directors, as
amended. Incorporated by reference to
Exhibit 10.12 to the Company's 1997
Form 10-K.
10.13 McMoRan Oil & Gas Co. Performance
Incentive Awards Program, as amended.
Incorporated by reference to Exhibit
10.5 to the Company's 1995 10-K.
10.14 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.
10.15 McMoRan Oil & Gas Co. 1998 Stock Option
Plan.
15.1 Letter dated July 21, 1998 from Arthur
Andersen LLP regarding unaudited
interim financial statements.
27.1 MOXY Financial Data Schedule.
27.2 Restated Financial Data Schedule.
<PAGE> E-2
Exhibit 10.15
McMoRan OIL & GAS CO.
1998 STOCK OPTION PLAN
SECTION 1
Purpose. The purpose of the McMoRan Oil & Gas Co. 1998
Stock Option Plan ("the Plan") is to motivate and reward key
employees, consultants and advisers 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 notice of grant, 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). 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.
"Eligible Individual" shall mean (i) any person providing
services as an officer of the Company or a Subsidiary, whether or
not employed by such entity, including any such person who is
also a director of the Company, (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
executive, management or legal services who provides services to
the Company or a Subsidiary through such arrangement, (iv) any
consultant or adviser to the Company, a Subsidiary or to an
entity described in clause (iii) hereof who provides services to
the Company or a Subsidiary through such arrangement and (v) any
person who has agreed in writing to become a person described in
clauses (i), (ii), (iii) or (iv) 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 beneficially own more than 40% of all
classes and series of the Company's stock outstanding, taken as a
whole, that has voting rights with respect to the election of
directors of the Company (not including any series of preferred
stock of the Company that has the right to elect directors only
upon the failure of the Company to pay dividends).
"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 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 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 the Company 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
(a) 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 Individual; (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 canceled, forfeited or suspended and the method or methods by
which Awards may be settled, exercised, canceled, 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 Eligible
Individual.
(b) 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,
Eligible Individuals 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.
SECTION 4
Eligibility. Any Eligible Individual 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.
(A) The number of Shares with respect to which
Awards payable in Shares may be granted under the Plan shall be
2,000,000. Awards that by their terms may be settled only in
cash shall not be counted against the maximum number of Shares
provided herein.
(B) Grants of Stock Appreciation Rights, Limited
Rights and Other Stock-Based Awards not granted in tandem with
Options and payable only in cash may relate to no more than
2,000,000 Shares.
(C) Any Shares granted under the Plan that are
forfeited because of failure to meet an Award contingency or
condition shall again be available for grant pursuant to new
Awards under the Plan.
(D) To the extent any Shares covered by an Award
are not issued because the Award is forfeited or cancelled or the
Award is settled in cash, such Shares shall again be available
for grant pursuant to new Awards under the Plan.
(E) To the extent that Shares are delivered to
pay the exercise price of an Option or are delivered or withheld
by the Company in payment of the withholding taxes relating to an
Award, the number of Shares so delivered or withheld 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 Shares 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, whether payable in cash or Shares,
that relate to more than 600,000 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 and,
if deemed appropriate, make provision for a cash payment to the
holder of an outstanding Award and, 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); 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 Eligible Individuals 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 Eligible Individuals to whom Stock Appreciation
Rights shall be granted, the number of Shares to be covered by
each Award of Stock Appreciation Rights, 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 upon exercise, for each Share to which the SAR
relates, 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 Eligible Individuals to whom Limited Rights shall be granted,
the number of Shares to be covered by each Award of Limited
Rights, 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 upon exercise, for each Share to which the Limited Right
relates, 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 Individuals 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 and may provide that such awards would be
payable in whole or in part in cash. 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, including for these purposes any approval
necessary to qualify Awards as "performance based" compensation
under Section 162(m) or any successor provision if such
qualification is deemed necessary or advisable by the Committee.
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 at any time prior to payment
or exercise in any manner not inconsistent with the terms of the
Plan, including without limitation, to change the date or dates
as of which an Award becomes exercisable. Notwithstanding the
foregoing, no amendment, modification or termination may impair
the rights of a holder of an Award under such Award without the
consent of the holder.
(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 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 11
(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, 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.
(b) Withholding. (i) 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.
(ii) At any time that a Participant is required to pay
to the Company an amount required to be withheld under the
applicable tax laws in connection with the issuance of shares of
Common Stock under the Plan, the Participant may, if permitted by
the Committee, satisfy this obligation in whole or in part by
electing (the "Election") to have the Company withhold from the
issuance shares of Common Stock having a value equal to the
amount required to be withheld. The value of the shares withheld
shall be based on the fair market value of the Common Stock on
the date that the amount of tax to be withheld shall be
determined in accordance with applicable tax laws (the "Tax
Date").
(iii) Each Election must be made prior to the Tax
Date. The Committee may suspend or terminate the right to make
Elections at any time.
(iv) A Participant may also satisfy his or her total
tax liability related to the Award by delivering Shares owned by
the Participant. The value of the Shares delivered shall be
based on the fair market value of the Shares on the Tax Date.
(c) 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)
if permitted by the Committee and so provided in the Award
Agreement or an amendment thereto, Options and Limited Rights
granted in tandem therewith may be transferred or assigned (a) to
Immediate Family Members, (b) to a partnership in which Immediate
Family Members, or entities in which Immediate Family Members are
the owners, members or beneficiaries, as appropriate, are the
partners, (c) to a limited liability company in which Immediate
Family Members, or entities in which Immediate Family Members are
the owners, members or beneficiaries, as appropriate, are the
members, or (d) to a trust for the benefit of Immediate Family
Members; provided, however, that no more than a de minimus
beneficial interest in a partnership, limited liability company
or trust described in (b), (c) or (d) above may be owned by a
person who is not an Immediate Family Member or by an entity that
is not beneficially owned solely by 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(c).
(d) 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.
(e) 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.
(f) 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 or as a consultant or adviser to the Company or
any Subsidiary or in the employ of or as a consultant or adviser
to 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, or terminate any
arrangement pursuant to which the Participant provides services
to the Company or a Subsidiary, free from any liability or any
claim under the Plan, unless otherwise expressly provided in the
Plan or in any Award Agreement. No Eligible Individual or other
person shall have any claim to be granted any Award, and there is
no obligation for uniformity of treatment of Eligible
Individuals, Participants or holders or beneficiaries of Awards.
(g) 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.
(h) 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.
(i) 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.
(j) 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 canceled, terminated, or otherwise eliminated.
(k) 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
Term of the Plan. Subject to Section 10(a), the Plan shall
remain in effect until all Awards permitted to be granted under
the Plan have either been satisfied, expired or cancelled under
the term of the Plan and any restrictions imposed on Shares in
connection with thier issuance under the Plan have lapsed.
Exhibit 15.1
July 21, 1998
McMoRan Oil & Gas Co.
1615 Poydras St.
New Orleans, LA 70112
Gentlemen:
We are aware that McMoRan Oil & Gas Co. Inc. has incorporated
by reference in its Registration Statements (File Nos. 33-
82866, 33-80369, 33-80371, and 333-44561) its Form 10-Q for
the quarter ended June 30, 1998, which includes our report
dated July 21, 1998 covering the unaudited interim financial
information contained therein. Pursuant to Regulation C of
the Securities Act of 1933 (the Act), this report is not
considered a part of the registration statements prepared or
certified by our firm or a report prepared or certified by
our firm within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
/s/ Arthur Andersen LLP
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from McMoRan Oil
& Gas Co. financial statements at June 30, 1998 and the six months then ended,
and is qualified in its entirety by reference to such statements. The earning
per share (EPS) data shown was prepared in accordance with Statement of
Financial Acconting Standards No. 128 "Earnings Per Share," basic and diluted EP
</LEGEND>
<CIK> 0000921941
<NAME> MCMORAN OIL & GAS CO.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 19,355
<SECURITIES> 0
<RECEIVABLES> 2,361
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 30,843
<PP&E> 88,574
<DEPRECIATION> 21,085
<TOTAL-ASSETS> 98,498
<CURRENT-LIABILITIES> 19,777
<BONDS> 0
0
0
<COMMON> 429
<OTHER-SE> 75,944
<TOTAL-LIABILITY-AND-EQUITY> 98,498
<SALES> 11,778
<TOTAL-REVENUES> 11,778
<CGS> 12,781
<TOTAL-COSTS> 12,781
<OTHER-EXPENSES> 12,258
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (14,878)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,878)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,878)
<EPS-PRIMARY> (.35)
<EPS-DILUTED> (.35)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This restated schedule contains summary financial information extracted from
McMoRan Oil & Gas Co. financial statements at March 31, 1998 and the three
months then ended. This schedule replaces the orginal schedule in its entirety.
</LEGEND>
<RESTATED>
<CIK> 0000921941
<NAME> MCMORAN OIL & GAS CO.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,803
<SECURITIES> 0
<RECEIVABLES> 4,659
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 47,638
<PP&E> 81,873
<DEPRECIATION> 15,678
<TOTAL-ASSETS> 114,000
<CURRENT-LIABILITIES> 27,795
<BONDS> 0
0
0
<COMMON> 428
<OTHER-SE> 83,445
<TOTAL-LIABILITY-AND-EQUITY> 114,000
<SALES> 5,779
<TOTAL-REVENUES> 5,779
<CGS> 6,186
<TOTAL-COSTS> 6,186
<OTHER-EXPENSES> 6,084
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,020)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,020)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,020)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
</TABLE>
