MCMORAN EXPLORATION CO /DE/ - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - February 1, 2013

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8-K - MMR 1-28-13 8K - MCMORAN EXPLORATION CO /DE/mmr12813_8k.htm
  Exhibit 99.1

McMoRan EXPLORATION CO.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


On January 28, 2013, McMoRan Exploration Co. (McMoRan) completed the sale of certain properties in the Breton Sound area to Century Exploration New Orleans, LLC (Century). Consideration consisted of assumption of related abandonment obligations by Century of approximately $4.6 million and payment by McMoRan to Century of $0.6 million in cash (the Century Sale). The Century Sale was effective October 1, 2012.
 
In addition, on January 17, 2013, McMoRan completed the sale of the Laphroaig field to Energy XXI Onshore, LLC (EXXI) for cash consideration of $80 million, after closing adjustments, and the assumption of approximately $0.6 million of related abandonment obligations (the Laphroaig Sale). The Laphroaig Sale was effective January 1, 2013.

Previously, on November 13, 2012, McMoRan completed the sale of a package of Gulf of Mexico traditional shelf oil and gas properties in the Eugene Island area to Arena Energy, LP (Arena), and on October 2, 2012, McMoRan completed the sale of three Gulf of Mexico shelf oil and gas properties in the West Delta and Mississippi Canyon areas to Renaissance Offshore, LLC (Renaissance) (collectively, the Previous Transactions).  The combined net cash proceeds from the Previous Transactions (after closing adjustments) totaled $55.9 million and reclamation obligations assumed by the purchasers totaled $45.6 million. The Previous Transactions were effective July 1, 2012.

The following unaudited pro forma condensed consolidated financial statements and accompanying notes of McMoRan as of and for the nine months ended September 30, 2012 and for the year ended December 31, 2011 (Pro Forma Statements), which have been prepared by McMoRan’s management, are derived from the audited consolidated financial statements of McMoRan for the year ended December 31, 2011 included in its 2011 Annual Report on Form 10-K and the unaudited condensed consolidated financial statements of McMoRan as of and for the nine months ended September 30, 2012 included in its Quarterly Report on Form 10-Q for the period then ended.

The Pro Forma Statements are provided for illustrative purposes only and do not purport to represent what McMoRan’s financial position or results of operations would have been had the Century Sale, the Laphroaig Sale and the Previous Transactions been consummated on the dates indicated or the financial position or results of operations for any future date or period. The unaudited pro forma condensed consolidated balance sheet was prepared assuming the Century Sale, the Laphroaig Sale and the Previous Transactions had occurred on September 30, 2012. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2011 and for the nine months ended September 30, 2012 were prepared assuming all of those transactions had occurred on January 1, 2011. McMoRan believes the assumptions used in the preparation of the Pro Forma Statements provide a reasonable basis for presenting the significant effects directly attributable to the Century Sale, the Laphroaig Sale and the Previous Transactions.

The Pro Forma Statements should be read in conjunction with the historical consolidated financial statements and accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which are set forth in McMoRan’s Annual Report on Form 10-K for the year ended December 31, 2011 and in McMoRan’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012.


 
1
 

McMoRan EXPLORATION CO.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2012
(in thousands)

             
Laphroaig
  
Century
      
     
Renaissance
  
Arena
  
Sale
  
Sale
      
     
Pro Forma
  
Pro Forma
  
Pro Forma
  
Pro Forma
      
 
Historical
  
Adjustments
  
Adjustments
  
Adjustments
  
Adjustments
  
Pro Forma
  
                                     
ASSETS
                                    
Current assets:
                                    
Cash and cash equivalents
$
191,934
  
$
23,053
 a
$
25,753
a
$
79,988
a
$
(600
)a
$
320,128
  
Accounts receivable
  
56,044
    
(1
)b
  
(4
)b
  
-
    
-
    
56,039
  
Inventories
  
35,551
    
-
    
-
    
-
    
-
    
35,551
  
Prepaid expenses
  
16,636
    
-
    
(37
)b
  
-
    
-
    
16,599
  
Current assets from discontinued operations
                                    
including restricted cash of $473
  
797
    
-
    
-
    
-
    
-
    
797
  
Total current assets
  
300,962
    
23,052
    
25,712
    
79,988
    
(600
)
  
429,114
  
Property, plant and equipment, net
  
2,378,285
    
(28,562
)c
  
(32,305
)c
  
(5,524
)c
  
(603
)c
  
2,311,291
  
Restricted cash and other
  
62,575
    
-
    
(2,440
)d
  
-
    
-
    
60,135
  
Deferred costs
  
9,023
    
-
    
-
    
-
    
-
    
9,023
  
Long-term assets from discontinued operations
  
439
    
-
    
-
    
-
    
-
    
439
  
Total assets
$
2,751,284
  
$
(5,510
)
$
(9,033
)
$
74,464
  
$
(1,203
)
$
2,810,002
  
                                     
LIABILITIES AND STOCKHOLDER’S EQUITY
                                    
Current liabilities:
                                    
Accounts payable
$
89,635
  
$
(99
)b
$
50
b
$
-
  
$
-
  
$
89,586
  
Accrued liabilities
  
145,779
    
42
b
  
366
b
  
796
 b
  
814
b
  
147,797
  
Accrued interest and dividends payable
  
20,704
    
-
    
-
    
-
    
-
    
20,704
  
Current portion of accrued oil and gas
                                    
reclamation costs
  
64,571
    
-
    
-
    
-
    
-
    
64,571
  
5¼% convertible senior notes due October 2012
  
345
    
-
    
-
    
-
    
-
    
345
  
Other current liabilities
  
6,480
    
(2,800
)e
  
(3,680
)e
  
-
    
-
    
-
  
Current liabilities from discontinued operations,
                                    
including sulphur reclamation costs
  
2,717
    
-
    
-
    
-
    
-
    
2,717
  
Total current liabilities
  
330,231
    
(2,857
)
  
(3,264
)
  
796
    
814
    
325,720
  
5¼% convertible senior notes due October 2013
  
67,832
    
-
    
-
    
-
    
-
    
67,832
  
11.875% senior notes
  
300,000
    
-
    
-
    
-
    
-
    
300,000
  
4% convertible senior notes
  
188,943
    
-
    
-
    
-
    
-
    
188,943
  
Accrued oil and gas reclamation costs
  
227,279
    
(8,356
)f
  
(37,280
)f
  
(606
)f
  
(4,612
)f
  
176,425
  
Other long-term liabilities
  
19,896
    
-
    
(2,440
)d
  
-
    
-
    
17,456
  
Other long-term liabilities from discontinued
                                    
operations, including sulphur reclamation costs
  
18,624
    
-
    
-
    
-
    
-
    
18,624
  
Total liabilities
  
1,152,805
    
(11,213
)
  
(42,984
)
  
190
    
(3,798
)
  
1,095,000
  
Stockholders’ equity
  
1,598,479
    
5,703
g
  
33,951
g
  
74,274
g
  
2,595
g
  
1,715,002
  
Total liabilities and stockholders’ equity
$
2,751,284
  
$
(5,510
)
$
(9,033
)
$
74,464
  
$
(1,203
)
$
2,810,002
  
                                     

See accompanying notes.

 
2
 

McMoRan EXPLORATION CO.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2011
(in thousands, except per share amounts)

             
Laphroaig
    
Century
      
     
Renaissance
  
Arena
  
Sale
    
Sale
      
     
Pro Forma
  
Pro Forma
  
Pro Forma
    
Pro Forma
      
 
Historical
  
Adjustments
  
Adjustments
  
Adjustments
    
Adjustments
  
Pro Forma
  
Revenues:
                                    
Oil and natural gas
$
542,310
  
$
(12,588
)h
$
(34,971
)h
$
(19,104
)h
$
(17,306
)h
$
458,341
  
Service
  
13,104
    
(895
)h
  
(1,135
)h
  
(172
)h
  
(15
)h
  
10,887
  
Total revenues
  
555,414
    
(13,483
)
  
(36,106
)
  
(19,276
)
  
(17,321
)
  
469,228
  
Costs and expenses:
                                    
Production and delivery costs
  
206,319
    
(2,389
)h
  
(15,077
)h
  
(1,672
)h
  
(4,043
)h
  
183,138
  
Depletion, depreciation and
                                    
amortization expense
  
307,902
    
(4,577
) i
  
(14,000
) i
  
(10,642
) i
  
(4,504
) i
  
274,179
  
Exploration expenses
  
81,742
    
-
    
-
    
-
    
-
    
81,742
  
General and administrative expenses
  
49,471
    
-
    
-
    
-
    
-
    
49,471
  
Main Pass Energy HubTM costs
  
588
    
-
    
-
    
-
    
-
    
588
  
Insurance recoveries
  
(91,076
)
  
-
    
-
    
-
    
-
    
(91,076
)
Gain on sale of oil and gas property
  
(900
)
  
-
    
-
    
-
    
-
    
(900
)
Total costs and expenses
  
554,046
    
(6,966
)
  
(29,077
)
  
(12,314
)
  
(8,547
)
  
497,142
  
Operating income (loss)
  
1,368
    
(6,517
)
  
(7,029
)
  
(6,962
)
  
(8,774
)
  
(27,914
)
Interest expense, net
  
(8,782
)
  
-
    
-
    
-
    
-
    
(8,782
)
Other income (expense), net
  
810
    
-
    
-
    
-
    
-
    
810
  
Loss from continuing operations
                                    
before income taxes
  
(6,604
)
  
(6,517
)
  
(7,029
)
  
(6,962
)
  
(8,774
)
  
(35,886
)
Income tax expense
  
-
    
-
    
-
    
-
    
-
    
-
  
Loss from continuing operations
  
(6,604
)
  
(6,517
)
  
(7,029
)
  
(6,962
)
  
(8,774
)
  
(35,886
)
                                     
Basic and diluted loss per share of common stock from continuing operations
$
(0.04
)
                        
$
(0.23
)
                                     
Basic and diluted average common shares outstanding
  
159,216
                            
159,216
  
                                     





See accompanying notes.

 
3
 




McMoRan EXPLORATION CO.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
(in thousands, except per share amounts)


             
Laphroaig
    
Century
      
     
Renaissance
  
Arena
  
Sale
    
Sale
      
     
Pro Forma
  
Pro Forma
  
Pro Forma
    
Pro Forma
      
 
Historical
  
Adjustments
  
Adjustments
  
Adjustments
    
Adjustments
  
Pro Forma
  
                                     
Revenues:
                                    
Oil and natural gas
$
282,387
  
$
(8,006
)h
$
(15,913
)h
$
(13,127
)h
$
(4,910
)h
$
240,431
  
Service
  
10,331
    
(595
)h
  
(791
)h
  
(31
)h
  
(4
)h
  
8,910
  
Total revenues
  
292,718
    
(8,601
)
  
(16,704
)
  
(13,158
)
  
(4,914
)
  
249,341
  
Costs and expenses:
                                    
Production and delivery costs
  
118,734
    
(1,765
)h
  
(5,855
)h
  
(1,329
)h
  
(2,369
)h
  
107,416
  
Depletion, depreciation and amortization
                                    
expense
  
116,649
    
(2,519
)i
  
(5,871
)i
  
(6,646
)i
  
(1,463
)i
  
100,150
  
Exploration expenses
  
122,763
    
-
    
-
    
-
    
-
    
122,763
  
General and administrative expenses
  
38,760
    
-
    
-
    
-
    
-
    
38,760
  
Main Pass Energy HubTM costs
  
210
    
-
    
-
    
-
    
-
    
210
  
Insurance recoveries
  
(1,229
)
  
-
    
1,229
j
  
-
    
-
    
-
  
Gain on sale of oil and gas property
  
(799
)
  
-
    
-
    
-
    
-
    
(799
)
Total costs and expenses
  
395,088
    
(4,284
)
  
(10,497
)
  
(7,975
)
  
(3,832
)
  
368,500
  
Operating loss
  
(102,370
)
  
(4,317
)
  
(6,207
)
  
(5,183
)
  
(1,082
)
  
(119,159
)
Interest expense, net
  
-
    
-
    
-
    
-
    
-
    
-
  
Loss on debt exchange
  
(5,955
)
  
-
    
-
    
-
    
-
    
(5,955
)
Other income (expense), net
  
525
    
-
    
-
    
-
    
-
    
525
  
Loss from continuing operations
                                    
before income taxes
  
(107,800
)
  
(4,317
)
  
(6,207
)
  
(5,183
)
  
(1,082
)
  
(124,589
)
Income tax expense
  
-
    
-
    
-
    
-
    
-
    
-
  
Loss from continuing operations
  
(107,800
)
  
(4,317
)
  
(6,207
)
  
(5,183
)
  
(1,082
)
  
(124,589
)
                                     
Basic and diluted loss per share of common stock from continuing operations
$
(0.67
)
                        
$
(0.77
)
                                     
Basic and diluted average common shares outstanding
  
161,627
                            
161,627
  
                                     




See accompanying notes.


 
4
 

McMoRan EXPLORATION CO.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.  BASIS OF PRESENTATION
On January 28, 2013, McMoRan Exploration Co. (McMoRan) completed the sale of certain properties in the Breton Sound area to Century Exploration New Orleans, LLC (Century). Consideration consisted of the assumption of related abandonment obligations by Century of approximately $4.6 million and payment by McMoRan to Century of $0.6 million (the Century Sale). The Century Sale properties represented approximately two percent of McMoRan’s total average daily production for the fourth quarter of 2012 and less than one percent of McMoRan’s total estimated reserves at June 30, 2012.  Independent reserve engineers’ estimates of proved reserves for the Century Sale properties at June 30, 2012 totaled approximately 35,300 barrels of oil and natural gas liquids and 0.7 billion cubic feet of natural gas (0.9 billion cubic feet of natural gas equivalents). As of June 30, 2012 the estimated present value of future net cash flows discounted at 10 percent (PV-10) for the Century Sale properties was negative. The Century Sale was effective October 1, 2012.
 
In addition, on January 17, 2013, McMoRan completed the sale of the Laphroaig field to Energy XXI Onshore, LLC (EXXI) for cash consideration, after closing adjustments, of $80.0 million and the assumption of approximately $0.6 million of related abandonment obligations (the Laphroaig Sale). The Laphroaig field represented approximately 10 percent of McMoRan’s total average daily production for the fourth quarter of 2012 and four percent of McMoRan’s total estimated reserves at June 30, 2012.  Independent reserve engineers’ estimates of proved reserves for the Laphroaig field at June 30, 2012 totaled approximately 103,000 barrels of oil and 8.9 billion cubic feet of natural gas (9.5 billion cubic feet of natural gas equivalents) with comparable year-end 2012 reserves not expected to be materially different. The Laphroaig Sale was effective January 1, 2013.

Previously, on November 13, 2012, McMoRan completed the sale of a package of Gulf of Mexico traditional shelf oil and gas properties in the Eugene Island area to Arena Energy, LP (Arena), and on October 2, 2012, McMoRan completed the sale of three Gulf of Mexico shelf oil and gas properties in the West Delta and Mississippi Canyon areas to Renaissance Offshore, LLC (Renaissance) (collectively, the Previous Transactions). The combined net cash proceeds from the Previous Transactions (after closing adjustments) totaled $55.9 million and reclamation obligations assumed by the purchasers totaled $45.6 million. Independent reserve engineers’ estimates of proved reserves for the Previous Transactions at June 30, 2012 totaled approximately 1,487 barrels of oil and 13.7 billion cubic feet of natural gas (22.6 billion cubic feet of natural gas equivalents).

The combined net cash proceeds from the Century Sale, the Laphroaig Sale and the Previous Transactions after closing adjustments totaled $135.3 million.

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2012 was prepared assuming that the Century Sale, the Laphroaig Sale and the Previous Transactions had occurred on that date. The unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2011 and for the nine months ended September 30, 2012 were prepared assuming all of those transactions had occurred on January 1, 2011. The Pro Forma Statements do not purport to represent what McMoRan’s financial position or results of operations would have been had the Century Sale, the Laphroaig Sale and the Previous Transactions been consummated on the dates indicated or the financial position or results of operations for any future date or period. McMoRan believes the assumptions used in the preparation of the Pro Forma Statements provide a reasonable basis for presenting the significant effects directly attributable to the Century Sale, the Laphroaig Sale and the Previous Transactions.



 
5
 





PRO FORMA ADJUSTMENTS
The unaudited pro forma condensed consolidated balance sheet includes the following adjustments:

a.  
Reflects transaction related cash proceeds received or remitted (excluding deposits received in advance of the Previous Transactions’ closings and prior to September 30, 2012), net of cash flow from operations (revenues less direct operating expenses) of the conveyed properties attributable to the period from the effective dates (October 1, 2012 for the Century Sale, January 1, 2013 for the Laphroaig Sale and July 1, 2012 for the Previous Transactions) through the respective transaction closing dates, and net of transaction costs.

b.  
Reflects adjustments of certain working capital items related to the Century Sale, the Laphroaig Sale and the Previous Transactions.

c.  
Reflects the elimination of McMoRan’s investment in property, plant and equipment related to the properties sold.

d.  
Reflects the transfer of property abandonment surety escrow funds associated with certain of the properties conveyed to Arena.

e.  
Reflects elimination of deposit liabilities for the amounts received from Renaissance and Arena prior to September 30, 2012 as partial consideration under the terms of the Previous Transactions.

f.  
Reflects the elimination of asset retirement obligations associated with the properties conveyed in the Century Sale, the Laphroaig Sale and the Previous Transactions.

g.  
Reflects the impact to retained earnings (stockholders’ equity) for the estimated gains resulting from the Century Sale and the Laphroaig Sale that will be recorded by McMoRan in the first quarter of 2013 and the Previous Transactions that will be recorded in the fourth quarter of 2012. No transaction related gains are reflected in the accompanying unaudited pro forma condensed consolidated statements of operations.

The unaudited pro forma condensed consolidated statements of operations include the following adjustments:

h.  
Reflects the elimination of revenues and direct operating expenses attributable to the properties sold.

i.  
Reflects the elimination of depreciation, depletion and amortization attributable to the properties sold.

j.  
Reflects the elimination of an insurance recovery attributable to one of the properties sold to Arena.


 
6
 

SUMMARY PRO FORMA OIL AND NATURAL GAS RESERVE DATA (UNAUDITED)

The following table sets forth summary pro forma reserve data as of December 31, 2011 giving effect to the Century Sale, the Laphroaig Sale and the Previous Transactions.

Estimated Quantities of Oil and Natural Gas Reserves at December 31, 2011:

               
Laphroaig
    
Century
      
       
Renaissance
  
Arena
  
Sale
    
Sale
      
       
Pro Forma
  
Pro Forma
  
Pro Forma
    
Pro Forma
      
   
Historical
  
Adjustments
  
Adjustments
  
Adjustments
    
Adjustments
  
Pro Forma
  
                                       
Proved Reserves:
                                      
Oil and Natural Gas Liquids (MBbls)
    
17,289
    
(925
)
  
(489
)
  
(90
)
  
(59
)
  
15,726
  
Natural Gas (MMcf)
    
152,051
    
(1,645
)
  
(12,385
)
  
(7,722
)
  
(813
)
  
129,486
  
                                       
Total reserves (MMcfe)
    
255,785
    
(7,193
)
  
(15,319
)
  
(8,263
)
  
(1,168
)
  
223,842
  
                                       
Proved Developed Reserves:
                                      
Oil and Natural Gas Liquids (MBbls)
    
15,573
    
(925
)
  
(489
)
  
(43
)
  
(59
)
  
14,057
  
Natural Gas (MMcf)
    
123,626
    
(1,645
)
  
(12,385
)
  
(4,597
)
  
(813
)
  
104,186
  
                                       
Total reserves (MMcfe)
    
217,064
    
(7,193
)
  
(15,319
)
  
(4,855
)
  
(1,168
)
  
188,529
  


 
Standardized Measure of Discounted Future Net Cash Flows at December 31, 2011 (in thousands):


               
Laphroaig
    
Century
      
       
Renaissance
  
Arena
  
Sale
    
Sale
      
       
Pro Forma
  
Pro Forma
  
Pro Forma
    
Pro Forma
      
   
Historical
  
Adjustments
  
Adjustments
  
Adjustments
    
Adjustments
  
Pro Forma
  
             
Future cash inflows
  
$
2,268,446
  
$
(104,190
)
$
(106,049
)
$
(43,579
)
$
(8,465
)
$
2,006,163
  
Future cost applicable to future cash flows:
                                      
Production costs
    
(566,947
)
  
27,359
    
27,495
    
5,746
    
1,833
    
(504,514
)
Development and abandonment costs
    
(534,703
)
  
17,530
    
39,769
    
8,920
    
5,294
    
(463,190
)
Future income taxes
    
-
    
-
    
-
    
-
    
-
    
-
  
Future net cash flows
    
1,166,796
    
(59,301
)
  
(38,785
)
  
(28,913
)
  
(1,338
)
  
1,038,459
  
Discount for estimated timing of net cash flows (10% discount rate)
    
(337,965
)
  
24,757
    
5,792
    
4,441
    
 
(646
 
)
  
(303,621
)
   
$
828,831
  
$
(34,544
)
$
(32,993
)
$
(24,472
)
$
(1,984
)
$
734,838
  




 
7
 

MCMORAN EXPLORATION CO /DE/ Reports