New Orleans-based McMoRan Exploration Co. posted a quarterly loss for the first three months of the year, which it blamed partly on lower natural gas and oil prices and partly on lower production. Some of its gas-weighted output remains shut in because of third-party facility outages following last September’s hurricanes in the Gulf of Mexico (GOM).

The independent, which focuses on deep gas prospects offshore, reported a loss in 1Q2009 of $63.2 million (minus 90 cents/share), compared with earnings of $32 million (46 cents) in 1Q2008. Continuing operations reported losses of $59.5 million, which included a $39 million loss (minus 55 cents/share) in impairment charges for certain fields to reduce their net carrying value to fair value. and $16.2 million (minus 23 cents) for exploration wells determined to be noncommercial. In addition, McMoRan’s results were impacted by an $18 million mark-to-market gain on hedging contracts an $18.7 million gain associated with its share of insurance proceeds related to the September 2008 hurricanes.

The independent is “prudently” managing its capital spending because of the current market conditions, Co-Chairman James R. Moffett said. He and Co-Chair Richard Adkerson jointly said that the company continues to focus on exploration in the GOM shallow waters of the Outer Continental Shelf. McMoRan currently has three deep gas exploration prospects under way: Ammazzo on South Marsh Island Block 251, Cordage on West Cameron Block 207, and Blueberry Hill sidetrack on Louisiana State Lease 340.

“Our drilling activities have confirmed that large hydrocarbon bearing structures are present below 15,000 feet,” Adkerson said. “The data we have gained from the South Timbalier Block 168 ultra-deep well drilled below 30,000 feet provides important information that is allowing us to correlate the depositional trends from the onshore and the deepwater to the Shelf.”

McMoRan’s gas and oil output in the quarter averaged only 198 MMcfe/d net, compared with 294 MMcfe/d for the same period a year ago. Current production is around 200 MMcfe/d, but output is expected to average only 180 MMcfe/d in 2Q2009 because of some planned facility expansion, maintenance and remediation activities. An estimated 45 MMcfe/d of McMoRan’s production continues to be constrained by outages at third-party facilities. Based on “recent” information from operators of these facilities, McMoRan estimates production will average 215 MMcfe/d for the year.

Capital spending in 1Q2009 totaled $29.2 million, and the company now expects to spend $30 million less in 2009, for a total of $200 million. Cash at the end of March totaled $95.4 million, and McMoRan said it had no borrowings under its revolving credit facility. The company’s borrowing base redetermination was completed earlier this month, and the aggregate amount was reduced to $235 million from $400 million, it said. Total debt at the end of 1Q2009 was $375 million, which included $75 million in convertible senior notes.

To ensure it can continue to fund its exploration, McMoRan said it “may pursue additional partner arrangements to further reduce capital expenditures.”

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