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| UNITED      STATES                                                                                                |
|-------------------------------------------------------------------------------------------------------------------|
| SECURITIES      AND EXCHANGE COMMISSION                                                                           |
| Washington,      D.C. 20549                                                                                       |
|                                                                                                              |
| FORM      10-K                                                                                                    |
| (Mark      One)                                                                                                   |
| [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE      ACT OF 1934                |
| For      the fiscal year ended December 31, 2008                                                                  |
| OR                                                                                                                |
| [  ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES      EXCHANGE ACT OF 1934 |
| For      the transition period from                                                                               |   | to |
| Commission      File Number: 001-07791                                                                            |
|                                                                                                         |
| McMoRan      Exploration Co.                                                                                      |
| (Exact      name of registrant as specified in itscharter)                                                        |

| Delaware                                                                | 72-1424200                             |                                           |
|-------------------------------------------------------------------------|----------------------------------------|------------------------------------------------|
| (State      or other jurisdiction ofincorporation      or organization) | (IRS      Employer Identification No.) |                                           |
|                                                                    |                                   |                                           |
| 1615      Poydras Street                                                |                                   |                                           |
| New      Orleans, Louisiana                                             | 70112                                  |                                           |
| (Address      of principal executive offices)                           | (Zip      Code)                        |                                           |
|                                                                    |                                   |
| (504)      582-4000                                                     |                                   |
| (Registrant's      telephone number, including area code)               |                                   |
|                                                                    |                                   |
| Securities      registered pursuant to Section 12(b) of the Act:        |                                   |
| Title      of each class                                                |                                   | Name      of each exchange on which registered |
| Common      Stock, par value $0.01 per share                            |                                   | New      York Stock Exchange                   |
| 6.75%      Mandatory Convertible Preferred Stock                        |                                   | New      York Stock Exchange                   |

| Portions      of our Proxy Statement for our 2009 Annual Meeting to be held on June 11,      2009 are incorporated by reference intoPart      III (Items 10, 11, 12, 13 and 14) of this  report. |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| TABLE OF CONTENTS                                                                                                                   |
|-------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                |   |
|                                                                                                                                | Page |
| Part I                                                                                                                              |   |
| Items 1. and 2. Business and Properties                                                                                             | 1 |
| Item 1A.  Risk Factors                                                                                                    | 11 |
| Item 1B.  Unresolved Staff      Comments                                                                                  | 20 |
| Item 3. Legal Proceedings                                                                                                           | 20 |
| Item 4. Submission of Matters to a Vote of      Security Holders                                                                    | 21 |
| Executive Officers of theRegistrant                                                                                                 | 21 |
|                                                                                                                                |   |
| Part II                                                                                                                             |   |
| Item 5. Market for Registrant’s Common Equity,      Related Stockholder Mattersand Issuer Purchases of Equity      Securities | 22 |
| Item 6. Selected Financial Data                                                                                                     | 24 |
| Items 7. and 7A. Management’s Discussion and Analysis of      Financial Condition and Results                                 |   |
| of Operation and Quantitative and Qualitative Disclosures      about Market Risk                                                    | 26 |
| Item 8. Financial Statements and Supplementary      Data                                                                            | 44 |
| Item 9. Changes in and Disagreements with Accountants on      Accounting and Financial Disclosure                                   | 91 |
| Item 9A. Controls and Procedures                                                                                                    | 91 |
| Item 9B. Other Information                                                                                                          | 92 |
|                                                                                                                                |   |
| Part III                                                                                                                            |   |
| Item 10. Directors, Executive Officers and Corporate      Governance                                                                | 92 |
| Item 11. Executive Compensation                                                                                                     | 92 |
| Item 12. Security Ownership of Certain      Beneficial Owners and Management and Related                                            |   |
| Stockholders Matters                                                                                                                | 92 |
| Item 13. Certain Relationships and Related Transactions,      and Director Independence                                             | 92 |
| Item 14. Principal Accounting Fees and      Services                                                                                | 92 |
|                                                                                                                                |   |
| Part IV                                                                                                                             |   |
|                                                                                                                                |   |
| Item 15. Exhibits and Financial Statement      Schedules                                                                            | 92 |
|                                                                                                                                |   |
| Glossary                                                                                                                            | 92 |
|                                                                                                                                |   |
| Signatures                                                                                                                          | S-1 |
|                                                                                                                                |   |
| Exhibit Index                                                                                                                       | E-1 |

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PART I

Items 1. and2.  Business and Properties

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TABLE OFCONTENTS

|   | • | allocating      investment capital based on the potential risk and reward for each      exploratory and developmentalopportunity; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | • | utilizing      advanced seismic applications in combination with traditional      analysis; |
|--------|---------|---------------------------------------------------------------------------------------------|

|   | • | employing      professionals with geophysical and geological  expertise; |
|--------|---------|--------------------------------------------------------------------------|

|   | • | using      new technology applications in drilling and completion practices;      and |
|--------|---------|---------------------------------------------------------------------------------------|

|   | • | increasing      the efficiency of our productionpractices; |
|--------|---------|------------------------------------------------------------|

|                        | Gas    |    | Oil      and condensate |   | Total  |
|-----------------------------|--------|---------|-------------------------|--------|--------|
|                        | (MMcf) |    | (MBbls)                 |   | (Bcfe) |
| Proved      developed:      |   |    |                    |   |   |   |   |   |
| Producing                   |   | 69,415  |                    |   | 5,168  |   |   | 100.4 |
| Non-producing               |   | 109,954 |                    |   | 9,057  |   |   | 164.3 |
| Shut-in                     |   | 19,241  |                    |   | 815    |   |   | 24.1 |
| Total      proved developed |   | 198,610 |                    |   | 15,040 |   |   | 288.8 |
| Proved      undeveloped     |   | 44,287  |                    |   | 1,950  |   |   | 56.0 |
| Total      proved reserves  |   | 242,897 |                    |   | 16,990 |   |   | 344.8 |

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|                                                         | Proved      Reserves |
|--------------------------------------------------------------|----------------------|
|                                                         | Developed            |   | Undeveloped |   | Total |
| Estimated      undiscounted future net cash flows before     |                 |   |   |   |   |   |   |   |
| income      taxes                                            | $                    | 804,776 |   | $ | 148,177 |   | $ | 952,953 |
| Present      value of estimated future net cash flows before |                 |   |   |   |   |   |   |   |
| income      taxes a                                          | $                    | 613,823 |   | $ | 94,248 |   | $ | 708,071 |

| a.   | Calculated      based on the prices and costs prevailing at December 31, 2008 and using a      10 percent per annum discount rate as required by the      SEC.  The weighted average price for all our properties with      proved reserves was $40.27 per barrel of oil and $6.09 per Mcf of natural      gas at December 31, 2008. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                         |   | Years      Ended December 31, |   |
|--------------------------------------------------------------|--------|-------------------------------|--------|
|                                                         |   | 2008                          |   | 2007 |   | 2006 |   |
| Net      natural gas production (Mcf)                        |   | 59,886,900                    |   | 38,994,000 |   | 14,545,600 |   |
| Net      crude oil and condensate production, excluding Main |   |                          |   |   |   |   |   |
| Pass      299(Bbls)                                          |   | 3,072,000                     |   | 1,821,900 |   | 600,300 |   |
| Net      crude oil production from Main Pass 299 (Bbls)      |   | 561,400                       |   | 564,000 |   | 775,500 |   |
| Net      plant product production (per Mcf equivalent)       |   | 8,004,400                     |   | 2,153,000 |   | 1,072,200 |   |
| Sales      prices:                                           |   |                          |   |   |   |   |   |
| Natural      gas (per Mcf)                                   |   | $   9.96       |   | $      7.01 |   | $      7.05 |   |
| Crude      oil and condensate, including Main Pass 299 (per  |   |                          |   |   |   |   |   |
| Bbl)                                                         |   | 104.00                        |   | 76.55 |   | 60.55 |   |
| Production      (lifting) costs: a                           |   |                          |   |   |   |   |   |
| Per      barrel for Main Pass b                              |   | $69.29                        |   | $44.17 |   | $35.76 |   |
| Per      Mcfe for other properties c                         |   | 2.56                          |   | 1.88 |   | 1.34 |   |

| a.   | Production      costs exclude all depletion, depreciation and amortization      expense.  The components of production costs may vary      substantially among wells depending on the production characteristics of      the particular producing formation, method of recovery employed, and other      factors.  Production costs include charges under transportation      agreements as well as all lease operating expenses including well      insurance costs. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Production      costs for Main Pass 299 included workover expenses of approximately $17.0      million, $30.22 per barrel in 2008, $1.8 million, $3.17 per barrel in 2007      and $3.6 million, $4.72 per barrel in2006. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Production      costs were converted to an Mcf equivalent on the basis of one barrel of      oil being equivalent to six Mcf of natural gas.  Production      costs included workover expenses totaling $45.8  million or      $0.53 per Mcfe in 2008, $19.7 million or $0.38 per Mcfe in 2007 and $4.5      million or $0.23 per Mcfe in 2006. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                             |   | Developed |   | Undeveloped |
|----------------------------------|--------|-----------|--------|-------------|
|                             |   | Gross     |   | Net         |   | Gross |   | Net |
|                             |   | Acres     |   | Acres       |   | Acres |   | Acres |
| Offshore      (federal waters)   |   | 659,267   |   | 379,932     |   | 359,245 |   | 145,944 |
| Onshore      Louisiana and Texas |   | 36,070    |   | 18,448      |   | 68,491 |   | 27,565 |
| Total      at December 31, 2008  |   | 695,337   |   | 398,380     |   | 427,736 |   | 173,509 |

|                                     |      | Net       |        |              |   |   |
|------------------------------------------|-----------|-----------|-------------|-------------------|--------|--------|
|                                     | Working   | Revenue   | Water       | Production      a |
|                                     | Interest  | Interest  |  Depth | Gross             |   | Net    |
|                                     | (%)       | (%)       | (feet)      | (MMcfe/d)         |
| Deep      Shelf:                         |      |      |        |              |   |   |
| South      Marsh Island Block 212        |      |      |        |              |   |   |
|  ”Flatrock”      b      | 25.0      | 18.8      | 10          | 164               |   | 31     |
| St.      Mary Parish, LA            |      |      |        |              |   |   |
| “Laphroaig”      c           | 37.3      | 28.5      | <10      | 37                |   | 11     |
| Louisiana      State Lease 18090         |      |      |        |              |   |   |
| “Long      Point” b          | 37.5      | 26.7      | 8           | 28                |   | 8      |
| Onshore      Vermilion Parish, LA        |      |      |        |              |   |   |
| “Liberty      Canal” c       | 37.5      | 27.6      | n/a      d  | 27                |   | 7      |
| Traditional      Shelf:                  |      |      |        |              |   |   |
| Eugene      Island Block 182 c,e,      f | 66.9      | 52.8-63.6 | 91          | 21                |   | 11     |
| Main      Pass Block 299      c          | 100.0     | 83.3      | 210         | 11                |   | 9      |
| South      Timbalier Block 193 c,e       | 62.8-72.8 | 46.8-53.0 | 114         | 17                |   | 8      |
| South      Timbalier Block 299           | 75.0      | 62.5      | 314         | 12                |   | 8      |
| South      Pelto Block 9 f               | 33.3      | 34.3      | 35          | 24                |   | 7      |
| Grand      Isle Block 3      c           | 50.0      | 36.5      | 12          | 16                |   | 6      |

| a.   | Reflects      average daily production rates for the fourth quarter of    2008. |
|----------------|---------------------------------------------------------------------------------|

| b.   | We      were operator for drilling exploratory wells at these prospects. We      relinquished being operator following successful completion of the related      wells. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Wells      operated by us. |
|----------------|----------------------------|

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| d.   | Prospect      is located onshore in Vermilion Parish,  Louisiana. |
|----------------|-------------------------------------------------------------------|

| e.   | This      property has multiple wells with varying ownership interests. Interests      reflected in this table are approximate average working interest and net      revenue interest for the field. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f.   | Well      is eligible for deep gas royalty relief under current MMS guidelines which      exempt from U.S. government royalties production of as much as the first      25 Bcf from a depth of 18,000 feet or greater, and as much as 15 Bcf from      depths between 15,000 and 18,000 feet, with gas production from all      qualified wells on a lease counting towards the volume eligible for      royalty relief.  The exact amount of royalty relief depends on      eligibility criteria, which include the well depth, nature of the well,      and the timing of drilling and production.  In addition, these      guidelines include price threshold provisions that discontinue royalty      relief if natural gas prices exceed a specified level.  The      price threshold was not exceeded for the years ended December 31, 2008,      2007 or 2006. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Flatrock      Wells                    | Total      Pay Intervals | Net      Feet of      Pay a | Status      b                                                                          |
|----------------------------------------|--------------------------|-----------------------------|----------------------------------------------------------------------------------------|
| No.      1 (#228)Discovery      Well   | 8                        | 260                         | Producing      from the Operc section                                                  |
|                                   |                     |                        |                                                                                   |
| No.      2 (#229)Delineation      Well | 8                        | 289                         | Producing      from the primary Rob-L sand                                             |
|                                   |                     |                        |                                                                                   |
| No.      3 (#230)Delineation      Well | 8                        | 256                         | Producing      from the Operc section                                                  |
|                                   |                     |                        |                                                                                   |
| No.      4 (#231)Development      Well | 2                        | 116                         | Producing      from the primary Rob-L sand                                             |
|                                   |                     |                        |                                                                                   |
| No.      5 (#232)Development      Well | 8                        | 155                         | Completing      in Operc section; first production expected in first half    2009      |
|                                   |                     |                        |                                                                                   |
| No.      6 (#233)Delineation      Well | 2                        | 40                          | Drilling;      targeting deeper Operc and possibly penetrate the upper Gyro      sands |

| a.   | Confirmed      with wireline logs. |
|----------------|------------------------------------|

| b.   | Status      is reported as of February 25,2009. |
|----------------|-------------------------------------------------|

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|               |   | 2008   |   | 2007   |   | 2006   |   |
|--------------------|--------|--------|--------|--------|--------|--------|--------|
|               |   | Gross  |   | Net    |   | Gross  |   | Net |   | Gross |   | Net |   |
| Exploratory        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Productive         |   | 2      |   | 0.500  |   | 4      |   | 1.150 |   | 6 |   | 2.375 |   |
| Dry                |   | 3      |   | 1.095  |   | 1      |   | 0.150 |   | 4 |   | 1.185 | a |
| In-progress        |   | 7      |   | 2.188  |   | 5      |   | 1.673 |   | 4 |   | 1.808 |   |
| Total              |   | 12     |   | 3.783  |   | 10     |   | 2.973 |   | 14 |   | 5.368 |   |
|               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Development        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Productive         |   | 3      |   | 1.000  |   | -      |   | - |   | 7 |   | 2.613 |   |
| Dry                |   | 1      |   | 0.500  |   | 1      |   | 0.250 |   | - |   | - |   |
| In-progress      b |   | 2      |   | 1.091  |   | 2      |   | 1.091 |   | 2 |   | 0.854 |   |
| Total              |   | 6      |   | 2.591  |   | 3      |   | 1.341 |   | 9 |   | 3.467 |   |

| a.   | Includes      the exploratory well at Grand Isle Block 18 (0.26 net) that was determined      to be nonproductive in early January2007. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Includes      the program’s 0.304 net interest in the Mound Point Offset No. 2 well      (increased to 0.541 net interest for 2007) and 0.550 net interest in the      JB Mountain No. 3, which have been temporarily  abandoned. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|     | Gas   |   | Oil    |   |
|----------|-------|--------|--------|--------|
|     | Gross |   | Net    |   | Gross |   | Net |   |
| Offshore | 173   |   | 79.729 |   | 109 |   | 59.749 |   |
| Onshore  | 19    |   | 7.122  |   | 2 |   | 1.289 |   |
| Total    | 192   |   | 86.851 |   | 111 |   | 61.038 |   |

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Item1A.  Risk Factors

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|   | • | our      cash flow from operations; |
|--------|---------|-------------------------------------|

|   | • | entering      into exploration arrangements with other third  parties; |
|--------|---------|------------------------------------------------------------------------|

|   | • | selling      oil and gas properties; |
|--------|---------|--------------------------------------|

|   | • | borrowing      money from banks;  |
|--------|---------|----------------------------------------|

|   | • | selling      preferred stock, common stock and securities convertible into common      stock. |
|--------|---------|-----------------------------------------------------------------------------------------------|

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|   | • | continued      economic uncertainty in light of the current state of the global financial      and credit markets; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------|

|   | • | the      market price of oil and naturalgas; |
|--------|---------|----------------------------------------------|

|   | • | unexpected      drilling conditions; |
|--------|---------|--------------------------------------|

|   | • | unexpected      pressure or irregularities in geologic  formations; |
|--------|---------|---------------------------------------------------------------------|

|   | • | equipment      failures or accidents; |
|--------|---------|---------------------------------------|

|   | • | title      imperfections; |
|--------|---------|---------------------------|

|   | • | tropical      storms, hurricanes and other adverse weather conditions, which are common      in the Gulf of Mexico during certain times of the  year; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | regulatory      requirements; and |
|--------|---------|----------------------------------------|

|   | • | equipment      and labor shortages resulting in costoverruns. |
|--------|---------|---------------------------------------------------------------|

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|   | • | historical      production from the area compared with production from other producing      areas; |
|--------|---------|----------------------------------------------------------------------------------------------------|

|   | • | assumptions      concerning future oil and natural gas prices, future operating and      development costs, workover, remediation and abandonment costs and      severance and excise taxes; |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | the      effects that hedging contracts may have on our sales of oil and natural      gas; and |
|--------|---------|-----------------------------------------------------------------------------------------------------|

|   | • | the      assumed effects of government regulation and  taxation. |
|--------|---------|------------------------------------------------------------------|

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|   | • | the      actual amount and timing ofproduction; |
|--------|---------|-------------------------------------------------|

|   | • | changes      in consumption by oil and gas  purchasers; and |
|--------|---------|------------------------------------------------------------------|

|   | • | changes      in governmental regulations andtaxation. |
|--------|---------|-------------------------------------------------------|

|   | • | timing      and amount of capital expenditures; |
|--------|---------|-------------------------------------------------|

|   | • | the      operator’s expertise, financial resources, and ability to sustain      operations through periods of distressed or adverse economic      conditions; |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | approval      of operators or other participants in drilling    wells; and |
|--------|---------|---------------------------------------------------------------------------------|

|   | • | selection      of technology. |
|--------|---------|-------------------------------|

|   | • | production      is less than expected; |
|--------|---------|----------------------------------------|

|   | • | the      other party to the hedging contract defaults on its      obligations; or |
|--------|---------|----------------------------------------------------------------------------------------|

|   | • | there      is a change in the expected differential between the underlying price in      the hedging agreement and actual prices  received. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------|

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|   | • | require      the acquisition of a permit before drilling  commences; |
|--------|---------|----------------------------------------------------------------------|

|   | • | restrict      the types, quantities and concentration of various substances that can be      released into the environment from drilling and production      activities; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | limit      or prohibit drilling activities on certain lands lying within wilderness,      wetlands and other protected areas; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------|

|   | • | require      remedial measures to address or mitigate pollution from former operations,      such as plugging abandoned wells; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------|

|   | • | require      bonds or the assumption of other financial responsibility requirements to      cover drilling contingencies and well plugging and abandonment      costs; |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | impose      substantial liabilities for pollution resulting from our      operations; and |
|--------|---------|------------------------------------------------------------------------------------------------|

|   | • | require      capital expenditures for pollution control  equipment. |
|--------|---------|---------------------------------------------------------------------|

|   | • | access      capital bearing a lower cost; |
|--------|---------|-------------------------------------------|

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|   | • | adapt      to fluctuations in the credit markets and periods of distressed or adverse      economic conditions; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------|

|   | • | acquire      producing properties and proved undeveloped  acreage; |
|--------|---------|--------------------------------------------------------------------|

|   | • | obtain      equipment, supplies and labor on betterterms; |
|--------|---------|-----------------------------------------------------------|

|   | • | develop,      or buy, and implement newtechnologies; and |
|--------|---------|---------------------------------------------------------------|

|   | • | access      more information relating toprospects. |
|--------|---------|----------------------------------------------------|

|   | • | fires; |
|--------|---------|--------|

|   | • | natural      disasters; |
|--------|---------|-------------------------|

|   | • | abnormal      pressures in geologic formations; |
|--------|---------|-------------------------------------------------|

|   | • | blowouts; |
|--------|---------|-----------|

|   | • | cratering; |
|--------|---------|------------|

|   | • | pipeline      ruptures; and |
|--------|---------|----------------------------------|

|   | • | spills. |
|--------|---------|---------|

|   | • | tropical      storms and hurricanes, which are common in the Gulf of Mexico during of      the summer and early fall of eachyear; |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | • | extensive      governmental regulation (including regulations that may, in certain      circumstances, impose strict liability for pollution      damage); and |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | interruption      or termination of operations by governmental authorities based on      environmental, safety or otherconsiderations. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------|

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|   | • | evaluating      and analyzing drilling prospects and producing oil and gas from proved      properties; and |
|--------|---------|------------------------------------------------------------------------------------------------------------------|

|   | • | maximizing      production from oil and natural gasproperties. |
|--------|---------|----------------------------------------------------------------|

Item1B.  Unresolved Staff Comments

Item3.  Legal Proceedings

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Item 4.  Submission of Matters to a Vote ofSecurity Holders

Executive Officers of the Registrant

| Name                     |   | Age    |   | Position      or Office                             |
|--------------------------|--------|--------|--------|-----------------------------------------------------|
| James      R. Moffett    |   | 70     |   | Co-Chairman      of the Board                       |
|                     |   |   |   |                                                |
| Richard      C. Adkerson |   | 62     |   | Co-Chairman      of the Board                       |
|                     |   |   |   |                                                |
| Glenn      A. Kleinert   |   | 66     |   | President      and Chief Executive Officer          |
|                     |   |   |   |                                                |
| C.      Howard Murrish   |   | 68     |   | Executive      Vice President                       |
|                     |   |   |   |                                                |
| Nancy      D. Parmelee   |   | 57     |   | Senior      Vice President, Chief Financial Officer |
|                     |   |   |   | and      Secretary                                  |
|                     |   |   |   |                                                |
| Kathleen      L. Quirk   |   | 45     |   | Senior      Vice President and Treasurer            |
|                     |   |   |   |                                                |
| John      G. Amato       |   | 64     |   | General      Counsel                                |

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PART II

Item 5.  Market for Registrant's Common Equity,Related Stockholder Matters and Issuer Purchases of EquitySecurities

|                |   | 2008   |   | 2007   |   |
|---------------------|--------|--------|--------|--------|--------|
|                |   | High   |   | Low    |   | High |   | Low |   |
| First      Quarter  |   | $18.62 |   | $12.50 |   | $15.53 |   | $11.01 |   |
| Second      Quarter |   | 35.52  |   | 17.01  |   | 15.73 |   | 12.51 |   |
| Third      Quarter  |   | 29.88  |   | 19.55  |   | 17.93 |   | 12.94 |   |
| Fourth      Quarter |   | 23.26  |   | 7.39   |   | 15.81 |   | 10.70 |   |

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|                                    | December      31, |
|-----------------------------------------|-------------------|
|                                    | 2003              | 2004 | 2005 | 2006 | 2007 | 2008 |
| McMoRan      Exploration Co.            | $100.00           | $99.73 | $105.44 | $75.84 | $69.81 | $52.27 |
| Independent      Oil & Gas Industry |              |   |   |   |   |   |
| Group                                   | 100.00            | 139.46 | 219.27 | 244.02 | 352.46 | 211.76 |
| S&P      500 Stock Index            | 100.00            | 110.88 | 116.33 | 134.70 | 142.10 | 89.53 |

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Item6.  Selected Financial Data

|                                      |   | 2008a                                                        |      | 2007a  |   | 2006      |   | 2005   |    | 2004   |   |
|-------------------------------------------|--------|--------------------------------------------------------------|-----------|--------|--------|-----------|--------|--------|---------|--------|--------|
| Financial      Data                       |   | (Financial      Data in Thousands, Except Per Share Amounts) |      |
| Years Ended December 31:                  |   |                                                         |      |   |   |      |   |   |    |   |   |   |   |   |   |   |
| Revenues      b                           |   | $                                                            | 1,072,482 |   | $      | 481,167   |   | $      | 209,738 |   | $      | 130,127 |   | $ | 29,849 |   |
| Depreciation      and amortization c      |   |                                                         | 854,798   |   |   | 256,007   |   |   | 104,724 |   |   | 25,896 |   |   | 5,904 |   |
| Exploration      expenses                 |   |                                                         | 79,116    |   |   | 58,954    |   |   | 67,737  |   |   | 63,805 |   |   | 36,903 |   |
| Start-up      costs for Main Pass Energy  |   |                                                         |      |   |   |      |   |   |    |   |   |   |   |   |   |   |
| Hub™      d                         |   |                                                         | 6,047     |   |   | 9,754     |   |   | 10,714  |   |   | 9,749 |   |   | 11,461 |   |
| Exploration      expense reimbursement e  |   |                                                         | -         |   |   | -         |   |   | (10,979 | )      |   | - |   |   | - |   |
| Litigation      settlement f              |   |                                                         | -         |   |   | -         |   |   | (446    | )      |   | 12,830 |   |   | - |   |
| Insurance      recovery g                 |   |                                                         | (3,391    | )      |   | (2,338    | )      |   | (3,306  | )      |   | (8,900 | ) |   | (1,074 | ) |
| Operating      income (loss)              |   |                                                         | (155,234  | )      |   | 3,509     |   |   | (32,567 | )      |   | (22,373 | ) |   | (43,940 | ) |
| Interest      expense, net                |   |                                                         | (50,890   | )      |   | 66,366    |   |   | 10,203  |   |   | 15,282 |   |   | 10,252 |   |
| Loss      from continuing operations      |   |                                                         | (211,198  | )      |   | (63,561   | )      |   | (44,716 | )      |   | (31,470 | ) |   | (52,032 | ) |
| Income      (loss) from discontinued      |   |                                                         |      |   |   |      |   |   |    |   |   |   |   |   |   |   |
| operations      h                         |   |                                                         | (5,496    | )      |   | 3,827     |   |   | (2,938  | )      |   | (8,242 | ) |   | 361 |   |
| Net      loss applicable to common stock  |   |                                                         | (238,980  | )      |   | (63,906   | )      |   | (49,269 | )      |   | (41,332 | ) |   | (53,313 | ) |
|                                      |   |                                                         |      |   |   |      |   |   |    |   |   |   |   |
| Basic      and diluted net loss per share |   |                                                         |      |   |   |      |   |   |    |   |   |   |   |
| of      common stock:                     |   |                                                         |      |   |   |      |   |   |    |   |   |   |   |   |   |   |
| Continuing      operations                |   | $                                                            | (3.79     | )      | $      | (1.97     | )      | $      | (1.66   | )      | $      | (1.35 | ) | $ | (2.85 | ) |
| Discontinued      operations              |   |                                                         | (0.09     | )      |   | 0.11      |   |   | (0.10   | )      |   | (0.33 | ) |   | 0.02 |   |
| Basic      and diluted net loss per share |   | $                                                            | (3.88     | )      | $      | (1.86     | )      | $      | (1.76   | )      | $      | (1.68 | ) | $ | (2.83 | ) |
|                                      |   |                                                         |      |   |   |      |   |   |    |   |   |   |   |
| Average      basic and diluted common     |   |                                                         |      |   |   |      |   |   |    |   |   |   |   |   |   |   |
| shares      outstanding                   |   |                                                         | 61,581    |   |   | 34,283    |   |   | 27,930  |   |   | 24,583 |   |   | 18,828 |   |
|                                      |   |                                                         |      |   |   |      |   |   |    |   |   |   |   |   |   |   |
| At December 31:                           |   |                                                         |      |   |   |      |   |   |    |   |   |   |   |   |   |   |
| Working      capital (deficit)            |   | $                                                            | 3,601     |   | $      | (221,302  | )      | $      | (25,906 | )      | $      | 67,135 |   | $ | 175,889 |   |
| Property,      plant and equipment, net   |   |                                                         | 992,563   |   |   | 1,503,359 |   |   | 282,538 |   |   | 192,397 |   |   | 97,262 |   |
| Total      assets                         |   |                                                         | 1,330,282 |   |   | 1,715,288 |   |   | 408,677 |   |   | 407,636 |   |   | 383,920 |   |
| Oil      and gas reclamation obligations  |   |                                                         | 421,201   |   |   | 294,737   |   |   | 25,876  |   |   | 26,484 |   |   | 14,429 |   |
| Long-term      debt                       |   |                                                         | 374,720   |   |   | 689,000   |   |   | 244,620 |   |   | 270,000 |   |   | 270,000 |   |
| Mandatorily      redeemable convertible   |   |                                                         |      |   |   |      |   |   |    |   |   |   |   |   |   |   |
| preferred      stock                      |   |                                                         | -         |   |   | -         |   |   | 29,043  |   |   | 28,961 |   |   | 29,565 |   |
| Stockholders’      equity (deficit) |   | $                                                            | 309,023   |   | $      | 372,229   |   | $      | (68,443 | )      | $      | (86,590 | ) | $ | (49,546 | ) |

| a.   | Amounts      in 2008 and 2007 include results from the 2007 oil and gas property      acquisition. |
|----------------|----------------------------------------------------------------------------------------------------|

| b.   | Includes      service revenues totaling $13.7 million in 2008, $5.9 million in 2007,      $13.0 million in 2006, $12.0 million in 2005 and $14.2 million in      2004.  See Notes 1 and 3. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Includes      impairment charges of $332.6 million in 2008, $13.6 million in 2007, $33.2      million in 2006 and $0.8 million in 2004.  McMoRan did not      record any impairment charges in 2005 (Note6). |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Reflects      costs associated with pursuit of the licensing, design and financing plans      necessary to establishing an energy hub, including an LNG terminal, at      Main Pass Block 299 (Main Pass) in the Gulf of Mexico (Notes 4 and      6). |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| e.   | Reflects      $20.0 million received upon inception of an exploration agreement in      fourth quarter of 2006 (Note 3). |
|----------------|--------------------------------------------------------------------------------------------------------------------------|

| f.   | Reflects      settlement of class action litigation case, net of insurance proceeds      (Note 17). |
|----------------|-----------------------------------------------------------------------------------------------------|

| g.   | Reflects      proceeds received in connection with our oil and gas hurricane-related      insurance claims (Note 6). |
|----------------|----------------------------------------------------------------------------------------------------------------------|

| h.   | Amounts      include charges for modification of previously estimated reclamation plans      for remaining closed sulphur facilities at Port Sulphur, Louisiana and      year-end reductions in the contractual liability associated with      postretirement benefit costs relating to certain retired former sulphur      employees (Notes 12 and 17). |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                   | 2008a  |       | 2007a  |   | 2006       |   | 2005   |       | 2004   |   |
|----------------------------------------|--------|------------|--------|--------|------------|--------|--------|------------|--------|--------|
| Operating      Data                    |   |       |   |   |       |   |   |       |   |   |   |   |   |   |   |
| Sales      Volumes:                    |   |       |   |   |       |   |   |       |   |   |   |   |   |   |   |
| Gas      (thousand cubic feet, or Mcf) |   | 59,886,900 |   |   | 38,994,000 |   |   | 14,545,600 |   |   | 7,938,000 |   |   | 1,978,500 |   |
| Oil      (barrels)                     |   | 3,635,200  |   |   | 2,380,500  |   |   | 1,379,300  |   |   | 716,400 |   |   | 61,900 |   |
| Plant      products (Mcf equivalent)b  |   | 8,004,400  |   |   | 2,153,300  |   |   | 1,072,200  |   |   | 640,200 |   |   | 137,400 |   |
| Average      realization:              |   |       |   |   |       |   |   |       |   |   |   |   |   |   |   |
| Gas      (per Mcf)                     | $      | 9.96       |   | $      | 7.01       |   | $      | 7.05       |   | $      | 9.24 |   | $ | 6.08 |   |
| Oil      (per barrel)                  |   | 104.00     |   |   | 76.55      |   |   | 60.55      |   |   | 53.82 |   |   | 39.83 |   |

| a.   | Sales      volumes in 2008 associated with the 2007 oil and gas property acquisition      totaled 40.9 Bcf of natural gas, approximately 2,411,500 barrels of oil      and condensate and 5.8 Bcf equivalents of plant products.  For      the period from August 6, 2007 to December 31, 2007, the sales volumes      associated with the 2007 oil and gas property acquisition totaled 25.5 Bcf      of natural gas, approximately 1,267,500 barrels of oil and condensate and      1.3 Bcf equivalents of plantproducts. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Revenues      from plant products (ethane, propane, butane, etc.) totaled $83.3 million      in 2008, $19.3 million in 2007, $9.6 million in 2006, $5.0 million in 2005      and $0.6 million in 2004.  One Mcf equivalent is determined      using the ratio of six Mcf of natural gas to one barrel of crude oil,      condensate or natural gasliquids. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Items 7. and7A.  Management’s Discussion and Analysis of Financial Condition andResults of Operation and Quantitative and Qualitative Disclosures About MarketRisk

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|                                       |   | 2008    |   |   | 2007          |   |
|--------------------------------------------|--------|---------|--------|--------|---------------|--------|
| Revenues:                                  |   |    |   |   |          |   |
| Oil      and natural gas                   | $      | 732,274 |   | $      | 290,856       |   |
| Service                                    |   | 14,171  |   |   | 4,557         |   |
|   Total      revenues            |   | 746,445 |   |   |  295,413 |   |
| Cost      and Expenses:                    |   |    |   |   |          |   |
| Production      and delivery costs         |   | 164,650 |   |   | 57,099        |   |
| Depreciation      and amortization         |   | 636,112 | a      |   | 170,012       |   |
| Exploration      expenses                  |   | 4,559   |   |   | 112           | b      |
| General      and administrative expenses c |   | 4,551   |   |   | 2,463         |   |
| Total      costs and expenses              |   | 809,872 |   |   | 229,686       |   |
| Operating      income (loss)               | $      | (63,427 | )      | $      | 65,727        |   |

| a.   | Includes      impairment charges totaling $207.5 million and reclamation charges      totaling $124.4 million to reflect higher estimates and accelerated timing      of future abandonment costs. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Excludes      $13.0 million in seismic data costs incurred that were not allocated to      the acquired properties. |
|----------------|---------------------------------------------------------------------------------------------------------------------|

| c.   | Only      includes cost directly allocated to the acquired properties and excludes      all compensation costs associated with newly hired employees, which are      not allocated to the acquiredproperties. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                        |   | 2008   |      | 2007   |   |
|-------------------------------------------------------------|--------|--------|-----------|--------|--------|
| Oil      and natural gas revenues – prior year period |   | $      | 475,250   |   | $      | 196,717 |   |
| Increase      (decrease)                                    |   |   |      |   |   |   |   |
| Price      realizations:                                    |   |   |      |   |   |   |   |
| Natural      gas                                            |   |   | 42,029    |   |   | 6,421 |   |
| Oil      and condensate                                     |   |   | 37,709    |   |   | 6,725 |   |
| Sales      volumes:                                         |   |   |      |   |   |   |   |
| Natural      gas                                            |   |   | 41,029    |   |   | (7,215 | ) |
| Oil      and condensate                                     |   |   | 7,418     |   |   | (15,702 | ) |
| Properties      acquired in 2007                            |   |   | 441,418   |   |   | 290,856 |   |
| Plant      products revenue                                 |   |   | 13,850    |   |   | (2,058 | ) |
| Other                                                       |   |   | 101       |   |   | (494 | ) |
| Oil      and natural gas revenues - current year period     |   | $      | 1,058,804 |   | $      | 475,250 |   |

|                                     |   |   | Per   |   |              |   | Per   |   |   |   | Per   |
|------------------------------------------|--------|--------|-------|--------|-------------------|--------|-------|--------|--------|--------|-------|
|                                     | 2008   |   | Mcfe  |   | 2007              |   | Mcfe  |   | 2006   |   | Mcfe  |
| Lease      operating expense             | $133.6 |   | $1.49 |   | $  69.8 |   | $1.26 |   | $30.4  |   | $1.27 |
| Workover      costs                      | 39.7   |   | 0.44  |   | 19.7              |   | 0.35  |   | 0.2    |   | 0.01  |
| Hurricane      related repairs           | 23.1   |   | 0.26  |   | -                 |   | -     |   | 4.3    |   | 0.18  |
| Insurance                                | 22.6   |   | 0.25  |   | 23.2              |   | 0.42  |   | 8.5    |   | 0.36  |
| Transportation      and production taxes | 38.4   |   | 0.43  |   | 9.1               |   | 0.16  |   | 5.1    |   | 0.21  |
| Other                                    | 1.1    |   | 0.01  |   | 0.3               |   | 0.01  |   | 4.6    |   | 0.19  |
| Total      production and delivery costs | $258.5 |   | $2.88 |   | $122.1            |   | $2.20 |   | $53.1  |   | $2.22 |

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|                                    |   |   | Per    |   |   |   | Per    |   |              |   | Per    |
|-----------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|-------------------|--------|--------|
|                                    | 2008   |   | Mcfe   |   | 2007   |   | Mcfe   |   | 2006              |   | Mcfe   |
| Depletion      and depreciation expense | $357.5 |   | $3.98  |   | $228.5 |   | $4.12  |   | $  69.4 |   | $2.91  |
| Accretion      expense                  | 164.8  |   | 1.84   |   | 13.9   |   | 0.25   |   | 2.1               |   | 0.08   |
| Impairment      charges/losses          | 332.5  |   | 3.71   |   | 13.6   |   | 0.25   |   | 33.2              |   | 1.39   |
| Total      depletion, depreciation and  |   |   |   |   |   |   |   |   |              |   |   |
| amortization      expense               | $854.8 |   | $9.53  |   | $256.0 |   | $4.62  |   | $104.7            |   | $4.38  |

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|                                   | Years      Ended December 31, |   |
|----------------------------------------|-------------------------------|--------|
|                                   |                          | 2008   |   |   | 2007 |   |   | 2006 |   |
| Geological      and geophysical,       |                          |   |   |   |   |   |   |   |   |
| including      3-D seismic purchases a | $                             | 31.9   |   | $ | 29.9 | b | $ | 15.2 |   |
| Dry      hole costs                    |                          | 38.9   | c |   | 22.8 | d |   | 45.6 | e |
| Insurance      and other               |                          | 8.3    |   |   | 6.3 |   |   | 6.9 |   |
|                                   | $                             | 79.1   |   | $ | 59.0 |   | $ | 67.7 |   |

| a.   | Includes      compensation costs associated with stock-based awards totaling $14.4      million in 2008, $6.3 million in 2007 and $8.1 million in      2006. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Includes      $13.0 million of seismic data purchases primarily associated with the      exploration acreage acquired in the 2007 oil and gas property      acquisition. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Includes      nonproductive exploratory drilling and related costs primarily associated      with the Mound Point East well at Louisiana State Lease 340 ($16.0      million), the Northeast Belle Isle well ($9.5 million) and the Gladstone      East well ($5.4 million) as well as approximately $8.0 million of      nonproductive leasehold costs. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Primarily      includes nonproductive exploratory drilling and related costs primarily      associated with the “Cas” well at South Timbalier Block 70 ($21.6      million). |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | Primarily      includes nonproductive exploratory drilling and related costs for wells at      Louisiana State Lease 18091 ($14.9 million), South Pass Block 26 ($8.3      million), Vermilion Block 54 ($7.8 million), Grand Isle Block 18 ($7.0      million), and the evaluation of the deeper objectives at “Zigler Canal” in      Vermilion Parish, Louisiana ($1.7 million).  Also includes the      costs incurred during 2006 totaling $5.2 million for two wells that were      evaluated as nonproductive in January2006. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                    | For      Year Ended December 31, |   |
|-------------------------|----------------------------------|--------|
|                    | 2008                             |   | 2007 |   | 2006 |   |
| Continuing operations   |                             |   |   |   |   |   |   |   |   |
| Operating               | $                                | 629.7  |   | $ | 209.6 |   | $ | 100.1 |   |
| Investing               |                             | (239.2 | ) |   | (1,195.2 | ) |   | (231.1 | ) |
| Financing               |                             | (295.5 | ) |   | 974.6 |   |   | 22.8 |   |
|                    |                             |   |   |   |   |   |   |   |   |
| Discontinued operations |                             |   |   |   |   |   |   |   |   |
| Operating               | $                                | (6.3   | ) | $ | (2.0 | ) | $ | (4.9 | ) |
| Investing               |                             | -      |   |   | - |   |   | - |   |
| Financing               |                             | -      |   |   | - |   |   | - |   |
|                    |                             |   |   |   |   |   |   |   |   |
| Total cash flow         |                             |   |   |   |   |   |   |   |   |
| Operating               | $                                | 623.4  |   | $ | 207.6 |   | $ | 95.2 |   |
| Investing               |                             | (239.2 | ) |   | (1,195.2 | ) |   | (231.1 | ) |
| Financing               |                             | (295.5 | ) |   | 974.6 |   |   | 22.8 |   |

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|       | Debt      and     |   |      |   |       |   |               |   |      |   |   |
|------------|-------------------|--------|-----------|--------|------------|--------|--------------------|--------|-----------|--------|--------|
|       | Convertible       |   | Interest  |   | Retirement |   | Oil      & Gas |   | Lease     |   |   |
|       | Securities      a |   | Paymentsb |   | Benefitsc  |   | Obligationsd       |   | Paymentse |   | Total  |
| 2009       | $                 | -      |      | $      | 44.7       |   | $                  | 1.4    |      | $      | 174.6  |   | $ | 2.3 |   | $ | 223.0 |
| 2010       |              | -      |      |   | 44.7       |   |               | 1.4    |      |   | 93.3   |   |   | 2.3 |   |   | 141.7 |
| 2011       |              | 74.7   |      |   | 44.7       |   |               | 1.4    |      |   | 0.4    |   |   | 2.3 |   |   | 123.5 |
| 2012       |              | -      |      |   | 37.4       |   |               | 1.4    |      |   | 5.3    |   |   | 2.3 |   |   | 46.4 |
| 2013       |              | -      |      |   | 35.6       |   |               | 1.3    |      |   | 5.3    |   |   | 2.3 |   |   | 44.5 |
| Thereafter |              | 300.0  |      |   | 31.2       |   |               | 6.2    |      |   | 0.1    |   |   | 1.2 |   |   | 338.7 |
| Total      | $                 | 374.7  |      | $      | 238.3      |   | $                  | 13.1   |      | $      | 279.0  |   | $ | 12.7 |   | $ | 917.8 |

| a.   | Amounts      due upon maturity subject to change based on future conversions by the      holders of the securities. |
|----------------|---------------------------------------------------------------------------------------------------------------------|

| b.   | Reflects      interest and unused commitment fees on the debt balances and availability      as of December 31, 2008.  We did not have any amounts      outstanding under our credit facility as of December 31, 2008; therefore,      we assumed a zero percent effective annual interest rate on our credit      facility and a 1.94 percent and 0.38 percent interest rate on outstanding      letters of credit ($100 million) and unused commitment fee,      respectively.  Interest on the convertible senior notes is      fixed. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Includes      anticipated payments under our employee retirement health care plan      through 2018 (Note 13) and our future reimbursements associated with the      contractual liability covering certain of our former sulphur retiree’s      medical costs (Note 17). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | These      oil & gas obligations primarily reflect our net working interest share      of authorized exploration and development project costs at December 31,      2008 (see below for total estimated exploration and development      expenditures for 2009).  Included in these amounts is $130.2      million of expenditures for drilling rig contract charges which we expect      to share with our partners in our exploration program.  Also      includes escrow payments to support the funding requirements related to      the 2007 oil and gas acquisition property reclamation obligations (Note      17). |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | Amount      primarily reflects leases for office space in two buildings in Houston,      Texas, which terminate in April 2014 and July 2014, respectively and      office space in Lafayette, Louisiana which terminates in November      2011. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                             | Oil      and Gas |    | Sulphur |
|----------------------------------|------------------|---------|---------|
|                             | 2008             |    | 2007    |   | 2008 |   | 2007 |
| Undiscounted      cost estimates | $                | 642,155 |    | $ | 448,095 |   | $ | 42,557 |   | $ | 38,712 |
| Discounted      cost estimates   | $                | 421,201 |    | $ | 294,737 |   | $ | 23,003 |   | $ | 21,300 |

|                                        | Inflation      Rate |   | Market      Risk Premium |   |
|---------------------------------------------|---------------------|--------|--------------------------|--------|
|                                        | +1%                 |   | -1%                      |   | +1% |   | -1% |   |
| Oil      & Gas reclamation obligations: |                |   |                     |   |   |   |   |   |   |   |   |   |
|     Undiscounted        | $                   | 28.4   |                     | $      | (29.7 | ) | $ | 2.6 |   | $ | (6.6 | ) |
|     Discounted          |                | 14.5   |                     |   | (14.8 | ) |   | 3.4 |   |   | (3.6 | ) |
| Sulphur      reclamation obligations:       |                |   |                     |   |   |   |   |   |   |   |   |   |
|     Undiscounted        |                | 5.0    |                     |   | (5.0 | ) |   | 0.4 |   |   | (0.4 | ) |
|     Discounted          |                | 1.1    |                     |   | (0.9 | ) |   | 0.2 |   |   | (0.2 | ) |

| 1)   | The      determination of our proved oil and natural gas reserves involves inherent      uncertainties. The accuracy of any reserve estimate depends on the quality      of available data and the application of engineering and geological      interpretations and judgments. Different reserve engineers may make      different estimates of proved reserve quantities and estimates of cash      flows based on varying interpretations of the same available data.      Estimates of proved reserves for wells with limited or no production      history are less reliable than those based on actual production      history. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2)   | The      assumptions used in determining whether reserves can be produced      economically can vary. The key assumptions used in estimating our proved      reserves include: |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| a)   | Estimated      future oil and natural gas prices and future operating    costs. |
|----------------|---------------------------------------------------------------------------------|

| b)   | Projected      production levels and the timing and amounts of future development,      remedial, and abandonment costs. |
|----------------|--------------------------------------------------------------------------------------------------------------------------|

| c)   | Assumed      effects of government regulations on our  operations. |
|----------------|--------------------------------------------------------------------|

| d)   | Historical      production from the area compared with production in similar producing      areas. |
|----------------|----------------------------------------------------------------------------------------------------|

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Item8.  Financial Statements and SupplementaryData

| ·   | Pertain      to the maintenance of records that in reasonable detail accurately and      fairly reflect the transactions and dispositions of the Company’s      assets; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Provide      reasonable assurance that transactions are recorded as necessary to permit      preparation of financial statements in accordance with generally accepted      accounting principles, and that receipts and expenditures of the Company      are being made only in accordance with authorizations of management and      directors of the Company; and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Provide      reasonable assurance regarding prevention or timely detection of      unauthorized acquisition, use or disposition of the Company’s assets that      could have a material effect on the financial  statements. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Glenn      A. Kleinert   | Nancy      D. Parmelee           |
|--------------------------|----------------------------------|
| President      and Chief | Senior      Vice President,      |
| Executive      Officer   | Chief      Financial Officer and |
|                     | Secretary                        |

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|                                                                                             |   | December      31,   |      |
|--------------------------------------------------------------------------------------------------|--------|---------------------|-----------|
|                                                                                             |   | 2008                |      | 2007 |   |
|                                                                                             |   | (In      Thousands) |      |
| ASSETS                                                                                           |   |                |      |   |   |   |   |
| Current      assets:                                                                             |   |                |      |   |   |   |   |
| Cash      and cash equivalents                                                                   |   | $                   | 93,486    |   | $ | 4,830 |   |
| Accounts      receivable                                                                         |   |                | 112,684   |   |   | 128,690 |   |
| Inventories                                                                                      |   |                | 31,284    |   |   | 11,507 |   |
| Prepaid      expenses                                                                            |   |                | 13,819    |   |   | 14,331 |   |
| Fair      value of oil and gas derivative contracts                                              |   |                | 31,624    |   |   | 16,623 |   |
| Current      assets from discontinued operations, including restricted cash of $0.5      million |   |                | 516       |   |   | 3,029 |   |
| Total      current assets                                                                        |   |                | 283,413   |   |   | 179,010 |   |
| Property,      plant and equipment, net                                                          |   |                | 992,563   |   |   | 1,503,359 |   |
| Sulphur      business assets                                                                     |   |                | 3,012     |   |   | 476 |   |
| Restricted      investments and cash                                                             |   |                | 29,789    |   |   | 6,909 |   |
| Fair      value of oil and gas derivative contracts                                              |   |                | 5,847     |   |   | 4,317 |   |
| Deferred      financing costs                                                                    |   |                | 15,658    |   |   | 21,217 |   |
| Total      assets                                                                                |   | $                   | 1,330,282 |   | $ | 1,715,288 |   |
|                                                                                             |   |                |      |   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY                                                  |   |                |      |   |   |   |   |
| Current      liabilities:                                                                        |   |                |      |   |   |   |   |
| Accounts      payable                                                                            |   | $                   | 77,009    |   | $ | 97,821 |   |
| Accrued      liabilities                                                                         |   |                | 89,565    |   |   | 68,292 |   |
| 6%      convertible senior notes                                                                 |   |                | -         |   |   | 100,870 |   |
| Other      short term borrowings                                                                 |   |                | -         |   |   | 10,665 |   |
| Accrued      interest and dividends payable                                                      |   |                | 7,586     |   |   | 13,055 |   |
| Current      portion of accrued oil and gas reclamation costs                                    |   |                | 103,550   |   |   | 80,839 |   |
| Current      portion of accrued sulphur reclamation costs                                        |   |                | 785       |   |   | 12,145 |   |
| Fair      value of oil and gas derivative contracts                                              |   |                | -         |   |   | 14,001 |   |
| Current      liabilities from discontinued operations                                            |   |                | 1,317     |   |   | 2,624 |   |
| Total      current liabilities                                                                   |   |                | 279,812   |   |   | 400,312 |   |
| Senior      secured revolving credit facility                                                    |   |                | -         |   |   | 274,000 |   |
| 5¼%      convertible senior notes                                                           |   |                | 74,720    |   |   | 115,000 |   |
| 11.875%      senior notes                                                                        |   |                | 300,000   |   |   | 300,000 |   |
| Accrued      oil and gas reclamation costs                                                       |   |                | 317,651   |   |   | 213,898 |   |
| Accrued      sulphur reclamation costs                                                           |   |                | 22,218    |   |   | 9,155 |   |
| Fair      value of oil and gas derivative contracts                                              |   |                | -         |   |   | 7,516 |   |
| Other      long-term liabilities from discontinued operations                                    |   |                | 6,835     |   |   | 7,808 |   |
| Other      long-term liabilities                                                                 |   |                | 20,023    |   |   | 15,370 |   |
| Total      liabilities                                                                           |   | $                   | 1,021,259 |   | $ | 1,343,059 |   |
| Commitments      and contingencies (Note 17)                                                     |   |                |      |   |   |   |   |

----

TABLE OFCONTENTS

|                                                                                       |   | December      31,   |      |
|--------------------------------------------------------------------------------------------|--------|---------------------|-----------|
|                                                                                       |   | 2008                |      | 2007 |   |
|                                                                                       |   | (In      Thousands) |      |
| Stockholders'      equity:                                                                 |   |                |      |   |   |   |   |
| Preferred      stock, par value $0.01, 50,000,000 shares authorized, 1,589,340      and    |   |                |      |   |   |   |   |
| 2,587,500      shares issued and outstanding ($100 per share liquidation      preference), |   |                |      |   |   |   |   |
| respectively      (Note 10)                                                                |   | $                   | 158,934   |   | $ | 258,750 |   |
| Common      stock, par value $0.01, 150,000,000 shares authorized,      72,981,734         |   |                |      |   |   |   |   |
| shares      and 55,795,251 shares issued and outstanding, respectively                     |   |                | 730       |   |   | 558 |   |
| Capital      in excess of par value of common stock                                        |   |                | 971,977   |   |   | 718,472 |   |
| Accumulated      deficit                                                                   |   |                | (776,153  | ) |   | (559,459 | ) |
| Accumulated      other comprehensive loss                                                  |   |                | (22       | ) |   | (653 | ) |
| Common      stock held in treasury, 2,508,660 shares and 2,471,674    shares,              |   |                |      |   |   |   |   |
| at      cost, respectively                                                                 |   |                | (46,443   | ) |   | (45,439 | ) |
| Total      stockholders’ equity                                                      |   |                | 309,023   |   |   | 372,229 |   |
| Total      liabilities, mandatorily redeemable convertible preferred stock      and        |   |                |      |   |   |   |   |
| stockholders’      equity                                                            |   | $                   | 1,330,282 |   | $ | 1,715,288 |   |

----

TABLE OFCONTENTS

|                                                             | Years      Ended December 31,                 |      |
|------------------------------------------------------------------|-----------------------------------------------|-----------|
|                                                             | 2008                                          |      | 2007 |   | 2006 |   |
|                                                             | (In      Thousands, Except Per Share Amounts) |      |
| Revenues:                                                        |                                          |      |   |   |   |   |   |   |   |
| Oil      and natural gas                                         | $                                             | 1,058,804 |   | $ | 475,250 |   | $ | 196,717 |   |
| Service                                                          |                                          | 13,678    |   |   | 5,917 |   |   | 13,021 |   |
| Total      revenues                                              |                                          | 1,072,482 |   |   | 481,167 |   |   | 209,738 |   |
|                                                             |                                          |      |   |   |   |   |   |   |   |
| Costs      and expenses:                                         |                                          |      |   |   |   |   |   |   |   |
| Production      and delivery costs                               |                                          | 258,450   |   |   | 122,127 |   |   | 53,134 |   |
| Depletion,      depreciation and amortization expense            |                                          | 854,798   |   |   | 256,007 |   |   | 104,724 |   |
| Exploration      expenses                                        |                                          | 79,116    |   |   | 58,954 |   |   | 67,737 |   |
| (Gain)      loss on oil and gas derivative contracts             |                                          | (16,303   | ) |   | 5,181 |   |   | - |   |
| General      and administrative expenses                         |                                          | 48,999    |   |   | 27,973 |   |   | 20,727 |   |
| Start-up      costs for Main Pass Energy Hub™      Project |                                          | 6,047     |   |   | 9,754 |   |   | 10,714 |   |
| Exploration      expense reimbursement (Note 3)                  |                                          | -         |   |   | - |   |   | (10,979 | ) |
| Litigation      settlement, net of insurance proceeds (Note 17)  |                                          | -         |   |   | - |   |   | (446 | ) |
| Insurance      recoveries (Note 6)                               |                                          | (3,391    | ) |   | (2,338 | ) |   | (3,306 | ) |
| Total      costs and expenses                                    |                                          | 1,227,716 |   |   | 477,658 |   |   | 242,305 |   |
| Operating      income (loss)                                     |                                          | (155,234  | ) |   | 3,509 |   |   | (32,567 | ) |
| Interest      expense, net                                       |                                          | (50,890   | ) |   | (66,366 | ) |   | (10,203 | ) |
| Other      expense, net                                          |                                          | (2,566    | ) |   | (704 | ) |   | (1,946 | ) |
| Loss      from continuing operations before income taxes         |                                          | (208,690  | ) |   | (63,561 | ) |   | (44,716 | ) |
| Provision      for income taxes                                  |                                          | (2,508    | ) |   | - |   |   | - |   |
| Loss      from continuing operations                             |                                          | (211,198  | ) |   | (63,561 | ) |   | (44,716 | ) |
| Income      (loss) from discontinued operations                  |                                          | (5,496    | ) |   | 3,827 |   |   | (2,938 | ) |
| Net      loss                                                    |                                          | (216,694  | ) |   | (59,734 | ) |   | (47,654 | ) |
| Preferred      dividends, amortization of convertible preferred  |                                          |      |   |   |   |   |   |   |   |
| stock      issuance costs and inducement payments for the        |                                          |      |   |   |   |   |   |   |   |
| early      conversion of preferred stock                         |                                          | (22,286   | ) |   | (4,172 | ) |   | (1,615 | ) |
| Net      loss applicable to common stock                         | $                                             | (238,980  | ) | $ | (63,906 | ) | $ | (49,269 | ) |
|                                                             |                                          |      |   |   |   |   |   |   |   |
| Basic      and diluted net loss per share of common stock:       |                                          |      |   |   |   |   |   |   |   |
| Net      loss from continuing operations                         |                                          | $(3.79    | ) |   | $(1.97 | ) |   | $(1.66 | ) |
| Net      income (loss) from discontinued operations              |                                          | (0.09     | ) |   | 0.11 |   |   | (0.10 | ) |
| Net      loss per share of common stock                          |                                          | $(3.88    | ) |   | $(1.86 | ) |   | $(1.76 | ) |
|                                                             |                                          |      |   |   |   |   |   |   |   |
| Average      common shares outstanding:                          |                                          |      |   |   |   |   |   |   |   |
| Basic      and diluted                                           |                                          | 61,581    |   |   | 34,283 |   |   | 27,930 |   |

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TABLE OFCONTENTS

|                                                               |   | Years      Ended December 31, |     |
|--------------------------------------------------------------------|--------|-------------------------------|----------|
|                                                               |   | 2008                          |     | 2007 |   | 2006 |   |
|                                                               |   | (In      Thousands)           |     |
| Cash      flow from operating activities:                          |   |                          |     |   |   |   |   |   |   |   |
| Net      loss                                                      |   | $                             | (216,694 | ) | $ | (59,734 | ) | $ | (47,654 | ) |
| Adjustments      to reconcile net loss to net cash                 |   |                          |     |   |   |   |   |   |   |   |
| provided      by operating activities:                             |   |                          |     |   |   |   |   |   |   |   |
| (Income)      loss from discontinued operations                    |   |                          | 5,496    |   |   | (3,827 | ) |   | 2,938 |   |
| Depletion,      depreciation and amortization expense              |   |                          | 854,798  |   |   | 256,007 |   |   | 104,724 |   |
| Exploration      drilling and related expenditures                 |   |                          | 37,841   |   |   | 22,832 |   |   | 45,591 |   |
| Compensation      associated with stock-based awards               |   |                          | 30,223   |   |   | 13,107 |   |   | 15,822 |   |
| Amortization      of deferred financing costs                      |   |                          | 4,630    |   |   | 14,713 |   |   | 1,891 |   |
| Unrealized      (gain) loss on oil and gas derivative contracts    |   |                          | (40,612  | ) |   | 5,181 |   |   | - |   |
| Loss      on induced conversion of convertible senior notes        |   |                          | 2,663    |   |   | - |   |   | 4,301 |   |
| Reclamation      expenditures, net of prepayments by third parties |   |                          | (29,432  | ) |   | (10,622 | ) |   | (670 | ) |
| (Increase)      decrease in restricted cash                        |   |                          | (15,152  | ) |   | (3,748 | ) |   | 278 |   |
| Payment      to fund terminated pension plan                       |   |                          | (2,291   | ) |   | - |   |   | - |   |
| Purchase      of oil and gas derivative contracts and other        |   |                          | (155     | ) |   | (4,335 | ) |   | 997 |   |
| (Increase)      decrease in working capital:                       |   |                          |     |   |   |   |   |   |   |   |
| Accounts      receivable-customers                                 |   |                          | 40,900   |   |   | (51,433 | ) |   | (2,423 | ) |
| Accounts      receivable-joint interest partners                   |   |                          | (25,270  | ) |   | (10,099 | ) |   | (3,364 | ) |
| Accounts      receivable-other                                     |   |                          | 1,461    |   |   | (2,228 | ) |   | 1,264 |   |
| Accounts      payable and accrued liabilities                      |   |                          | 8,618    |   |   | 17,781 |   |   | 8,337 |   |
| Inventories                                                        |   |                          | (19,777  | ) |   | 13,527 |   |   | (17,050 | ) |
| Prepaid      expenses                                              |   |                          | (7,588   | ) |   | 12,526 |   |   | (14,845 | ) |
| Net      cash provided by continuing operations                    |   |                          | 629,659  |   |   | 209,648 |   |   | 100,137 |   |
| Net      cash used in discontinued operations                      |   |                          | (6,262   | ) |   | (2,010 | ) |   | (4,946 | ) |
| Net      cash provided by operating activities                     |   |                          | 623,397  |   |   | 207,638 |   |   | 95,191 |   |
|                                                               |   |                          |     |   |   |   |   |   |   |   |
|                                                               |   |                          |     |   |   |   |   |   |   |   |
| Cash      flow from investing activities:                          |   |                          |     |   |   |   |   |   |   |   |
| Exploration,      development and other capital expenditures       |   |                          | (236,383 | ) |   | (153,210 | ) |   | (252,369 | ) |
| Acquisition      of properties, net                                |   |                          | (2,826   | ) |   | (1,047,936 | ) |   | - |   |
| Property      insurance reimbursement                              |   |                          | -        |   |   | - |   |   | 3,947 |   |
| Proceeds      from restricted investments                          |   |                          | -        |   |   | 6,056 |   |   | 16,505 |   |
| Increase      in restricted investments                            |   |                          | -        |   |   | (126 | ) |   | (229 | ) |
| Proceeds      from sale of oil and gas properties                  |   |                          | -        |   |   | - |   |   | 1,071 |   |
| Net      cash used in continuing activities                        |   |                          | (239,209 | ) |   | (1,195,216 | ) |   | (231,075 | ) |
| Net      cash used in discontinued operations                      |   |                          | -        |   |   | - |   |   | - |   |
| Net      cash used in investing activities                         |   | $                             | (239,209 | ) | $ | (1,195,216 | ) | $ | (231,075 | ) |
|                                                               |   |                          |     |   |   |   |   |   |   |   |

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TABLE OFCONTENTS

|                                                             |   | Years      Ended December 31, |     |
|------------------------------------------------------------------|--------|-------------------------------|----------|
|                                                             |   | 2008                          |     | 2007 |   | 2006 |   |
|                                                             |   | (In      Thousands)           |     |
| Cash      flow from financing activities:                        |   |                          |     |   |   |   |   |   |   |   |
| (Payments)      borrowings under senior secured revolving credit |   |                          |     |   |   |   |   |   |   |   |
| facility,      net                                               |   | $                             | (274,000 | ) | $ | 245,250 |   | $ | 28,750 |   |
| Proceeds      from sale of 11.875% senior notes                  |   |                          | -        |   |   | 300,000 |   |   | - |   |
| Net      proceeds from sale of 6¾% mandatory convertible    |   |                          |     |   |   |   |   |   |   |   |
| preferred      stock                                             |   |                          | -        |   |   | 250,385 |   |   | - |   |
| Net      proceeds from sale of common stock                      |   |                          | -        |   |   | 200,189 |   |   | - |   |
| Proceeds      from bridge loan facility                          |   |                          | -        |   |   | 800,000 |   |   | - |   |
| Repayment      of bridge loan facility                           |   |                          | -        |   |   | (800,000 | ) |   | - |   |
| Proceeds      from senior term loan                              |   |                          | -        |   |   | 100,000 |   |   | - |   |
| Repayment      of senior term loan                               |   |                          | -        |   |   | (100,000 | ) |   | - |   |
| Financing      costs                                             |   |                          | -        |   |   | (30,553 | ) |   | (531 | ) |
| Dividends      paid and inducement payments on early conversion  |   |                          |     |   |   |   |   |   |   |   |
| of      convertible preferred stock                              |   |                          | (23,565  | ) |   | (1,121 | ) |   | (1,494 | ) |
| Payments      for induced conversion of convertible senior notes |   |                          | (2,663   | ) |   | - |   |   | (4,301 | ) |
| Proceeds      from exercise of stock options, warrants and other |   |                          | 4,696    |   |   | 10,428 |   |   | 389 |   |
| Net      cash (used in) provided by continuing operations        |   |                          | (295,532 | ) |   | 974,578 |   |   | 22,813 |   |
| Net      cash activity from discontinued operations              |   |                          | -        |   |   | - |   |   | - |   |
| Net      cash (used in ) provided by financing activities        |   |                          | (295,532 | ) |   | 974,578 |   |   | 22,813 |   |
| Net      decrease in cash and cash equivalents                   |   |                          | 88,656   |   |   | (13,000 | ) |   | (113,071 | ) |
| Cash      and cash equivalents at beginning of year              |   |                          | 4,830    |   |   | 17,830 |   |   | 130,901 |   |
| Cash      and cash equivalents at end of year                    |   | $                             | 93,486   |   | $ | 4,830 |   | $ | 17,830 |   |
|                                                             |   |                          |     |   |   |   |   |   |   |   |
|                                                             |   |                          |     |   |   |   |   |   |   |   |
| Interest      paid                                               |   | $                             | 55,181   |   | $ | 67,622 |   | $ | 9,382 |   |
| Income      taxes paid                                           |   | $                             | 3,370    |   | $ | - |   | $ | - |   |
|                                                             |   |                          |     |   |   |   |   |   |   |   |

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TABLE OFCONTENTS

|                                                                           |   | Years      Ended December 31, |    |
|--------------------------------------------------------------------------------|--------|-------------------------------|---------|
|                                                                           |   | 2008                          |    | 2007 |   | 2006 |   |
|                                                                           |   | (In      Thousands)           |    |
| Preferred      stock:                                                          |   |                          |    |   |   |   |   |   |   |   |
| Balance      at beginning of year, representing  2,587,500    shares |   |                          |    |   |   |   |   |   |   |   |
| in      2008 and no shares in 2007 or 2006                                     |   | $                             | 258,750 |   | $ | - |   | $ | - |   |
| Shares      converted in privately negotiated transaction,                     |   |                          |    |   |   |   |   |   |   |   |
| representing      998,160 shares                                               |   |                          | (99,816 | ) |   | - |   |   | - |   |
| Shares      sold in equity offering, representing 2,587,500 shares             |   |                          | -       |   |   | 258,750 |   |   | - |   |
| Balance      end of year, representing 1,589,340 shares in                     |   |                          |    |   |   |   |   |   |   |   |
| 2008,      2,587,500 shares in 2007 and no shares in 2006                      |   |                          | 158,934 |   |   | 258,750 |   |   | - |   |
|                                                                           |   |                          |    |   |   |   |   |   |   |   |
| Common      stock:                                                             |   |                          |    |   |   |   |   |   |   |   |
| Balance      at beginning of year representing 55,795,251 shares               |   |                          |    |   |   |   |   |   |   |   |
| in      2008, 30,740,275 shares in 2007 and 27,122,538 shares                  |   |                          |    |   |   |   |   |   |   |   |
| in      2006                                                                   |   |                          | 558     |   |   | 307 |   |   | 271 |   |
| Shares      issued in equity offering representing 16,887,500                  |   |                          |    |   |   |   |   |   |   |   |
| shares      (at $12.40 per share) (Note 10)                                    |   |                          | -       |   |   | 169 |   |   | - |   |
| Shares      issued in debt conversion transactions representing                |   |                          |    |   |   |   |   |   |   |   |
| 9,508,743      shares in 2008 and 3,552,494 shares in 2006                     |   |                          | 95      |   |   | - |   |   | 36 |   |
| Exercise      of stock warrants representing 636,811 shares in                 |   |                          |    |   |   |   |   |   |   |   |
| 2008      and 1,742,424 shares in 2007                                         |   |                          | 7       |   |   | 17 |   |   | - |   |
| Exercise      of stock options and other representing 332,896                  |   |                          |    |   |   |   |   |   |   |   |
| shares      in 2008, 219,633 shares in 2007 and 56,927                         |   |                          |    |   |   |   |   |   |   |   |
| shares      in 2006                                                            |   |                          | 3       |   |   | 3 |   |   | - |   |
| Preferred      stock conversions representing 6,708,033 shares                 |   |                          |    |   |   |   |   |   |   |   |
| in      2008, 6,205,419 shares in 2007 and 8,316 shares in 2006                |   |                          | 67      |   |   | 62 |   |   | - |   |
| Balance      at end of year representing, 72,981,734 shares in                 |   |                          |    |   |   |   |   |   |   |   |
| 2008,      55,795,251 shares in 2007 and 30,740,275 shares in                  |   |                          |    |   |   |   |   |   |   |   |
| 2006                                                                           |   |                          | 730     |   |   | 558 |   |   | 307 |   |
|                                                                           |   |                          |    |   |   |   |   |   |   |   |
| Capital      in Excess of Par Value:                                           |   |                          |    |   |   |   |   |   |   |   |
| Balance      at beginning of year                                              |   |                          | 718,472 |   |   | 477,178 |   |   | 410,139 |   |
| Costs      associated with preferred stock equity offering                     |   |                          | -       |   |   | (8,365 | ) |   | - |   |
| Common      stock equity offering, net of offering costs                       |   |                          |    |   |   |   |   |   |   |   |
| of      $9.6 million                                                           |   |                          | -       |   |   | 200,020 |   |   | - |   |
| Shares      issued in debt conversion transactions                             |   |                          | 140,127 |   |   | - |   |   | 52,513 |   |
| Preferred      stock conversions                                               |   |                          | 99,749  |   |   | 29,786 |   |   | 40 |   |
| Stock-based      compensation expense                                          |   |                          | 30,223  |   |   | 13,107 |   |   | 15,822 |   |
| Exercise      of stock options  and warrants                         |   |                          | 5,692   |   |   | 10,917 |   |   | 389 |   |
| Dividends      and inducement payments on preferred stock and                  |   |                          |    |   |   |   |   |   |   |   |
| amortization      of related issuance cost                                     |   |                          | (22,286 | ) |   | (4,171 | ) |   | (1,615 | ) |
| Unamortized      value of restricted stock units on adoption                   |   |                          |    |   |   |   |   |   |   |   |
| of      new accounting standard                                                |   |                          | -       |   |   | - |   |   | (110 | ) |
| Balance      at end of year                                                    |   |                          | 971,977 |   |   | 718,472 |   |   | 477,178 |   |
|                                                                           |   |                          |    |   |   |   |   |   |   |   |
| Unamortized      value of restricted stock units:                              |   |                          |    |   |   |   |   |   |   |   |
| Balance      beginning of year                                                 |   |                          | -       |   |   | - |   |   | (110 | ) |
| Unamortized      value of restricted stock units on adoption                   |   |                          |    |   |   |   |   |   |   |   |
| of      new accounting standard                                                |   |                          | -       |   |   | - |   |   | 110 |   |
| Amortization      of related deferred compensation                             |   |                          | -       |   |   | - |   |   | - |   |
| Balance      end of year                                                       |   | $                             | -       |   | $ | - |   | $ | - |   |
|                                                                           |   |                          |    |   |   |   |   |   |   |   |

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TABLE OF CONTENTS

|                                                                |   | Years      Ended December 31,             |     |
|---------------------------------------------------------------------|--------|-------------------------------------------|----------|
|                                                                |   | 2008                                      |     | 2007 |   | 2006 |   |
|                                                                |   | (In      Thousands, Except Share Amounts) |     |
| Accumulated      Deficit:                                           |   |                                      |     |   |   |   |   |   |   |   |
| Balance      at beginning of year                                   |   | $                                         | (559,459 | ) | $ | (499,725 | ) | $ | (452,071 | ) |
| Net      loss                                                       |   |                                      | (216,694 | ) |   | (59,734 | ) |   | (47,654 | ) |
| Balance      at end of year                                         |   | $                                         | (776,153 | ) | $ | (559,459 | ) | $ | (499,725 | ) |
|                                                                |   |                                      |     |   |   |   |   |   |   |   |
| Accumulated      Other Comprehensive Loss:                          |   |                                      |     |   |   |   |   |   |   |   |
| Balance      at beginning of year                                   |   |                                      | (653     | ) |   | (1,273 | ) |   | - |   |
| Adoption      of SFAS No. 158 (Note 15)                             |   |                                      | -        |   |   | - |   |   | (1,273 | ) |
| Amortization      of previously unrecognized pension                |   |                                      |     |   |   |   |   |   |   |   |
| components,      net                                                |   |                                      | (40      | ) |   | 31 |   |   | - |   |
| Change      in unrecognized net gains/losses of pension plans       |   |                                      | 671      |   |   | 589 |   |   | - |   |
| Balance      at end of year                                         |   |                                      | (22      | ) |   | (653 | ) |   | (1,273 | ) |
|                                                                |   |                                      |     |   |   |   |   |   |   |   |
| Common      Stock Held in Treasury:                                 |   |                                      |     |   |   |   |   |   |   |   |
| Balance      at beginning of year representing, 2,471,674 shares in |   |                                      |     |   |   |   |   |   |   |   |
| 2008,      2,433,545 in 2007 and 2,428,121 shares in 2006           |   |                                      | (45,439  | ) |   | (44,930 | ) |   | (44,819 | ) |
| Tender      of 36,986 shares in 2008, 38,129 shares in 2007 and     |   |                                      |     |   |   |   |   |   |   |   |
| 5,424      shares in 2006 associated with the exercise of stock     |   |                                      |     |   |   |   |   |   |   |   |
| options      and the vesting of restricted stock                    |   |                                      | (1,004   | ) |   | (509 | ) |   | (111 | ) |
| Balance      at end of year representing 2,508,660 shares in        |   |                                      |     |   |   |   |   |   |   |   |
| 2007,      2,471,674 shares in 2007 and 2,433,545 shares            |   |                                      |     |   |   |   |   |   |   |   |
| in      2006                                                        |   |                                      | (46,443  | ) |   | (45,439 | ) |   | (44,930 | ) |
|                                                                |   |                                      |     |   |   |   |   |   |   |   |
| Total      stockholders’ equity (deficit)                     |   | $                                         | 309,023  |   | $ | 372,229 |   | $ | (68,443 | ) |

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| ·   | labor      costs to operate the wells and related equipment and      facilities; |
|--------------------|----------------------------------------------------------------------------------|

| ·   | repair      and maintenance costs, including costs associated with re-establishing      production from a geological structure that has previously      produced; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | material,      supplies, and fuel consumed and services utilized in operating the wells      and related equipment and facilities, including marketing and      transportation costs; and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | property      taxes and insurance applicable to proved properties and wells and related      equipment and facilities. |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

| ·   | Geological      and geophysical costs and costs of retaining unproved properties and      undeveloped properties are charged to expense as incurred and are included      as a reduction of operating cash flow in the accompanying consolidated      statements of cash flow. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Costs      of exploratory wells are capitalized pending determination of whether they      have discovered proved reserves. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------|

| *   | The      costs of exploratory wells that have found oil and natural gas reserves      that cannot be classified as proved when drilling is completed continue to      be capitalized as long as the well has found a sufficient quantity of      reserves to justify its completion as a producing well and sufficient      progress is being made in assessing the proved reserves and the economic      and operating viability of the project.  Management evaluates      progress on such wells on a quarterlybasis. |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *   | Costs      that no longer meet the criteria for continued drilling and capitalization      under Statement of Financial Accounting Standards (SFAS) 19-1, but for      which management intends to pursue development activities are included in      depletion, depreciation and amortization  expense. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *   | If      proved reserves are not discovered the related drilling costs are charged      to exploration expense. |
|---------------|----------------------------------------------------------------------------------------------------------------|

| ·   | Acquisition      costs of leases and development activities are  capitalized. |
|--------------------|-------------------------------------------------------------------------------|

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| ·   | Other      exploration costs are charged to expense as  incurred. |
|--------------------|-------------------------------------------------------------------|

| ·   | Depletion,      depreciation and amortization expense is determined on a field-by-field      basis using the units-of-production method, with depletion, depreciation      and amortization rates for leasehold acquisition costs based on estimated      proved reserves and depletion, depreciation and amortization rates for      well and related facility costs based on proved developed reserves      associated with each field.  The depletion, depreciation and      amortization rates are changed whenever there is an indication of the need      for a revision but, at a minimum, are revised      semi-annually.  Any such revisions are accounted for      prospectively as a change in accounting  estimate. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      costs of maintenance and repairs, which are not significant improvements,      are expensed when incurred. |
|--------------------|---------------------------------------------------------------------------------------------------------------------|

| ·   | Gains      or losses from dispositions of McMoRan’s interests in oil and gas      properties are included in earnings under the following      conditions: |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *   | All      or part of an interest owned is sold to an unrelated third party; if only      part of an interest is sold, there is no substantial uncertainty about the      recoverability of cost applicable to the interest retained;      and |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *   | McMoRan      has no substantial obligation for future performance (e.g, drilling a      well(s) or operating the property without proportional reimbursement of      costs relating to the interestsold). |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Interest      expense allocable to significant unproved leasehold costs and in progress      exploration and development projects is capitalized until the assets are      ready for their intended use.  Interest expense capitalized by      McMoRan totaled $5.0 million in 2008, $6.3 million in 2007 and $5.3      million in 2006. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Level      1:  valuations consist of unadjusted quoted prices in active markets      for identical assets and liabilities and has the highest      priority; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level      2:  valuations rely on quoted prices in markets that are not active      or observable inputs over the full term of the asset or      liability; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Level      3:  valuations are based on prices or third party or internal      valuation models that require inputs that are significant to the fair      value measurement and are less observable and thus have the lowest      priority. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | allows      the use of new technologies to determine proved  reserves; |
|--------------------|------------------------------------------------------------------------|

| ·   | permits      the optional disclosure of probable and possible  reserves; |
|--------------------|--------------------------------------------------------------------------|

| ·   | modifies      the prices used to estimate reserves for SEC disclosure purposes to a      12-month average price instead of a period-end price;  and |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | requires      that if a third party is primarily responsible for preparing or auditing      the reserve estimates, the company make disclosures relating to the      independence and qualifications of the third party, including filing as an      exhibit any report received from the third  party. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Cash      paid for acquired assets at closing (August 6, 2007) | $      | 1,076,286 |     |
|----------------------------------------------------------------|--------|-----------|----------|
| Estimated      oil & gas reclamation costs                 |   | 268,766   |     |
| Net      assets acquired at closing                            |   | 1,345,052 |     |
| Post      closing adjustments                                  |   | (38,645   | )      a |
| Other      acquisition related costs                           |   | 17,124    | b        |
| Net      assets acquired                                       | $      | 1,323,531 |     |

| a.   | Represents      net cash flow from the operation of the acquired properties during the      period from July 1, 2007 (effective date) to August 6, 2007 (closing      date). |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Includes      $3.5 million contingency settled in the first quarter of    2008. |
|----------------|---------------------------------------------------------------------------------|

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| Accounts      receivable                                       | $      | 35,649    |   |
|----------------------------------------------------------------|--------|-----------|--------|
| Oil      and gas property, plant and equipment                 |   | 1,322,819 |   |
| Asset      retirement obligations                              |   | (268,766  | )      |
| Other      accrued liabilities                                 |   | (13,416   | )      |
| Cash      paid for acquired assets at closing (August 6, 2007) | $      | 1,076,286 |   |

|                                                     | (Pro      Forma, Unaudited) |    |
|----------------------------------------------------------|-----------------------------|---------|
|                                                     | Years      Ended            |    |
|                                                     | December      31,           |    |
|                                                     |                        | 2007    |   |   | 2006 |   |
| Revenues                                                 | $                           | 888,550 |   | $ | 822,791 |   |
| Operating      income                                    |                        | 85,163  |   |   | 196,619 |   |
| Net      income (loss)                                   |                        | (55,645 | ) |   | 55,761 |   |
| Basic      net income (loss) per share of common stock   |                        | $(1.62  | ) |   | $2.00 |   |
| Diluted      net income (loss) per share of common stock |                        | (1.62   | ) |   | 1.23 |   |

|                             |   | (Unaudited) |
|----------------------------------|--------|-------------|
|                             |   | Developed   |   | Undeveloped |
|                             |   | Gross       |   | Net |   | Gross |   | Net |
|                             |   | Acres       |   | Acres |   | Acres |   | Acres |
| Offshore      (federal waters)   |   | 659,267     |   | 379,932 |   | 359,245 |   | 145,944 |
| Onshore      Louisiana and Texas |   | 36,070      |   | 18,448 |   | 68,491 |   | 27,565 |
| Total      at December 31, 2008  |   | 695,337     |   | 398,380 |   | 427,736 |   | 173,509 |

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|                           |   | December      31, |    |
|--------------------------------|--------|-------------------|---------|
|                           |   | 2008              |    | 2007 |   |
| Accounts      receivable:      |   |              |    |   |   |   |   |
| Customers                      |   | $                 | 50,275  |   | $ | 91,176 |   |
| Joint      interest partners   |   |              | 60,039  |   |   | 33,683 |   |
| Other                          |   |              | 2,370   |   |   | 3,831 |   |
| Total      accounts receivable |   | $                 | 112,684 |   | $ | 128,690 |   |

|   | Year      Ended December 31, |   |
|--------|------------------------------|--------|
|   | 2008                         |   | 2007 |   | 2006 |   |
| A      |                         | 35     | % |   | 27 | % |   | 20 | % |
| B      |                         | 18     |   |   | 24 |   |   | - |   |
| C      |                         | 12     |   |   | 13 |   |   | - |   |
| D      |                         | 10     |   |   | <10 |   |   | 25 |   |
| E      |                         | <10 |   |   | <10 |   |   | 26 |   |
| F      |                         | <10 |   |   | <10 |   |   | 16 |   |

|                                                      |   | December      31, |       |
|-----------------------------------------------------------|--------|-------------------|------------|
|                                                      |   | 2008              |       | 2007 |   |
| Oil      and gas property, plant and equipment            |   | $                 | 2,163,577  |   | $ | 1,984,328 |   |
| Other                                                     |   |              | 31         |   |   | 31 |   |
|                                                      |   |              | 2,163,608  |   |   | 1,984,359 |   |
| Accumulated      depletion, depreciation and amortization |   |              | (1,171,045 | ) |   | (481,000 | ) |
| Property,      plant and equipment, net                   |   | $                 | 992,563    |   | $ | 1,503,359 |   |

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|                                                                                |   | 2008   |     | 2007   |   | 2006    |   |
|-------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|---------|--------|
| Depletion      and depreciation expense                                             |   | $      | $357,458 |   | $      | 228,540 |   | $ | 69,465 |   |
| Accretion      expense                                                              |   |   | 164,753  |   |   | 13,872  |   |   | 2,088 |   |
| Impairment      charges/losses                                                      |   |   | 332,587  |   |   | 13,595  |   |   | 33,171 |   |
|     Total      depletion, depreciation and amortization expense |   | $      | 854,798  |   | $      | 256,007 |   | $ | 104,724 |   |

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|                             | December      31, 2008 |   | December      31, 2007 |   |
|----------------------------------|------------------------|--------|------------------------|--------|
|                             | Gross                  |   |                   |   |   |   | Gross |   |   |   |   |   |
|                             | Carrying               |   | Accumulated            |   |   |   | Carrying |   | Accumulated |   |   |   |
|                             | Amount                 |   | Amortization           |   | Net |   | Amount |   | Amortization |   | Net |   |
| 11.875%      Senior Notes        |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (due      November 2014)         | $                      | 8,055  |                   | $      | (1,301 | ) | $ | 6,754 |   | $ | 8,055 |   | $ | (150 | ) | $ | 7,905 |   |
| Revolving      Credit Facility   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (matures      August 2012)       |                   | 11,377 |                   |   | (3,679 | ) |   | 7,698 |   |   | 11,136 |   |   | (893 | ) |   | 10,243 |   |
| 6%      Convertible Senior       |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notes      (due July 2008)       |                   | -      |                   |   | - |   |   | - |   |   | 5,706 |   |   | (5,160 | ) |   | 546 |   |
| 5¼%      Convertible Senior |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notes      (due October 2011)    |                   | 6,243  |                   |   | (5,037 | ) |   | 1,206 |   |   | 7,032 |   |   | (4,509 | ) |   | 2,523 |   |
|                             | $                      | 25,675 |                   | $      | (10,017 | ) | $ | 15,658 |   | $ | 31,929 |   | $ | (10,712 | ) | $ | 21,217 |   |

|                                                      |   | December      31, |   |
|-----------------------------------------------------------|--------|-------------------|--------|
|                                                      |   | 2008              |   | 2007 |   |
| Employee      postretirement medical liability (Note 13)  |   | $                 | 4,387  |   | $ | 5,303 |   |
| Accrued      workers compensation and group insurance     |   |              | 638    |   |   | 733 |   |
| Sulphur-related      environmental liability (Note 17)    |   |              | 3,161  |   |   | 3,161 |   |
| Defined      benefit pension plan liability (Note 13)     |   |              | -      |   |   | 2,255 |   |
| Nonqualified      pension plan liability                  |   |              | 1,370  |   |   | 1,199 |   |
| Restricted      liability for abandonment costs (Note 17) |   |              | 7,728  |   |   | - |   |
| Liability      for management services (Note 16)          |   |              | 2,739  |   |   | 2,719 |   |
|                                                      |   | $                 | 20,023 |   | $ | 15,370 |   |

|                                              | December      31, |    |
|---------------------------------------------------|-------------------|---------|
|                                              | 2008              |    | 2007 |   |
| Senior      secured revolving credit facility     | $                 | -       |   | $ | 274,000 |   |
| 11.875%      senior notes (due 2014)              |              | 300,000 |   |   | 300,000 |   |
| 5¼%      convertible senior notes (due 2011) |              | 74,720  |   |   | 115,000 |   |
| 6%      convertible senior notes                  |              | -       |   |   | 100,870 |   |
| Other                                             |              | -       |   |   | 10,665 |   |
| Total      debt                                   |              | 374,720 |   |   | 800,535 |   |
| Less      current maturities                      |              | -       |   |   | (111,535 | ) |
| Long-term      debt                               | $                 | 374,720 |   | $ | 689,000 |   |

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|   | Natural      Gas Positions (million MMbtu)                                        |
|--------|-----------------------------------------------------------------------------------|
|   | Open      Swap Positions a                                                        |   | Put      Options b |   |   |
|   | Annual                                                                            |   | Average |   | Annual |   | Average |   | Total |
|   | Volumes                                                                           |   | Swap      Price      c |   | Volumes |   | Floor      c |   | Volumes |
| 2009   |              7.3 |   | $ |  8.97 |   |              3.2 |   | $ |  6.00 |   | 10.5 |
| 2010   |              2.6 |   | $ |  8.63 |   |              1.2 |   | $ |  6.00 |   | 3.8 |

|   | Oil      Positions (thousand bbls)                                          |
|--------|-----------------------------------------------------------------------------|
|   | Open      Swap Positions a                                                  |   | Put      Options b |   |   |
|   | Annual                                                                      |   | Average |   | Annual |   | Average |   | Total |
|   | Volumes                                                                     |   | Swap      Price d |   | Volumes |   | Floor      d |   | Volumes |
| 2009   |             322 |   | $ |  71.82 |   |             125 |   | $ |  50.00 |   | 447 |
| 2010   |             118 |   | $ |  70.89 |   |               50 |   | $ |  50.00 |   | 168 |

| a.   | Covering      periods January-June and November-December of the respective      years. |
|----------------|----------------------------------------------------------------------------------------|

| b.   | Covering      periods July-October of the respectiveyears. |
|----------------|------------------------------------------------------------|

| c.   | Price      per Mmbtu of natural gas. |
|----------------|--------------------------------------|

| d.   | Price      per barrel of oil. |
|----------------|-------------------------------|

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|                                                 | Years      Ended December 31, |    |
|------------------------------------------------------|-------------------------------|---------|
|                                                 |                          | 2008    |   |   | 2007 |   |
| Realized      loss                                   |                          |    |   |   |   |   |
| Gas      puts                                        | $                             | 2,209   |   | $ | - |   |
| Oil      puts                                        |                          | 356     |   |   | - |   |
| Gas      swaps                                       |                          | 4,005   |   |   | - |   |
| Oil      swaps                                       |                          | 17,739  |   |   | - |   |
| Total      realized loss                             |                          | 24,309  |   |   | - |   |
|                                                 |                          |    |   |   |   |   |
| Unrealized      (gain) loss                          |                          |    |   |   |   |   |
| Gas      puts                                        |                          | (3,178  | ) |   | 1,433 |   |
| Oil      puts                                        |                          | (1,483  | ) |   | 630 |   |
| Gas      swaps                                       |                          | (7,872  | ) |   | (17,665 | ) |
| Oil      swaps                                       |                          | (28,079 | ) |   | 20,783 |   |
| Total      unrealized (gain) loss                    |                          | (40,612 | ) |   | 5,181 |   |
| (Gain)      loss on oil and gas derivative contracts | $                             | (16,303 | ) | $ | 5,181 |   |

|                             | December      31, 2008 |   |
|----------------------------------|------------------------|--------|
|                             | Puts                   |   | Swaps |   |   |   |   |
|                             | Gas                    |   | Oil |   | Gas |   | Oil |   | Total |   |
| Current      assets              | $                      | 2,659  |   | $ | 915 |   | $ | 21,701 |   | $ | 6,349 |   | $ | 31,624 |   |
| Other      assets                |                   | 765    |   |   | 297 |   |   | 3,837 |   |   | 948 |   |   | 5,847 |   |
| Current      liabilities         |                   | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Other      long-term liabilities |                   | -      |   |   | - |   |   | - |   |   | - |   |   | - |   |
| Fair      value of contracts     | $                      | 3,424  |   | $ | 1,212 |   | $ | 25,538 |   | $ | 7,297 |   | $ | 37,471 |   |

|                             | December      31, 2007 |   |
|----------------------------------|------------------------|--------|
|                             | Puts                   |   | Swaps |   |   |   |   |
|                             | Gas                    |   | Oil |   | Gas |   | Oil |   | Total |   |
| Current      assets              | $                      | 1,350  |   | $ | 4 |   | $ | 15,269 |   | $ | - |   | $ | 16,623 |   |
| Other      assets                |                   | 1,105  |   |   | 81 |   |   | 3,131 |   |   | - |   |   | 4,317 |   |
| Current      liabilities         |                   | -      |   |   | - |   |   | - |   |   | (14,001 | ) |   | (14,001 | ) |
| Other      long-term liabilities |                   | -      |   |   | - |   |   | (735 | ) |   | (6,781 | ) |   | (7,516 | ) |
| Fair      value of contracts     | $                      | 2,455  |   | $ | 85 |   | $ | 17,665 |   | $ | (20,782 | ) | $ | (577 | ) |

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|                                                           |   | Years      Ended December 31, |   |
|----------------------------------------------------------------|--------|-------------------------------|--------|
|                                                           |   | 2008                          |   | 2007 |   | 2006 |   |
|                                                           |   |                          |   |   |   |   |   |   |   |   |
| In-the-money      stock options a,      b                      |   |                          | 1,631  |   |   | 1,727 |   |   | 1,097 |   |
| Shares      issuable upon exercise of stock warrants a,      c |   |                          | 257    |   |   | 1,467 |   |   | 1,753 |   |
| Shares      issuable upon assumed conversion of:               |   |                          |   |   |   |   |   |   |   |   |
| 5%      mandatorily redeemable preferred stock d               |   |                          | -      |   |   | 3,103 |   |   | 6,205 |   |
| 6¾%      mandatorily convertible preferred stock e        |   |                          | 17,705 |   |   | 2,525 |   |   | - |   |
| 6%      convertible senior notes f                             |   |                          | 2,635  |   |   | 7,079 |   |   | 7,079 |   |
| 5¼%      convertible senior notes g                       |   |                          | 5,508  |   |   | 6,938 |   |   | 6,938 |   |

| a.   | McMoRan      uses the treasury stock method to determine the amount of in-the-money      stock options and stock warrants to include in its diluted earnings per      share calculation. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| b.   | Represents      stock options with an exercise price less than the average market price      for McMoRan’s common stock for the periods  presented. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Includes      stock warrants issued to K1 USA Energy Production Corporation in December      2002 (1.74 million shares) and September 2003 (0.76 million      shares).  On December 12, 2007, the stock warrant for 1.74      million common shares was exercised.  K1 exercised the remaining      warrant for 0.76 million common shares in a cashless transaction and      received 0.64 million common shares (Note6). |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Amount      represents total equivalent common stock shares assuming conversion of 5%      mandatorily redeemable preferred stock (Note 10).  The remaining      shares of the 5% preferred stock were converted into common stock at June      30, 2007.  The amount is reduced from 6.2 million equivalent      shares that were issued upon conversion to reflect the six months the      preferred stock was outstanding.  Preferred dividends and      related costs totaled $1.6 million in 2007 and  2006. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | Amount      represents total equivalent common stock shares assuming conversion of 6¾%      mandatorily convertible preferred stock (Note 10).  The 2007      amount is reduced from the total 17.4 million equivalent shares that would      have been issued upon conversion to reflect the 53 days the preferred      stock was outstanding in 2007.  Preferred dividends,      amortization of convertible preferred stock issuance costs and inducement      payments for the early conversion of preferred stock totaled $22.3 million      in 2008 and $2.6 million in 2007. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f.   | Amount      represents total equivalent common stock shares assuming conversion of 6%      convertible senior notes (Note 8). Related      net interest expense totaled $1.5 million in 2008, $6.6 million in 2007      and $4.7 million in 2006. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g.   | Amount      represents total equivalent common stock shares assuming conversion of 5¼%      convertible senior notes (Note 8).  Net interest expense on the      5¼% convertible senior notes totaled $4.4 million in 2008, $6.1 million in      2007 and $4.2 million in 2006. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                            |   | Years      Ended December 31, |   |
|-------------------------------------------------|--------|-------------------------------|--------|
|                                            |   | 2008                          |   | 2007 |   | 2006 |   |
| Sulphur      retiree costs a                    |   |                          | 494    |   |   | (3,155 | ) |   | (1,436 | ) |
| Caretaking      costs                           |   |                          | 979    |   |   | 901 |   |   | 1,889 |   |
| Accretion      expense – sulphur          |   |                          |   |   |   |   |   |   |   |   |
| reclamation      obligations                    |   |                          | 3,295  | b |   | 1,738 |   |   | 4,417 | b |
| Insurance                                       |   |                          | 432    |   |   | 463 |   |   | 881 |   |
| General      and administrative and legal       |   |                          | 236    |   |   | 174 |   |   | 176 |   |
| Other                                           |   |                          | 60     |   |   | (3,948 | )c |   | (2,989 | )d |
| (Income)      loss from discontinued operations |   | $                             | 5,496  |   |   | (3,827 | ) |   | 2,938 |   |

| a.   | Reflects      postretirement benefit costs associated with certain retired former      sulphur employees (Note 17).  The amounts during 2008 and 2007      reflect reductions of the contractual liability resulting from decreased      health care claim costs of $0.7 million and $4.6 million,      respectively.  The amount during 2006 reflects a $3.2 million      reduction in a contractual liability resulting primarily from a      significant reduction in the number of participants in the related benefit      plans. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Includes      $3.1 million and $3.4 million charges to expense at December 31, 2008 and      2006 to increase the accrued reclamation costs for the Port Sulphur      facilities to their estimated fairvalue. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Includes      $4.2 million of finalized insurance recoveries associated with the Port      Sulphur property damage claims resulting from the 2005      hurricanes. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| d.   | Includes      income of $3.5 million related to approved insurance claims resulting from      property damages at the Port Sulphur facilities.  Also includes      $0.5 million of additional hurricane repair  costs. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Plan                                                                       |   | Authorized      amountof      stock-based awards |   | Shares      availablefor      grant atDecember      31, 2008 |
|----------------------------------------------------------------------------|--------|--------------------------------------------------|--------|--------------------------------------------------------------|
| 2008      Stock Incentive Plan (2008 Plan)                                 |   | 5,500,000                                        |   | 3,778,500                                                    |
| 2005      Stock Incentive Plan (2005 Plan)                                 |   | 3,500,000                                        |   | 60,000                                                       |
| 2004      Director Compensation Plan (2004 Directors Plan)                 |   | 175,000                                          |   | 79,123                                                       |
| 2003      Stock Incentive Plan (2003 Plan)                                 |   | 2,000,000                                        |   | 1,500                                                        |
| 2001      Stock Incentive Plan (2001 Plan)                                 |   | 1,250,000                                        |   | -                                                            |
| 2000      Stock Option Plan (2000 Plan)                                    |   | 600,000                                          |   | 1,500                                                        |
| 1998      Stock Option Plan                                                |   | 775,000                                          |   | -                                                            |
| 1998      Stock Option Plan for Non-Employee Directors (Directors    Plan) |   | 75,000                                           |   | -                                                            |

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TABLEOF CONTENTS

|                    |   | 2008           |   | 2007              |   | 2006           |
|-------------------------|--------|----------------|--------|-------------------|--------|----------------|
|                    |   | Number      of |   | Average           |   | Number      of |   | Average |   | Number      of |   | Average |
|                    |   | Options        |   | Option      Price |   | Options        |   | Option      Price |   | Options |   | Option      Price |
| Beginning      of year  |   | 7,754,100      |   | $14.96            |   |           | 7,095,991 |   | $15.50 |   |   | 5,845,416 |   | $14.57 |   |
| Granted                 |   | 1,759,500      |   | 15.25             |   |           | 1,353,250 |   | 12.29 |   |   | 1,365,500 |   | 19.79 |   |
| Exercised               |   | (318,475       | )      | 17.90             |   |           | (213,695 | ) | 8.37 |   |   | (26,823 | ) | 14.52 |   |
| Expired/forfeited       |   | (78,375        | )      | 15.29             |   |           | (481,446 | ) | 18.33 |   |   | (88,102 | ) | 20.71 |   |
| End      of year        |   | 9,116,750      |   | 14.91             |   |           | 7,754,100 |   | 14.96 |   |   | 7,095,991 |   | 15.50 |   |
| Exercisable      at end |   |           |   |              |   |           |   |   |   |   |   |   |   |   |   |
| of      year            |   | 6,565,437      |   |              |   |           | 5,636,100 |   |   |   |   | 5,169,822 |   |   |   |

|                                                                 | Year      Ended December 31, |   |
|----------------------------------------------------------------------|------------------------------|--------|
|                                                                 | 2008                         |   | 2007 |   | 2006 |   |
| Cost      of options awarded to employees (including Directors)      | $                            | 28,725 | a | $ | 12,415 | a | $ | 15,129 | a |
| Cost      of options awarded to non-employees and Advisory Directors |                         | 1,251  |   |   | 630 |   |   | 588 |   |
| Cost      of restricted stock units                                  |                         | 247    |   |   | 62 |   |   | 105 |   |
| Total      stock-based compensation cost                             | $                            | 30,223 |   | $ | 13,107 |   | $ | 15,822 |   |

| a.   | Includes      $16.2 million, $2.8 million and $5.8 million of compensation charges      associated with immediately vested stock options granted to McMoRan’s      Co-Chairmen in lieu of receiving any cash compensation during 2008, 2007      and 2006, respectively.  Also includes $4.9 million, $1.2      million and $1.9 million of compensation charges related to stock options      granted to retirement-eligible employees, which resulted in one-year’s      compensation expense being immediately recognized at the date of the stock      option grant during 2008, 2007 and 2006,  respectively. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                     | 2008   |   | 2007   |   | 2006   |   |
|------------------------------------------|--------|--------|--------|--------|--------|--------|
| General      and administrative expenses | $      | 14,818 |   | $      | 6,334  |   | $ | 7,120 |   |
| Exploration      expenses                |   | 14,376 |   |   | 6,296  |   |   | 8,104 |   |
| Main      Pass Energy Hub start-up costs |   | 1,029  |   |   | 477    |   |   | 598 |   |
| Total      stock-based compensation cost | $      | 30,223 |   | $      | 13,107 |   | $ | 15,822 |   |

|                                                      |   | 2008  |   |   | 2007 |   |   | 2006  |   |
|-----------------------------------------------------------|--------|-------|--------|--------|------|--------|--------|-------|--------|
| Weighted      average fair value of stock options granted | $      | 24.27 | a      | $      | 6.94 | b      | $      | 11.85 | c      |
| Expected      and weighted average volatility             |   | 52.3  |   |   | 52.2 |   |   | 55.5  | %      |
| Expected      life of options (in years)                  |   | 6.41  | a      |   | 6.29 | b      |   | 7     | c      |
| Risk-free      interest rate                              |   | 3.04  |   |   | 4.76 |   |   | 4.5   | %      |

| a.   | Excludes      stock options that were granted with immediate vesting (445,000 shares,      including 400,000 shares granted to the Co-Chairmen in lieu of cash      compensation for 2008) with an expected life of 6.86 years and fair value      of stock options on grant date of $25.41 per  share. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Excludes      stock options that were granted with immediate vesting (445,000 shares,      including 400,000 shares granted to the Co-Chairmen in lieu of cash      compensation for 2007) with an expected life of 6.56 years and fair value      of stock options on grant date of $7.02 per  share. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Excludes      stock options that were granted with immediate vesting (500,000 shares      granted to the Co-Chairmen in lieu of any cash compensation for 2006) with      an expected life of six years and a grant date fair value of $11.52 per      share. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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TABLE OF CONTENTS

|                                                | Pension      Benefits |   | Other      Benefits |   |
|-----------------------------------------------------|-----------------------|--------|---------------------|--------|
|                                                | 2008                  |   | 2007                |   | 2008 |   | 2007 |   |
| Change      in benefit obligation:                  |                  |   |                |   |   |   |   |   |   |   |   |   |
| Benefit      obligation at the beginning of year    | $                     | (3,779 | )                   | $      | (4,372 | ) | $ | (5,844 | ) | $ | (6,293 | ) |
| Service      cost                                   |                  | -      |                |   | - |   |   | (48 | ) |   | (26 | ) |
| Interest      cost                                  |                  | (62    | )                   |   | (214 | ) |   | (285 | ) |   | (330 | ) |
| Actuarial      gains                                |                  | -      |                |   | - |   |   | 670 |   |   | 588 |   |
| Participant      contributions                      |                  | -      |                |   | - |   |   | (223 | ) |   | (206 | ) |
| Benefits      paid                                  |                  | 3,841  |                |   | 807 |   |   | 857 |   |   | 423 |   |
| Benefit      obligation at end of year              |                  | -      |                |   | (3,779 | ) |   | (4,873 | ) |   | (5,844 | ) |
|                                                |                  |   |                |   |   |   |   |   |   |   |   |   |
| Change      in plan assets:                         |                  |   |                |   |   |   |   |   |   |   |   |   |
| Fair      value of plan assets at beginning of year |                  | 1,524  |                |   | 2,231 |   |   | - |   |   | - |   |
| Return      on plan assets                          |                  | 21     |                |   | 100 |   |   | - |   |   | - |   |
| Employer/participant      contributions             |                  | 2,296  |                |   | - |   |   | 856 |   |   | 423 |   |
| Benefits      paid                                  |                  | (3,841 | )                   |   | (807 | ) |   | (856 | ) |   | (423 | ) |
| Fair      value of plan assets at end of year       |                  | -      |                |   | 1,524 |   |   | - |   |   | - |   |
|                                                |                  |   |                |   |   |   |   |   |   |   |   |   |
| Funded      status                                  | $                     | -      |                | $      | (2,255 | ) | $ | (4,873 | ) | $ | (5,844 | ) |
|                                                |                  |   |                |   |   |   |   |   |   |   |   |   |
| Weighted-average      assumptions (percent):        |                  |   |                |   |   |   |   |   |   |   |   |   |
| Discount      rate                                  |                  | N/A    |                |   | N/A | a |   | 6.20 | % |   | 6.00 | % |
| Expected      return on plan assets                 |                  | N/A    |                |   | N/A |   |   | - |   |   | - |   |
| Rate      of compensation increase                  |                  | N/A    |                |   | N/A |   |   | - |   |   | - |   |

| a.   | As      discussed above, McMoRan elected to terminate its defined benefit pension      plan on June 30, 2000. McMoRan invested almost the entire amount of this      plan’s asset portfolio in short-term fixed income securities, with the      remainder invested in overnight money market  accounts. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     |   | Pension      Benefits |   | Other      Benefits |   |
|------------------------------------------|--------|-----------------------|--------|---------------------|--------|
|                                     |   | 2008                  |   | 2007                |   | 2006 |   | 2008 |   | 2007 |   | 2006 |   |
| Service      cost                        |   | $                     |   |                | $      | - |   | $ | - |   | $ | 48 |   | $ | 26 |   | $ | 20 |   |
| Interest      cost                       |   |                  | 62     |                |   | 214 |   |   | 217 |   |   | 285 |   |   | 330 |   |   | 347 |   |
| Return      on plan assets               |   |                  | (21    | )                   |   | (100 | ) |   | (29 | ) |   | - |   |   | - |   |   | - |   |
| Amortization      of prior service costs |   |                  | -      |                |   | - |   |   | - |   |   | (40 | ) |   | (40 | ) |   | (40 | ) |
| Recognition      of net actuarial loss   |   |                  | -      |                |   | - |   |   | - |   |   | - |   |   | 71 |   |   | 148 |   |
| Net      periodic benefit cost           |   | $                     | 41     |                | $      | 114 |   | $ | 188 |   | $ | 293 |   | $ | 387 |   | $ | 475 |   |

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|                                                                |   | December      31,  |     |
|---------------------------------------------------------------------|--------|-------------------------|----------|
|                                                                |   | 2008                    |     | 2007 |   |
| Federal      and state net operating loss carryforwards             |   | $                       | 128,109  |   | $ | 172,644 |   |
| Property,      plant and equipment                                  |   |                    | 38,037   |   |   | (43,000 | ) |
| Reclamation      and shutdown reserves                              |   |                    | 155,197  |   |   | 110,613 |   |
| Deferred      compensation, postretirement and pension benefits and |   |                    |     |   |   |   |   |
| accrued      liabilities                                            |   |                    | 25,075   |   |   | 16,644 |   |
| Tax      credits and other, net                                     |   |                    | (3,356   | ) |   | 7,653 |   |
| Less:      valuation allowance                                      |   |                    | (343,062 | ) |   | (264,554 | ) |
| Net      deferred tax asset                                         |   | $                       | -        |   | $ | - |   |

|                                            | 2008   |    | 2007   |   | 2006    |   |
|-------------------------------------------------|--------|---------|--------|--------|---------|--------|
| Income      tax benefit computed at the federal |   |    |   |   |    |   |   |   |   |
| statutory      income tax rate                  | $      | 74,965  |   | $      | 20,907  |   | $ | 16,679 |   |
| Change      in valuation allowance              |   | (78,508 | )      |   | (20,517 | )      |   | (17,030 | ) |
| Other                                           |   | 1,100   |   |   | (390    | )      |   | 351 |   |
| Federal      income tax provision               |   | (2,443  | )      |   | -       |   |   | - |   |
| State      income tax provision                 |   | (65     | )      |   | -       |   |   | - |   |
| Total      income tax provision                 | $      | (2,508  | )      | $      | -       |   | $ | - |   |

|                                                          | 2008   |     | 2007   |   | 2006    |   |
|---------------------------------------------------------------|--------|----------|--------|--------|---------|--------|
| Net      loss                                                 | $      | (216,694 | )      | $      | (59,734 | )      | $ | (47,654 | ) |
| Other      comprehensive income (loss)                        |   |     |   |   |    |   |   |   |   |
| Amortization      of previously unrecognized pension          |   |     |   |   |    |   |   |   |   |
| components,      net                                          |   | (40      | )      |   | 31      |   |   | - |   |
| Change      in unrecognized net gains/losses of pension plans |   | 671      |   |   | 589     |   |   | - |   |
| Other      comprehensive loss                                 | $      | (216,063 | )      | $      | (59,114 | )      | $ | (47,654 | ) |

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TABLE OF CONTENTS

|                                                    | Years      Ended December 31, |    |
|---------------------------------------------------------|-------------------------------|---------|
|                                                    | 2008                          |    | 2007 |   | 2006 |   |
| Oil      and Natural Gas                                |                          |    |   |   |   |   |   |   |   |
| Asset      retirement obligation at beginning of year   | $                             | 294,737 |   | $ | 25,876 |   | $ | 21,760 |   |
| Liabilities      settled                                |                          | (43,782 | ) |   | (6,720 | ) |   | (670 | ) |
| Accretion      expense a                                |                          | 32,933  |   |   | 12,222 |   |   | 2,088 |   |
| Reclamation      costs assumed from third parties       |                          | 2,859   |   |   | - |   |   | - |   |
| Liabilities      assumed in 2007 property acquisition   |                          | -       |   |   | 267,537 |   |   | - |   |
| Incurred      liabilities                               |                          | 2,476   |   |   | 272 |   |   | 2,534 |   |
| Revision      for changes in estimates                  |                          | 131,978 | b |   | (4,450 | ) |   | 164 |   |
| Asset      retirement obligations at end of year        | $                             | 421,201 |   | $ | 294,737 |   | $ | 25,876 |   |
| Sulphur                                                 |                          |    |   |   |   |   |   |   |   |
| Asset      retirement obligations at beginning of year: | $                             | 21,300  |   | $ | 23,094 |   | $ | 21,786 |   |
| Liabilities      settled                                |                          | (1,591  | ) |   | (3,532 | )c |   | (3,109 | )c |
| Accretion      expense                                  |                          | 866     |   |   | 1,738 |   |   | 1,392 |   |
| Revision      for changes in estimates                  |                          | 2,428   |   |   | - |   |   | 3,025 | d |
| Asset      retirement obligation at end of year         | $                             | 23,003  |   | $ | 21,300 |   | $ | 23,094 |   |
|                                                    |                          |    |   |   |   |   |   |   |   |

| a.   | Accretion      expense charges are included within depletion, depreciation and      amortization expense in the accompanying consolidated statements of      operations. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Primarily      represents estimated future abandonment costs associated with damaged      structures and well abandonment related to Hurricane  Ike. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Amount      of costs incurred to remove structures at Port Sulphur that were damaged      by hurricanes Katrina and Rita in2005. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------|

| d.   | Revisions      primarily reflect changes in estimated timing of reclamation work at Port      Sulphur (Note 12).  Accretion expense within discontinued      operations includes amounts associated with revision for changes in      estimates because there are no related property, plant and equipment      amounts associated with the sulphur reclamation    obligations. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                |   | Years      Ended        |       |
|-----------------------------------------------------|--------|-------------------------|------------|
|                                                |   | December      31,  |       |
|                                                |   | 2008                    |       | 2007 |   |
|                                                |   | (In      Thousands)     |       |
| Unproved      properties a                          |   | $                       | 51,684     |   | $ | 70,421 |   |
| Proved      properties b                            |   |                    | 2,111,893  |   |   | 1,913,907 |   |
| Subtotal                                            |   |                    | 2,163,577  |   |   | 1,984,328 |   |
| Less      accumulated depreciation and amortization |   |                    | (1,171,045 | ) |   | (481,000 | ) |
| Net      oil and gas properties                     |   | $                       | 992,532    |   | $ | 1,503,328 |   |

| a.   | Includes      costs associated with in-progress wells and wells not fully evaluated,      including related leasehold acquisition costs, totaling $43.8 million at      December 31, 2008 and $55.6 million at December 31,  2007. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Includes      the costs associated with the Blueberry Hill well at Louisiana State Lease      340, where plans to sidetrack the well are being      developed.  Amounts totaled $22.9 million at December 31, 2008      and 2007, respectively. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            |   | Years      Ended December 31, |    |
|---------------------------------|--------|-------------------------------|---------|
|                            |   | 2008                          |    | 2007 |   | 2006 |   |
|                            |   | (In      Thousands)           |    |
| Acquisition      of properties: |   |                          |    |   |   |   |   |   |   |   |
| Proved                          |   | $                             | 2,230   |   | $ | 1,314,136 | a | $ | - |   |
| Unproved                        |   |                          | 2,808   |   |   | 8,313 | a |   | 2,310 |   |
| Exploration      costs          |   |                          | 125,039 |   |   | 140,874 |   |   | 124,590 |   |
| Development      costs          |   |                          | 126,199 |   |   | 59,287 |   |   | 134,338 |   |
|                            |   | $                             | 256,276 |   | $ | 1,522,610 |   | $ | 261,238 |   |

| a.   | Includes      the costs associated with the 2007 oil and gas property acquisition (Note      2), including $7.5 million attributable to unproved      properties. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                       | Years      Ended December 31, |     |
|------------------------------------------------------------|-------------------------------|----------|
|                                                       | 2008                          |     | 2007 |   | 2006 |   |
| Beginning      of year                                     | $                             | 55,980   |   | $ | 38,456 |   | $ | 19,619 |   |
| Additions      to capitalized exploratory well             |                          |     |   |   |   |   |   |   |   |
| costs      pending determination of proved reserves        |                          | 141,263  |   |   | 157,216 |   |   | 242,558 |   |
| Reclassifications      to wells, facilities, and equipment |                          |     |   |   |   |   |   |   |   |
| based      on determination of proved reserves             |                          | (120,182 | ) |   | (117,259 | ) |   | (178,777 | ) |
| Amounts      charged to expense                            |                          | (33,270  | ) |   | (22,433 | ) |   | (44,944 | ) |
| End      of year                                           | $                             | 43,791   |   | $ | 55,980 |   | $ | 38,456 |   |

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|                                 | Oil    |   | Natural      Gas |   |
|--------------------------------------|--------|--------|------------------|--------|
|                                 | 2008   |   | 2007             |   | 2006 |   | 2008 |   | 2007 |   | 2006 |   |
| Proved      reserves:                |   |   |             |   |   |   |   |   |   |   |   |   |
| Beginning      of year               | 19,717 |   | 5,772            |   | 7,131 |   | 245,606 |   | 41,202 |   | 38,944 |   |
| Revisions      of previous estimates | (335   | )      | 565              |   | (519 | ) | 5,469 |   | (1,039 | ) | 723 |   |
| Discoveries      and extensions      | 1,016  |   | 484              |   | 536 |   | 45,993 |   | 25,552 |   | 17,153 |   |
| Production                           | (3,633 | )      | (2,385           | )      | (1,376 | ) | (67,891 | ) | (41,147 | ) | (15,618 | ) |
| Purchase      of reserves            | 224    |   | 15,281           | a      | - |   | 13,720 |   | 221,038 | a | - |   |
| End      of year                     | 16,989 | b      | 19,717           |   | 5,772 |   | 242,897 | b | 245,606 |   | 41,202 |   |

|                            | Oil    |   | Natural      Gas |   |
|---------------------------------|--------|--------|------------------|--------|
|                            | 2008   |   | 2007             |   | 2006 |   | 2008 |   | 2007 |   | 2006 |   |
| Proved      developed reserves: |   |   |             |   |   |   |   |   |   |   |   |   |
| Beginning      of year          | 17,452 |   | 5,526            |   | 6,248 |   | 203,595 |   | 34,949 |   | 29,101 |   |
| End      of year                | 15,039 |   | 17,452           |   | 5,526 |   | 198,610 |   | 203,595 |   | 34,949 |   |

| a.   | Reflects      the estimated proved reserves of the 2007 oil and gas property acquisition      (Note 2). |
|----------------|---------------------------------------------------------------------------------------------------------|

| b.   | At      December 31, 2008, McMoRan had natural gas imbalances of 1.5 MMcf for      under deliveries and 1.6 MMcf for over  deliveries |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                            |   | December      31,  |      |
|---------------------------------------------------------------------------------|--------|-------------------------|-----------|
|                                                                            |   | 2008                    |      | 2007 |   |
|                                                                            |   | (In      Thousands)     |      |
| Future      cash inflows                                                        |   | $                       | 2,163,814 |   | $ | 3,601,360 |   |
| Future      costs applicable to future cash flows:                              |   |                    |      |   |   |   |   |
| Production      costs                                                           |   |                    | (537,147  | ) |   | (687,588 | ) |
| Development      and abandonment costs                                          |   |                    | (673,715  | ) |   | (585,681 | ) |
| Future      income taxes                                                        |   |                    | (1,965    | ) |   | (266,928 | ) |
| Future      net cash flows                                                      |   |                    | 950,987   |   |   | 2,061,163 |   |
| Discount      for estimated timing of net cash flows (10% discount rate)      a |   |                    | (245,696  | ) |   | (422,897 | ) |
|                                                                            |   | $                       | 705,291   |   | $ | 1,638,266 |   |

| a.   | Amount      reflects application of required 10 percent discount rate to both the      estimated future income taxes and estimated future net cash flows      associated with production of the estimated proved    reserves. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                           |   | Years      Ended December 31, |      |
|----------------------------------------------------------------|--------|-------------------------------|-----------|
|                                                           |   | 2008                          |      | 2007 |   | 2006 |   |
|                                                           |   | (In      Thousands)           |      |
| Beginning      of year                                         |   | $                             | 1,638,266 |   | $ | 269,962 |   | $ | 383,139 |   |
| Revisions:                                                     |   |                          |      |   |   |   |   |   |   |   |
| Changes      in prices                                         |   |                          | (534,921  | ) |   | 494,774 |   |   | (106,961 | ) |
| Accretion      of discount                                     |   |                          | 163,827   |   |   | 26,996 |   |   | 38,313 |   |
| Change      in reserve quantities                              |   |                          | 4,204     |   |   | 196,253 |   |   | (21,317 | ) |
| Other      changes, including revised estimates of development |   |                          |      |   |   |   |   |   |   |   |
| costs      and rates of production                             |   |                          | (234,425  | )a |   | (186,238 | ) |   | (11,739 | ) |
| Discoveries      and extensions, less related costs            |   |                          | 211,492   |   |   | 132,808 |   |   | 93,125 |   |
| Development      costs incurred during the year                |   |                          | 50,811    |   |   | 8,559 |   |   | 35,123 |   |
| Change      in future income taxes                             |   |                          | 179,156   |   |   | (179,725 | ) |   | 3,862 |   |
| Revenues,      less production costs                           |   |                          | (800,354  | ) |   | (353,123 | ) |   | (143,583 | ) |
| Purchase      of reserves in place                             |   |                          | 27,235    |   |   | 1,228,000 | b |   | - |   |
| End      of year                                               |   | $                             | 705,291   |   | $ | 1,638,266 |   | $ | 269,962 |   |

| a.   | Includes      $107.6 million of revised reclamation cost estimates related to additional      costs associated with properties damaged by Hurricane Ike and acceleration      timing of when these costs are expected to be  incurred. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Reflects      the standardized measure of the proved reserves for the 2007 oil and gas      property acquisition (Note 2). |
|----------------|----------------------------------------------------------------------------------------------------------------------------|

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TABLE OFCONTENTS

|                                                                 |   |                |    |   |   | Freeport  |   |         |    | Consolidated |   |
|----------------------------------------------------------------------|--------|---------------------|---------|--------|--------|-----------|--------|--------------|---------|--------------|--------|
|                                                                 |   | Parent              |    | MOXY   |   | Energy    |   | Eliminations |    | McMoRan      |   |
|                                                                 |   | (In      Thousands) |    |
| ASSETS                                                               |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| Current      assets:                                                 |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| Cash      and cash equivalents                                       |   | $                   | 35      |   | $      | 93,442    |   | $            | 9       |         | $      | - |   | $ | 93,486 |   |
| Accounts      receivable                                             |   |                | -       |   |   | 112,684   |   |         | -       |         |   | - |   |   | 112,684 |   |
| Inventories                                                          |   |                | -       |   |   | 31,284    |   |         | -       |         |   | - |   |   | 31,284 |   |
| Prepaid      expenses                                                |   |                | 12,794  |   |   | 1,025     |   |         | -       |         |   | - |   |   | 13,819 |   |
| Fair      value of derivative contracts                              |   |                | -       |   |   | 31,624    |   |         | -       |         |   | - |   |   | 31,624 |   |
| Current      assets from discontinued                                |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| operations                                                           |   |                | -       |   |   | -         |   |         | 516     |         |   | - |   |   | 516 |   |
| Total      current assets                                            |   |                | 12,829  |   |   | 270,059   |   |         | 525     |         |   | - |   |   | 283,413 |   |
| Property,      plant and equipment, net                              |   |                | -       |   |   | 992,532   |   |         | 31      |         |   | - |   |   | 992,563 |   |
| Discontinued      sulphur assets                                     |   |                | -       |   |   | -         |   |         | 3,012   |         |   | - |   |   | 3,012 |   |
| Investment      in subsidiaries                                      |   |                | 841,882 |   |   | -         |   |         | -       |         |   | (841,882 | ) |   | - |   |
| Amounts      due from affiliates                                     |   |                |    |   |   | 168,004   |   |         | (2,993  | )            |   | (165,011 | ) |   | - |   |
| Deferred      financing costs and other                              |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| assets                                                               |   |                | 11,122  |   |   | 40,172    |   |         | -       |         |   | - |   |   | 51,294 |   |
| Total      assets                                                    |   | $                   | 865,833 |   | $      | 1,470,767 |   | $            | 575     |         | $      | (1,006,893 | ) | $ | 1,330,282 |   |
|                                                                 |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY  (DEFICIT) |   |                |    |   |   |      |   |         |    |         |
| Currentliabilities:                                                  |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| Accounts      payable                                                |   | $                   | 512     |   | $      | 76,491    |   | $            | 6       |         | $      | - |   | $ | 77,009 |   |
| Accrued      liabilities                                             |   |                | 705     |   |   | 88,329    |   |         | 531     |         |   | - |   |   | 89,565 |   |
| Current      portion of oil and gas                                  |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| accrued      reclamation costs                                       |   |                | -       |   |   | 103,550   |   |         | -       |         |   | - |   |   | 103,550 |   |
| Other      current liabilities                                       |   |                | 6,835   |   |   | 751       |   |         | -       |         |   | - |   |   | 7,586 |   |
| Current      liabilities from discontinued                           |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| operations                                                           |   |                | -       |   |   | -         |   |         | 2,102   |         |   | - |   |   | 2,102 |   |
| Total      current liabilities                                       |   |                | 8,052   |   |   | 269,121   |   |         | 2,639   |         |   | - |   |   | 279,812 |   |
| Long-term      debt                                                  |   |                | 374,720 |   |   | -         |   |         | -       |         |   | - |   |   | 374,720 |   |
| Amounts      due to affiliates                                       |   |                | 165,011 |   |   | -         |   |         | -       |         |   | (165,011 | ) |   | - |   |
| Accrued      oil and gas reclamation costs                           |   |                | -       |   |   | 317,651   |   |         | -       |         |   | - |   |   | 317,651 |   |
| Accrued      sulphur reclamation costs                               |   |                | -       |   |   | -         |   |         | 22,218  |         |   | - |   |   | 22,218 |   |
| Other      long-term liabilities                                     |   |                | 9,027   |   |   | 9,380     |   |         | 8,451   |         |   | - |   |   | 26,858 |   |
| Total      liabilities                                               |   |                | 556,810 |   |   | 596,152   |   |         | 33,308  |         |   | (165,011 | ) |   | 1,021,259 |   |
| Commitments      and contingencies                                   |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| Stockholders’      equity (deficit)                            |   |                | 309,023 |   |   | 874,615   |   |         | (32,733 | )            |   | (841,882 | ) |   | 309,023 |   |
| Total      liabilities and stockholders’                       |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| equity      (deficit)                                                |   | $                   | 865,833 |   | $      | 1,470,767 |   | $            | 575     |         | $      | (1,006,893 | ) | $ | 1,330,282 |   |

----

TABLE OFCONTENTS

|                                                                 |   |                |    |   |   | Freeport  |   |         |    | Consolidated |   |
|----------------------------------------------------------------------|--------|---------------------|---------|--------|--------|-----------|--------|--------------|---------|--------------|--------|
|                                                                 |   | Parent              |    | MOXY   |   | Energy    |   | Eliminations |    | McMoRan      |   |
|                                                                 |   | (In      Thousands) |    |
| ASSETS                                                               |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| Current      assets:                                                 |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| Cash      and cash equivalents                                       |   | $                   | 143     |   | $      | 3,446     |   | $            | 1,241   |         | $      | - |   | $ | 4,830 |   |
| Accounts      receivable                                             |   |                | 885     |   |   | 127,805   |   |         | -       |         |   | - |   |   | 128,690 |   |
| Inventories                                                          |   |                | -       |   |   | 11,507    |   |         | -       |         |   | - |   |   | 11,507 |   |
| Prepaid      expenses                                                |   |                | 12,833  |   |   | 1,498     |   |         | -       |         |   | - |   |   | 14,331 |   |
| Fair      value of derivative contracts                              |   |                | -       |   |   | 16,623    |   |         | -       |         |   | - |   |   | 16,623 |   |
| Current      assets from discontinued                                |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| operations                                                           |   |                | -       |   |   | -         |   |         | 3,029   |         |   | - |   |   | 3,029 |   |
| Total      current assets                                            |   |                | 13,861  |   |   | 160,879   |   |         | 4,270   |         |   | - |   |   | 179,010 |   |
| Property,      plant and equipment, net                              |   |                | -       |   |   | 1,503,328 |   |         | 31      |         |   | - |   |   | 1,503,359 |   |
| Discontinued      sulphur assets                                     |   |                | -       |   |   | -         |   |         | 476     |         |   | - |   |   | 476 |   |
| Investment      in subsidiaries                                      |   |                | 971,176 |   |   | -         |   |         | -       |         |   | (971,176 | ) |   | - |   |
| Amounts      due from affiliates                                     |   |                | -       |   |   | 68,341    |   |         | 5,987   |         |   | (74,328 | ) |   | - |   |
| Deferred      financing costs and other                              |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| assets                                                               |   |                | 14,135  |   |   | 18,308    |   |         | -       |         |   | - |   |   | 32,443 |   |
| Total      assets                                                    |   | $                   | 999,172 |   | $      | 1,750,856 |   | $            | 10,764  |         | $      | (1,045,504 | ) | $ | 1,715,288 |   |
|                                                                 |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY  (DEFICIT) |   |                |    |   |   |      |   |         |    |         |
| Currentliabilities:                                                  |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| Accounts      payable                                                |   | $                   | 222     |   | $      | 97,300    |   | $            | 299     |         | $      | - |   | $ | 97,821 |   |
| Accrued      liabilities                                             |   |                | 2,110   |   |   | 65,006    |   |         | 1,176   |         |   | - |   |   | 68,292 |   |
| Current      portion of debt                                         |   |                | 111,535 |   |   | -         |   |         | -       |         |   | - |   |   | 111,535 |   |
| Current      portion of oil and gas                                  |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| accrued      reclamation costs                                       |   |                | -       |   |   | 80,839    |   |         | -       |         |   | - |   |   | 80,839 |   |
| Other      current liabilities                                       |   |                | 11,723  |   |   | 15,333    |   |         | -       |         |   | - |   |   | 27,056 |   |
| Current      liabilities from discontinued                           |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| operations                                                           |   |                | -       |   |   | -         |   |         | 14,769  |         |   | - |   |   | 14,769 |   |
| Total      current liabilities                                       |   |                | 125,590 |   |   | 258,478   |   |         | 16,244  |         |   | - |   |   | 400,312 |   |
| Long-term      debt                                                  |   |                | 415,000 |   |   | 274,000   |   |         | -       |         |   | - |   |   | 689,000 |   |
| Amounts      due to affiliates                                       |   |                | 74,328  |   |   | -         |   |         | -       |         |   | (74,328 | ) |   | - |   |
| Accrued      oil and gas reclamation costs                           |   |                | -       |   |   | 213,898   |   |         | -       |         |   | - |   |   | 213,898 |   |
| Accrued      sulphur reclamation costs                               |   |                | -       |   |   | -         |   |         | 9,155   |         |   | - |   |   | 9,155 |   |
| Other      long-term liabilities                                     |   |                | 12,025  |   |   | 9,245     |   |         | 9,424   |         |   | - |   |   | 30,694 |   |
| Total      liabilities                                               |   |                | 626,943 |   |   | 755,621   |   |         | 34,823  |         |   | (74,328 | ) |   | 1,343,059 |   |
| Commitments      and contingencies                                   |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| Stockholders’      equity (deficit)                            |   |                | 372,229 |   |   | 995,235   |   |         | (24,059 | )            |   | (971,176 | ) |   | 372,229 |   |
| Total      liabilities and stockholders’                       |   |                |    |   |   |      |   |         |    |         |   |   |   |   |   |   |
| equity      (deficit)                                                |   | $                   | 999,172 |   | $      | 1,750,856 |   | $            | 10,764  |         | $      | (1,045,504 | ) | $ | 1,715,288 |   |

----

TABLE OF CONTENTS

|                                             |   |                |     |   |   | Freeport  |   |         |    | Consolidated |   |
|--------------------------------------------------|--------|---------------------|----------|--------|--------|-----------|--------|--------------|---------|--------------|--------|
|                                             |   | Parent              |     | MOXY   |   | Energy    |   | Eliminations |    | McMoRan      |   |
|                                             |   | (In      Thousands) |     |
| Revenues:                                        |   |                |     |   |   |      |   |         |    |         |   |   |   |   |   |   |
| Oil      and gas                                 |   | $                   | -        |   | $      | 1,058,804 |   | $            | -       |         | $      | - |   | $ | 1,058,804 |   |
| Service                                          |   |                | -        |   |   | 13,678    |   |         | -       |         |   | - |   |   | 13,678 |   |
| Total      revenues                              |   |                | -        |   |   | 1,072,482 |   |         | -       |         |   | - |   |   | 1,072,482 |   |
| Costs      and expenses:                         |   |                |     |   |   |      |   |         |    |         |   |   |   |   |   |   |
| Production      and delivery costs               |   |                | -        |   |   | 258,504   |   |         | (54     | )            |   | - |   |   | 258,450 |   |
| Depletion,      depreciation and amortization    |   |                | -        |   |   | 854,798   |   |         | -       |         |   | - |   |   | 854,798 |   |
| Exploration      expenses                        |   |                | -        |   |   | 79,116    |   |         | -       |         |   | - |   |   | 79,116 |   |
| General      and administrative expenses         |   |                | 7,624    |   |   | 41,024    |   |         | 351     |         |   | - |   |   | 48,999 |   |
| Gain      on oil and gas derivative contracts    |   |                | -        |   |   | (16,303   | )      |         | -       |         |   | - |   |   | (16,303 | ) |
| Start-up      costs for Main Pass                |   |                |     |   |   |      |   |         |    |         |   |   |   |   |   |   |
| Energy      HubTM                                |   |                | -        |   |   | -         |   |         | 6,047   |         |   | - |   |   | 6,047 |   |
| Insurance      recoveries and other              |   |                | -        |   |   | (3,391    | )      |         | -       |         |   | - |   |   | (3,391 | ) |
| Total      costs and expenses                    |   |                | 7,624    |   |   | 1,213,748 |   |         | 6,344   |         |   | - |   |   | 1,227,716 |   |
| Operating      income (loss)                     |   |                | (7,624   | )      |   | (141,266  | )      |         | (6,344  | )            |   | - |   |   | (155,234 | ) |
| Interest      expense, net                       |   |                | (43,722  | )      |   | (7,168    | )      |         | -       |         |   | - |   |   | (50,890 | ) |
| Equity      in earnings (losses) of              |   |                |     |   |   |      |   |         |    |         |   |   |   |   |   |   |
|    consolidated      subsidiaries |   |                | (160,205 | )      |   | -         |   |         | -       |         |   | 160,205 |   |   | - |   |
| Other      income (expense), net                 |   |                | (2,635   | )      |   | 69        |   |         | -       |         |   | - |   |   | (2,566 | ) |
| Income      (loss) from continuing operations    |   |                |     |   |   |      |   |         |    |         |   |   |   |   |   |   |
| before      income taxes                         |   |                | (214,186 | )      |   | (148,365  | )      |         | (6,344  | )            |   | 160,205 |   |   | (208,690 | ) |
| Provision      for income taxes                  |   |                | (2,508   | )      |   | -         |   |         | -       |         |   | - |   |   | (2,508 | ) |
| Income      (loss) from continuing operations    |   |                | (216,694 | )      |   | (148,365  | )      |         | (6,344  | )            |   | 160,205 |   |   | (211,198 | ) |
| Income      from discontinued operations         |   |                | -        |   |   | -         |   |         | (5,496  | )            |   | - |   |   | (5,496 | ) |
| Net      income (loss)                           |   |                | (216,694 | )      |   | (148,365  | )      |         | (11,840 | )            |   | 160,205 |   |   | (216,694 | ) |
| Preferred      dividends and amortization        |   |                |     |   |   |      |   |         |    |         |   |   |   |   |   |   |
| of      convertible preferred stock              |   |                |     |   |   |      |   |         |    |         |   |   |   |   |   |   |
| issuance      costs                              |   |                | (22,286  | )      |   | -         |   |         | -       |         |   | - |   |   | (22,286 | ) |
| Net      income (loss) applicable to             |   |                |     |   |   |      |   |         |    |         |   |   |   |   |   |   |
| common      stock                                |   | $                   | (238,980 | )      | $      | (148,365  | )      | $            | (11,840 | )            | $      | 160,205 |   | $ | (238,980 | ) |
|                                             |   |                |     |   |   |      |   |         |    |         |   |   |   |   |   |   |

----

TABLE OFCONTENTS

|                                             |   |                |    |   |   | Freeport |   |         |   | Consolidated |   |
|--------------------------------------------------|--------|---------------------|---------|--------|--------|----------|--------|--------------|--------|--------------|--------|
|                                             |   | Parent              |    | MOXY   |   | Energy   |   | Eliminations |   | McMoRan      |   |
|                                             |   | (In      Thousands) |    |
| Revenues:                                        |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Oil      and gas                                 |   | $                   | -       |   | $      | 475,250  |   | $            | -      |         | $      | - |   | $ | 475,250 |   |
| Service                                          |   |                | -       |   |   | 5,917    |   |         | -      |         |   | - |   |   | 5,917 |   |
| Total      revenues                              |   |                | -       |   |   | 481,167  |   |         | -      |         |   | - |   |   | 481,167 |   |
| Costs      and expenses:                         |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Production      and delivery costs               |   |                | -       |   |   | 122,175  |   |         | (48    | )            |   | - |   |   | 122,127 |   |
| Depreciation      and amortization               |   |                | -       |   |   | 256,007  |   |         | -      |         |   | - |   |   | 256,007 |   |
| Exploration      expenses                        |   |                | -       |   |   | 58,954   |   |         | -      |         |   | - |   |   | 58,954 |   |
| General      and administrative expenses         |   |                | 5,264   |   |   | 22,499   |   |         | 210    |         |   | - |   |   | 27,973 |   |
| Loss      on oil and gas derivative contracts    |   |                | -       |   |   | 5,181    |   |         | -      |         |   | - |   |   | 5,181 |   |
| Start-up      costs for Main Pass                |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Energy      HubTM                                |   |                | -       |   |   | -        |   |         | 9,754  |         |   | - |   |   | 9,754 |   |
| Insurance      recovery and other                |   |                | -       |   |   | (2,338   | )      |         | -      |         |   | - |   |   | (2,338 | ) |
| Total      costs and expenses                    |   |                | 5,264   |   |   | 462,478  |   |         | 9,916  |         |   | - |   |   | 477,658 |   |
| Operating      income (loss)                     |   |                | (5,264  | )      |   | 18,689   |   |         | (9,916 | )            |   | - |   |   | 3,509 |   |
| Interest      expense                            |   |                | (49,513 | )      |   | (16,853  | )      |         | -      |         |   | - |   |   | (66,366 | ) |
| Equity      in earnings (losses) of              |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
|    consolidated      subsidiaries |   |                | (6,464  | )      |   | -        |   |         | -      |         |   | 6,464 |   |   | - |   |
| Other      income (expense), net                 |   |                | 1,507   |   |   | (2,211   | )      |         |   |         |   |   |   |   | (704 | ) |
| Income      (loss) from continuing operations    |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| before      income taxes                         |   |                | (59,734 | )      |   | (375     | )      |         | (9,916 | )            |   | 6,464 |   |   | (63,561 | ) |
| Provision      for income taxes                  |   |                | -       |   |   | -        |   |         | -      |         |   | - |   |   | - |   |
| Income      (loss) from continuing operations    |   |                | (59,734 | )      |   | (375     | )      |         | (9,916 | )            |   | 6,464 |   |   | (63,561 | ) |
| Income      from discontinued operations         |   |                | -       |   |   | 302      |   |         | 3,525  |         |   | - |   |   | 3,827 |   |
| Net      income (loss)                           |   |                | (59,734 | )      |   | (73      | )      |         | (6,391 | )            |   | 6,464 |   |   | (59,734 | ) |
| Preferred      dividends and amortization        |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| of      convertible preferred stock              |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| issuance      costs                              |   |                | (4,172  | )      |   | -        |   |         | -      |         |   | - |   |   | (4,172 | ) |
| Net      income (loss) applicable to             |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| common      stock                                |   | $                   | (63,906 | )      | $      | (73      | )      | $            | (6,391 | )            | $      | 6,464 |   | $ | (63,906 | ) |
|                                             |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |

----

TABLE OFCONTENTS

|                                          |   |                |    |   |   | Freeport |   |         |   | Consolidated |   |
|-----------------------------------------------|--------|---------------------|---------|--------|--------|----------|--------|--------------|--------|--------------|--------|
|                                          |   | Parent              |    | MOXY   |   | Energy   |   | Eliminations |   | McMoRan      |   |
|                                          |   | (In      Thousands) |    |
| Revenues:                                     |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Oil      and gas                              |   | $                   | -       |   | $      | 185,852  |   | $            | 10,865 |         | $      | - |   | $ | 196,717 |   |
| Service                                       |   |                | 778     |   |   | 11,742   |   |         | 501    |         |   | - |   |   | 13,021 |   |
| Total      revenues                           |   |                | 778     |   |   | 197,594  |   |         | 11,366 |         |   | - |   |   | 209,738 |   |
| Costs      and expenses:                      |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Production      and delivery costs            |   |                | -       |   |   | 48,192   |   |         | 4,942  |         |   | - |   |   | 53,134 |   |
| Depreciation      and amortization            |   |                | -       |   |   | 104,063  |   |         | 661    |         |   |   |   |   | 104,724 |   |
| Exploration      expenses                     |   |                | -       |   |   | 67,737   |   |         | -      |         |   | - |   |   | 67,737 |   |
| General      and administrative expenses      |   |                | 5,637   |   |   | 14,982   |   |         | 108    |         |   | - |   |   | 20,727 |   |
| Start-up      costs for Main Pass             |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Energy      HubTM                             |   |                | -       |   |   | -        |   |         | 10,714 |         |   | - |   |   | 10,714 |   |
| Exploration      expense reimbursement        |   |                | -       |   |   | (10,979  | )      |         | -      |         |   | - |   |   | (10,979 | ) |
| Insurance      recovery and other             |   |                | (446    | )      |   | (2,583   | )      |         | (723   | )            |   | - |   |   | (3,752 | ) |
| Total      costs and expenses                 |   |                | 5,191   |   |   | 221,412  |   |         | 15,702 |         |   | - |   |   | 242,305 |   |
| Operating      income (loss)                  |   |                | (4,413  | )      |   | (23,818  | )      |         | (4,336 | )            |   | - |   |   | (32,567 | ) |
| Interest      expense                         |   |                | (10,135 | )      |   | (68      | )      |         | -      |         |   | - |   |   | (10,203 | ) |
| Equity      in earnings (losses) of           |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| consolidated      subsidiaries                |   |                | (30,228 | )      |   | -        |   |         | -      |         |   | 30,228 |   |   | - |   |
| Other      income (expense), net              |   |                | (2,878  | )      |   | 724      |   |         | 208    |         |   | - |   |   | (1,946 | ) |
| Income      (loss) from continuing operations |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| before      income taxes                      |   |                | (47,654 | )      |   | (23,162  | )      |         | (4,128 | )            |   | 30,228 |   |   | (44,716 | ) |
| Provision      for income taxes               |   |                | -       |   |   | -        |   |         | -      |         |   | - |   |   | - |   |
| Income      (loss) from continuing operations |   |                | (47,654 | )      |   | (23,162  | )      |         | (4,128 | )            |   | 30,228 |   |   | (44,716 | ) |
| Income      (loss) from discontinued          |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| operations                                    |   |                | -       |   |   | 77       |   |         | (3,015 | )            |   | - |   |   | (2,938 | ) |
| Net      income (loss)                        |   |                | (47,654 | )      |   | (23,085  | )      |         | (7,143 | )            |   | 30,228 |   |   | (47,654 | ) |
| Preferred      dividends and amortization     |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| of      convertible preferred stock           |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| issuance      costs                           |   |                | (1,615  | )      |   | -        |   |         | -      |         |   | - |   |   | (1,615 | ) |
| Net      income (loss) applicable to          |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| common      stock                             |   | $                   | (49,269 | )      | $      | (23,085  | )      | $            | (7,143 | )            | $      | 30,228 |   | $ | (49,269 | ) |
|                                          |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |

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TABLE OF CONTENTS

|                                              |   |                |    |   |   | Freeport |   | Consolidated |   |
|---------------------------------------------------|--------|---------------------|---------|--------|--------|----------|--------|--------------|--------|
|                                              |   | Parent              |    | MOXY   |   | Energy   |   | McMoRan      |   |
|                                              |   | (In      Thousands) |    |
|                                              |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Cash      flow from operating activities:         |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Net      cash provided by continuing              |   |                |    |   |   |     |   |         |   |   |   |   |   |
| operations                                        |   | $                   | 23,676  |   | $      | 603,205  |   | $            | 2,778  |   | $ | 629,659 |   |
| Net      cash used in discontinued                |   |                |    |   |   |     |   |         |   |   |   |   |   |
| operations                                        |   |                | -       |   |   | -        |   |         | (6,262 | ) |   | (6,262 | ) |
| Net      cash provided by (used in)               |   |                |    |   |   |     |   |         |   |   |   |   |   |
| operating      activities                         |   |                | 23,676  |   |   | 603,205  |   |         | (3,484 | ) |   | 623,397 |   |
|                                              |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Cash      flow from investing activities:         |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Exploration,      development and other           |   |                |    |   |   |     |   |         |   |   |   |   |   |
| capital      expenditures                         |   |                | -       |   |   | (236,383 | )      |         | -      |   |   | (236,383 | ) |
| Acquisition      of oil & gas properties, net |   |                | -       |   |   | (2,826   | )      |         | -      |   |   | (2,826 | ) |
| Net      cash used in investing activities        |   |                | -       |   |   | (239,209 | )      |         | -      |   |   | (239,209 | ) |
|                                              |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Cash      flow from financing activities:         |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Net      borrowings under revolving credit        |   |                |    |   |   |     |   |         |   |   |   |   |   |
| facility                                          |   |                | -       |   |   | (274,000 | )      |         | -      |   |   | (274,000 | ) |
| Dividends      and inducements payments           |   |                |    |   |   |     |   |         |   |   |   |   |   |
| on      convertible preferred stock               |   |                | (23,565 | )      |   | -        |   |         | -      |   |   | (23,565 | ) |
| Proceeds      from exercise of stock              |   |                |    |   |   |     |   |         |   |   |   |   |   |
| options,      warrants and other                  |   |                | 4,696   |   |   | -        |   |         | -      |   |   | 4,696 |   |
| Payments      for induced conversion of           |   |                |    |   |   |     |   |         |   |   |   |   |   |
| convertible      senior notes                     |   |                | (2,663  | )      |   | -        |   |         | -      |   |   | (2,663 | ) |
| Investment      from parent                       |   |                | (2,252  | )      |   | -        |   |         | 2,252  |   |   | - |   |
| Net      cash provided by (used in)               |   |                |    |   |   |     |   |         |   |   |   |   |   |
| financing      activities                         |   |                | (23,784 | )      |   | (274,000 | )      |         | 2,252  |   |   | (295,532 | ) |
|                                              |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Net      increase (decrease) in cash and          |   |                |    |   |   |     |   |         |   |   |   |   |   |
| cash      equivalents                             |   |                | (108    | )      |   | 89,996   |   |         | (1,232 | ) |   | 88,656 |   |
| Cash      and cash equivalents at beginning       |   |                |    |   |   |     |   |         |   |   |   |   |   |
| of      year                                      |   |                | 143     |   |   | 3,446    |   |         | 1,241  |   |   | 4,830 |   |
| Cash      and cash equivalents at end of          |   |                |    |   |   |     |   |         |   |   |   |   |   |
| year                                              |   | $                   | 35      |   | $      | 93,442   |   | $            | 9      |   | $ | 93,486 |   |
|                                              |   |                |    |   |   |     |   |         |   |   |   |   |   |

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TABLE OF CONTENTS

|                                         |   |                |     |   |   | Freeport   |   | Consolidated |    |
|----------------------------------------------|--------|---------------------|----------|--------|--------|------------|--------|--------------|---------|
|                                         |   | Parent              |     | MOXY   |   | Energy     |   | McMoRan      |    |
|                                         |   | (In      Thousands) |     |
|                                         |   |                |     |   |   |       |   |         |    |   |   |   |   |
| Cash      flow from operating activities:    |   |                |     |   |   |       |   |         |    |   |   |   |   |
| Net      cash provided by (used in)          |   |                |     |   |   |       |   |         |    |   |   |   |   |
| continuing      operations                   |   | $                   | 35,897   |   | $      | 189,205    |   | $            | (15,454 | ) | $ | 209,648 |   |
| Net      cash provided by (used in)          |   |                |     |   |   |       |   |         |    |   |   |   |   |
| discontinued      operations                 |   |                | -        |   |   | 302        |   |         | (2,312  | ) |   | (2,010 | ) |
| Net      cash provided by (used in)          |   |                |     |   |   |       |   |         |    |   |   |   |   |
| operating      activities                    |   |                | 35,897   |   |   | 189,507    |   |         | (17,766 | ) |   | 207,638 |   |
|                                         |   |                |     |   |   |       |   |         |    |   |   |   |   |
| Cash      flow from investing activities:    |   |                |     |   |   |       |   |         |    |   |   |   |   |
| Exploration,      development and other      |   |                |     |   |   |       |   |         |    |   |   |   |   |
| capital      expenditures                    |   |                | -        |   |   | (153,210   | )      |         | -       |   |   | (153,210 | ) |
| Acquisition      of Newfield properties, net |   |                | -        |   |   | (1,047,936 | )      |         | -       |   |   | (1,047,936 | ) |
| Proceeds      from restricted investments    |   |                | 6,056    |   |   | -          |   |         | -       |   |   | 6,056 |   |
| Increase      in restricted investments      |   |                | (126     | )      |   | -          |   |         | -       |   |   | (126 | ) |
| Net      cash provided by (used in)          |   |                |     |   |   |       |   |         |    |   |   |   |   |
| investing      activities                    |   |                | 5,930    |   |   | (1,201,146 | )      |         | -       |   |   | (1,195,216 | ) |
|                                         |   |                |     |   |   |       |   |         |    |   |   |   |   |
| Cash      flow from financing activities:    |   |                |     |   |   |       |   |         |    |   |   |   |   |
| Net      borrowings under revolving credit   |   |                |     |   |   |       |   |         |    |   |   |   |   |
| facility                                     |   |                | -        |   |   | 245,250    |   |         | -       |   |   | 245,250 |   |
| Proceeds      from sale of 11.875% senior    |   |                |     |   |   |       |   |         |    |   |   |   |   |
| notes                                        |   |                | 300,000  |   |   | -          |   |         | -       |   |   | 300,000 |   |
| Net      proceeds from sale of 6.75%         |   |                |     |   |   |       |   |         |    |   |   |   |   |
| mandatory      convertible preferred         |   |                |     |   |   |       |   |         |    |   |   |   |   |
| stock                                        |   |                | 250,385  |   |   | -          |   |         | -       |   |   | 250,385 |   |
| Net      proceeds from sale of common stock  |   |                | 200,189  |   |   | -          |   |         | -       |   |   | 200,189 |   |
| Proceeds      from bridge loan facility      |   |                | 800,000  |   |   | -          |   |         | -       |   |   | 800,000 |   |
| Repayment      of bridge loan facility       |   |                | (800,000 | )      |   | -          |   |         | -       |   |   | (800,000 | ) |
| Proceeds      from senior term loan          |   |                | -        |   |   | 100,000    |   |         | -       |   |   | 100,000 |   |
| Repayment      of senior term loan           |   |                | -        |   |   | (100,000   | )      |         | -       |   |   | (100,000 | ) |
| Financing      costs                         |   |                | (17,573  | )      |   | (12,980    | )      |         | -       |   |   | (30,553 | ) |
| Dividends      paid on convertible preferred |   |                |     |   |   |       |   |         |    |   |   |   |   |
| stock                                        |   |                | (1,121   | )      |   | -          |   |         | -       |   |   | (1,121 | ) |
| Proceeds      from exercise of stock         |   |                |     |   |   |       |   |         |    |   |   |   |   |
| options,      warrants and other             |   |                | 10,428   |   |   | -          |   |         | -       |   |   | 10,428 |   |
| Investment      from parent                  |   |                | (800,586 | )      |   | 781,786    |   |         | 18,800  |   |   | - |   |
| Net      cash provided by (used in)          |   |                |     |   |   |       |   |         |    |   |   |   |   |
| financing      activities                    |   |                | (58,278  | )      |   | 1,014,056  |   |         | 18,800  |   |   | 974,578 |   |
|                                         |   |                |     |   |   |       |   |         |    |   |   |   |   |
| Net      increase (decrease) in cash and     |   |                |     |   |   |       |   |         |    |   |   |   |   |
| cash      equivalents                        |   |                | (16,451  | )      |   | 2,417      |   |         | 1,034   |   |   | (13,000 | ) |
| Cash      and cash equivalents at beginning  |   |                |     |   |   |       |   |         |    |   |   |   |   |
| of      year                                 |   |                | 16,594   |   |   | 1,029      |   |         | 207     |   |   | 17,830 |   |
| Cash      and cash equivalents at end of     |   |                |     |   |   |       |   |         |    |   |   |   |   |
| year                                         |   | $                   | 143      |   | $      | 3,446      |   | $            | 1,241   |   | $ | 4,830 |   |
|                                         |   |                |     |   |   |       |   |         |    |   |   |   |   |

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TABLE OF CONTENTS

|                                         |   |                |    |   |   | Freeport |   | Consolidated |    |
|----------------------------------------------|--------|---------------------|---------|--------|--------|----------|--------|--------------|---------|
|                                         |   | Parent              |    | MOXY   |   | Energy   |   | McMoRan      |    |
|                                         |   | (In      Thousands) |    |
| Cash      flow from operating activities:    |   |                |    |   |   |     |   |         |    |   |   |   |   |
| Net      cash provided by (used in)          |   |                |    |   |   |     |   |         |    |   |   |   |   |
| continuing      operations                   |   | $                   | (25,469 | )      |   | 131,323  |   |         | (5,717  | ) |   | 100,137 |   |
| Net      cash provided by (used in)          |   |                |    |   |   |     |   |         |    |   |   |   |   |
| discontinued      operations                 |   |                | -       |   |   | 77       |   |         | (5,023  | ) |   | (4,946 | ) |
| Net      cash provided by (used in)          |   |                |    |   |   |     |   |         |    |   |   |   |   |
| operating      activities                    |   |                | (25,469 | )      |   | 131,400  |   |         | (10,740 | ) |   | 95,191 |   |
|                                         |   |                |    |   |   |     |   |         |    |   |   |   |   |
| Cash      flow from investing activities:    |   |                |    |   |   |     |   |         |    |   |   |   |   |
| Exploration,      development and other      |   |                |    |   |   |     |   |         |    |   |   |   |   |
| capital      expenditures                    |   |                | -       |   |   | (251,851 | )      |         | (518    | ) |   | (252,369 | ) |
| Property      insurance reimbursement        |   |                | -       |   |   | 3,947    |   |         | -       |   |   | 3,947 |   |
| Proceeds      from restricted investments    |   |                | 16,505  |   |   | -        |   |         | -       |   |   | 16,505 |   |
| Increase      in restricted investments      |   |                | (229    | )      |   | -        |   |         | -       |   |   | (229 | ) |
| Proceeds      from sale of oil and gas       |   |                |    |   |   |     |   |         |    |   |   |   |   |
| properties                                   |   |                | -       |   |   | 1,021    |   |         | 50      |   |   | 1,071 |   |
| Cash      acquired                           |   |                | -       |   |   | 23,052   |   |         | (23,052 | ) |   | - |   |
| Net      cash provided by (used in)          |   |                |    |   |   |     |   |         |    |   |   |   |   |
| investing      activities                    |   |                | 16,276  |   |   | (223,831 | )      |         | (23,520 | ) |   | (231,075 | ) |
|                                         |   |                |    |   |   |     |   |         |    |   |   |   |   |
| Cash      flow from financing activities:    |   |                |    |   |   |     |   |         |    |   |   |   |   |
| Net      borrowings under revolving credit   |   |                |    |   |   |     |   |         |    |   |   |   |   |
| facility                                     |   |                | -       |   |   | 28,750   |   |         | -       |   |   | 28,750 |   |
| Financing      costs                         |   |                | -       |   |   | (531     | )      |         | -       |   |   | (531 | ) |
| Dividends      paid on convertible preferred |   |                |    |   |   |     |   |         |    |   |   |   |   |
| stock                                        |   |                | (1,494  | )      |   | -        |   |         | -       |   |   | (1,494 | ) |
| Proceeds      from exercise of stock         |   |                |    |   |   |     |   |         |    |   |   |   |   |
| options,      warrants and other             |   |                | 389     |   |   | -        |   |         | -       |   |   | 389 |   |
| Payments      for induced conversion of      |   |                |    |   |   |     |   |         |    |   |   |   |   |
| convertible      senior notes                |   |                | (4,301  | )      |   | -        |   |         | -       |   |   | (4,301 | ) |
| Net      repayment of borrowings to parent   |   |                | 5,674   |   |   | (5,674   | )      |         | -       |   |   | - |   |
| Investment      from parent                  |   |                | (17,826 | )      |   | -        |   |         | 17,826  |   |   | - |   |
| Net      cash provided by (used in)          |   |                |    |   |   |     |   |         |    |   |   |   |   |
| financing      activities                    |   |                | (17,558 | )      |   | 22,545   |   |         | 17,826  |   |   | 22,813 |   |
|                                         |   |                |    |   |   |     |   |         |    |   |   |   |   |
| Net      decrease in cash and cash           |   |                |    |   |   |     |   |         |    |   |   |   |   |
| equivalents                                  |   |                | (26,751 | )      |   | (69,886  | )      |         | (16,434 | ) |   | (113,071 | ) |
| Cash      and cash equivalents at beginning  |   |                |    |   |   |     |   |         |    |   |   |   |   |
| of      year                                 |   |                | 43,345  |   |   | 70,915   |   |         | 16,641  |   |   | 130,901 |   |
| Cash      and cash equivalents at end of     |   |                |    |   |   |     |   |         |    |   |   |   |   |
| year                                         |   | $                   | 16,594  |   | $      | 1,029    |   | $            | 207     |   | $ | 17,830 |   |
|                                         |   |                |    |   |   |     |   |         |    |   |   |   |   |

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|             |   |                                          |      | Operating    |   | Net           |   | Net      Income       |     |
|------------------|--------|-----------------------------------------------|-----------|--------------|--------|---------------|--------|-----------------------|----------|
|             |   |                                          |      | Income       |   | Income        |   | (Loss)      per Share |     |
|             |   | Revenues                                      |      |  (Loss) |   | (Loss)      a |   | Basic                 |     | Diluted |   |
|             |   | (In      Thousands, Except Per Share Amounts) |      |
| 2008      b      |   |                                          |      |         |   |          |   |                  |     |   |   |   |   |   |   |   |
| 1st      Quarter |   | $                                             | 295,476   |         | $      | 55,825        |   | $                     | 32,009   |   | $ | 0.59 |   | $ | 0.46 |   |
| 2nd      Quarter |   |                                          | 375,508   |         |   | 70,256        |   |                  | 49,725   |   |   | 0.87 |   |   | 0.63 |   |
| 3rd      Quarter |   |                                          | 285,245   |         |   | 18,057        | c      |                  | (6,132   | ) |   | (0.10 | ) |   | (0.10 | ) |
| 4th      Quarter |   |                                          | 116,253   |         |   | (299,372      | )d     |                  | (314,582 | ) |   | (4.46 | ) |   | (4.46 | ) |
|             |   | $                                             | 1,072,482 |         | $      | (155,234      | )      | $                     | (238,980 | ) |   |   |   |   |   |   |

|             |   |                                          |    | Operating    |   | Net           |   | Net      Income       |    |
|------------------|--------|-----------------------------------------------|---------|--------------|--------|---------------|--------|-----------------------|---------|
|             |   |                                          |    | Income       |   | Income        |   | (Loss)      per Share |    |
|             |   | Revenues                                      |    |  (Loss) |   | (Loss)      a |   | Basic                 |    | Diluted |   |
|             |   | (In      Thousands, Except Per Share Amounts) |    |
| 2007      b      |   |                                          |    |         |   |          |   |                  |    |   |   |   |   |   |   |   |
| 1st      Quarter |   | $                                             | 51,697  |         | $      | (11,923       | )      | $                     | (14,903 | )e | $ | (0.53 | ) | $ | (0.53 | ) |
| 2nd      Quarter |   |                                          | 45,348  |         |   | 685           |   |                  | (6,486  | ) |   | (0.23 | ) |   | (0.23 | ) |
| 3rd      Quarter |   |                                          | 133,252 |         |   | (25,663       | )f     |                  | (52,184 | ) |   | (1.50 | ) |   | (1.50 | ) |
| 4th      Quarter |   |                                          | 250,870 | h            |   | 40,410        |   |                  | 9,667   | g |   | 0.21 |   |   | 0.20 |   |
|             |   | $                                             | 481,167 |         | $      | 3,509         |   | $                     | (63,906 | ) |   |   |   |   |   |   |
|             |   |                                          |    |         |   |          |   |                  |    |   |   |   |   |   |   |   |

| a.   | Reflects      net income (loss) attributable to common stock, which includes preferred      dividends and amortization of convertible preferred stock issuance costs      as a reduction to net income(loss). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Amounts      associated with the 2007 oil and gas property acquisition were recorded      beginning August 6, 2007. |
|----------------|---------------------------------------------------------------------------------------------------------------------|

| c.   | Includes      $152.6 million of Hurricane Ike related charges and an impairment charge      of $10.8 million. |
|----------------|---------------------------------------------------------------------------------------------------------------|

| d.   | Includes      $291.8 million in impairment losses, $16.8 million of additional charges      associated with Hurricane Ike damage and $22.1 million of non-productive      well costs. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | Includes      $4.2 million final settlement of property damage claims for the Port      Sulphur, Louisiana facilities. |
|----------------|------------------------------------------------------------------------------------------------------------------------|

| f.   | Includes      a $13.6 million impairment charge, nonproductive exploratory well drilling      and related costs of $20.3 million and $12.5 million of seismic data      purchases for exploration acreage acquired in  2007. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g.   | Includes      $8.7 million net charge to write off the remaining unamortized financing      costs associated with the bridge loan facility upon its repayment and      termination in November 2007 (Note 8) and a $4.6 million reduction in      contractual liability covering certain retired former sulphur employees      (Note 17). |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

Item9.  Changes in and Disagreements with Accountants on Accounting andFinancial Disclosure

Item9A.  Controls and Procedures

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Item9B.  Other Information

PART III

Item10.  Directors, Executive Officers and CorporateGovernance

Item11.  Executive Compensation

Item 12.  Security Ownership of CertainBeneficial Owners and Management and Related StockholdersMatters

Item13.  Certain Relationships and Related Transactions, and DirectorIndependence

Item 14.Principal Accounting Fees and Services

PART IV

Item15.  Exhibits and Financial StatementSchedules

| (a)(2). | Financial Statement      Schedules.  All financial statement schedules are either      not required under the related instructions or are not applicable because      the information has been included elsewhere  herein. |
|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (a)(3). | Exhibits.  Reference      is made to the Exhibit Index beginning on page E-1  hereof. |
|---------|-------------------------------------------------------------------------------------------------|

GLOSSARY

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Delineationwell.  A well drilled at a distance from a development well todetermine physical extent, reserves and likely production rate of a new oil orgas reservoir.

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SIGNATURES

| *                                       | Co-Chairman      of the Board                                                                                      |
|-----------------------------------------|--------------------------------------------------------------------------------------------------------------------|
| James      R. Moffett                   |                                                                                                               |
|                                    |                                                                                                               |
| *                                       | Co-Chairman      of the Board                                                                                      |
| Richard      C. Adkerson                |                                                                                                               |
|                                    |                                                                                                               |
| *                                       | Vice      Chairman of the Board                                                                                    |
| B.M.      Rankin, Jr.                   |                                                                                                               |
|                                    |                                                                                                               |
| *                                       | Executive      Vice President                                                                                      |
| C.      Howard Murrish                  |                                                                                                               |
|                                    |                                                                                                               |
| /s/      Glenn A. Kleinert              | President      and Chief Executive Officer                                                                         |
| Glenn      A. Kleinert                  |                                                                                                               |
|                                    |                                                                                                               |
| /s/      Nancy D. Parmelee              | Senior      Vice President, Chief Financial                                                                        |
| Nancy      D. Parmelee                  | Officer      and Secretary                                                                                         |
|                                    |                   (Principal Financial Officer)        |
|                                    |                                                                                                               |
| *                                       | Vice      President and Controller - Financial Reporting                                                           |
| C.      Donald Whitmire, Jr.            |                    (Principal Accounting Officer) |
|                                    |                                                                                                               |
| *                                       | Director                                                                                                           |
| Robert      A. Day                      |                                                                                                               |
|                                    |                                                                                                               |
| *                                       | Director                                                                                                           |
| Gerald      J. Ford                     |                                                                                                               |
|                                    |                                                                                                               |
| *                                       | Director                                                                                                           |
| H.      Devon Graham, Jr.               |                                                                                                               |
|                                    |                                                                                                               |
| *                                       | Director                                                                                                           |
| Suzanne      T. Mestayer                |                                                                                                               |
|                                    |                                                                                                               |
| *By:  /s/ Richard C. Adkerson |                                                                                                               |
| Richard      C. Adkerson                |                                                                                                               |
| Attorney-in-Fact                        |                                                                                                               |

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TABLE OF CONTENTS
Exhibit Index

|                              |                                                                                                                                                                                                                                                                                                                                                     | Filed          |                           |          |            |
|-----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|--------------------------------|---------------|-----------------|
| Exhibit                           |                                                                                                                                                                                                                                                                                                                                                     | with      this | Incorporated      by Reference |
| Number                            | Exhibit      Title                                                                                                                                                                                                                                                                                                                                       | Form      10-K | Form                           | File      No. | Date      Filed |
|           2.1 | Agreement      and Plan of Merger dated as of August 1, 1998                                                                                                                                                                                                                                                                                             |           | S-4                            | 333-61171     | 10/06/1998      |
|           3.1 | Amended      and Restated Certificate of Incorporation of McMoRan                                                                                                                                                                                                                                                                                        |           | 10-K                           | 001-07791     | 03/25/1999      |
|           3.2 | Certificate      of Amendment to the Amended and Restated Certificate of Incorporation of      McMoRan                                                                                                                                                                                                                                                   |           | 10-Q                           | 001-07791     | 05/13/2003      |
|           3.3 | Amended      and Restated By-Laws of McMoRan as amended effective January 30,      2006                                                                                                                                                                                                                                                                  |           | 8-K                            | 001-07791     | 02/03/2006      |
| 3.4                               | Certificate      of Elimination of Series A Participating Cumulative preferred Stock of      McMoRan                                                                                                                                                                                                                                                     |           | 8-K                            | 001-07791     | 11/14/2008      |
| 4.1                               | Form      of Certificate of McMoRan Common Stock                                                                                                                                                                                                                                                                                                         |           | S-4                            | 333-61171     | 10/06/1998      |
| 4.2                               | Standstill      Agreement dated August 5, 1999 between McMoRan and Alpine Capital, L.P.,      Robert W. Bruce III, Algenpar, Inc, J. Taylor Crandall, Susan C. Bruce,      Keystone, Inc., Robert M. Bass, the Anne T. and Robert M. Bass Foundation,      Anne T. Bass and The Robert Bruce Management Company, Inc. Defined Benefit      Pension Trust |           | 10-Q                           | 001-07791     | 11/12/1999      |
| 4.3                               | Purchase      Agreement dated September 30, 2004, by and among McMoRan Exploration Co.,      Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith      Incorporated, and J.P. Morgan Securities Inc                                                                                                                                        |           | 8-K                            | 001-07791     | 10/07/2004      |
| 4.4                               | Indenture      dated October 6, 2004 by and among McMoRan and the Bank of New York, as      trustee                                                                                                                                                                                                                                                      |           | 8-K                            | 001-07791     | 10/07/2004      |
| 4.5                               | Collateral      Pledge and Security Agreement dated October 6, 2004 by and among McMoRan,      as pledgor, The Bank of New York, as trustee and the Bank of New York, as      collateral agent                                                                                                                                                           |           | 8-K                            | 001-07791     | 10/07/2004      |
| 4.6                               | Registration      Rights Agreement dated October 6, 2004 by and among McMoRan, as issuer and      Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan      Securities Inc. and Jefferies & Company, Inc. as Initial      Purchasers                                                                                             |           | 8-K                            | 001-07791     | 10/07/2004      |
| 10.1                              | Main      Pass 299 Sulphur and Salt Lease, effective May 1, 1988                                                                                                                                                                                                                                                                                         |           | 10-K                           | 001-07791     | 04/16/2002      |
| 10.2                              | IMC      Global/FSC Agreement dated as of March 29, 2002 among IMC Global Inc., IMC      Global Phosphate Company, Phosphate Resource Partners Limited Partnership,      IMC Global Phosphates MP Inc., MOXY and McMoRan                                                                                                                            |           | 10-Q                           | 001-07791     | 08/14/2002      |
| 10.3                              | Amended      and Restated Services Agreement dated as of January 1, 2002 between      McMoRan and FM Services Company                                                                                                                                                                                                                                    |           | 10-Q                           | 001-07791     | 08/14/2003      |
| 10.4                              | Letter      Agreement dated August 22, 2000 between Devon Energy Corporation and      Freeport Sulphur                                                                                                                                                                                                                                              |           | 10-Q                           | 001-07791     | 10/25/2000      |

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TABLE OFCONTENTS

|    |               | Filed          |                           |          |            |
|---------|--------------------|----------------|--------------------------------|---------------|-----------------|
| Exhibit |               | with      this | Incorporated      by Reference |
| Number  | Exhibit      Title | Form      10-K | Form                           | File      No. | Date      Filed |

| 10.5  | Asset      Purchase Agreement dated effective December 1, 1999 between SOI Finance      Inc., Shell Offshore Inc. and MOXY                                                                                                                                                                                                                                                               |   | 10-K | 001-07791 | 02/08/2000 |
|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------|-----------|------------|
| 10.6  | Employee      Benefits Agreement by and between Freeport-McMoRan Inc. and Freeport      Sulphur                                                                                                                                                                                                                                                                                     |   | 10-K | 001-07791 | 04/16/2002 |
| 10.7  | Purchase      and Sales agreement dated January 25, 2002 but effective January 1, 2002      by and between MOXY and Halliburton Energy Services,    Inc                                                                                                                                                                                                                             |   | 8-K  | 001-07791 | 03/11/2002 |
| 10.8  | Purchase      and Sale Agreement dated as of March 29, 2002 by and among Freeport      Sulphur, McMoRan, MOXY and Gulf Sulphur Services Ltd.,      LLP                                                                                                                                                                                                                              |   | 10-Q | 001-07791 | 05/10/2002 |
| 10.9  | Purchase      and Sale Agreement dated May 9, 2002 by and between MOXY and El Paso      Production Company                                                                                                                                                                                                                                                                          |   | 10-Q | 001-07791 | 08/14/2002 |
| 10.10 | Amendment      to Purchase and Sale Agreement dated May 22, 2002 by and between MOXY and      El Paso Production Company                                                                                                                                                                                                                                                            |   | 10-Q | 001-07791 | 08/14/2002 |
| 10.11 | Master      Agreement dated October 22, 2002 by and among Freeport-McMoRan Sulphur      LLC, K-Mc Venture LLC, K1 USA Energy Production Corporation and      McMoRan                                                                                                                                                                                                                |   | 10-K | 001-07791 | 03/27/2003 |
| 10.12 | Purchase      and Sale Agreement dated June 20, 2007 by and between Newfield Exploration      Company as Seller and McMoRan Oil & Gas LLC as Buyer effective July 1,      2007                                                                                                                                                                                                  |   | 8-K  | 001-07791 | 06/22/2007 |
| 10.13 | Amended      and Restated Credit Agreement dated as of August 6, 2007, among McMoRan      Exploration Co., as parent, McMoRan Oil & Gas LLC, as borrower,      JPMorgan Chase Bank, N.A. Merrill Lynch Capital, a division of Merrill      Lynch Business Financial Services, Inc., as syndication agent, BNP      Paribas, as documentation agent, and the lenders party    thereto |   | 10-Q | 001-07791 | 11/01/2007 |
| 10.14 | First      Amendment to Credit Agreement dated as of June 20, 2008, among McMoRan      Exploration Co., as borrower, JPMorgan Chase Bank, N.A., as administrative      agent, and the lenders party thereto                                                                                                                                                                              |   | 10-Q | 001-07791 | 08/07/2008 |

| 10.15        | Second      Amendment to Credit Agreement dated as of September 10, 2008, among      McMoRan Exploration Co., as borrower, JPMorgan Chase Bank, N.A., as      administrative agent, and the lenders party thereto |   | 10-Q | 001-07791 | 11/06/2008 |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------|-----------|------------|
| 10.16*       | McMoRan      1998 Stock Option Plan, as amended and restated                                                                                                                                                      |   | 10-Q | 001-07791 | 05/10/2007 |
| 10.17*       | McMoRan      1998 Stock Option Plan for Non-Employee Directors                                                                                                                                                    |   | 10-Q | 001-07791 | 05/10/2007 |
| 10.      18* | McMoRan      Form of Notice of Grant of Nonqualified Stock Options under the 1998 Stock      Option Plan                                                                                                          |   | 10-Q | 001-07791 | 08/04/2005 |
| 10.19*       | McMoRan      2000 Stock Incentive Plan, as amended and restated                                                                                                                                                   |   | 10-Q | 001-07791 | 05/10/2007 |

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TABLE OFCONTENTS
|    |                                                                                                                                                                                                                                                       | Filed          |                           |          |            |
|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|--------------------------------|---------------|-----------------|
| Exhibit |                                                                                                                                                                                                                                                       | with      this | Incorporated      by Reference |
| Number  | Exhibit      Title                                                                                                                                                                                                                                         | Form      10-K | Form                           | File      No. | Date      Filed |
| 10.20*  | McMoRan      Form of Notice of Grant of Nonqualified Stock Options under the 2000 Stock      Incentive Plan                                                                                                                                                |           | 10-Q                           | 001-07791     | 08/04/2005      |
| 10.21*  | McMoRan      2001 Stock Incentive Plan, as amended and restated                                                                                                                                                                                            |           | 10-Q                           | 001-07791     | 05/10/2007      |
| 10.22*  | McMoRan      2003 Stock Incentive Plan, as amended and restated                                                                                                                                                                                            |           | 10-Q                           | 001-07791     | 05/10/2007      |
| 10.23*  | McMoRan’s      Performance Incentive Awards Program as amended December 1,      2008                                                                                                                                                                 | X              |                           |          |            |
| 10.24*  | McMoRan      Form of Notice of Grant of Nonqualified Stock Options under the 2001 Stock      Incentive Plan                                                                                                                                                |           | 10-Q                           | 001-07791     | 08/04/2005      |
| 10.25*  | McMoRan      Form of Restricted Stock Unit Agreement Under the 2001 Stock Incentive      Plan                                                                                                                                                              |           | 10-Q                           | 001-07791     | 08/09/2007      |
| 10.26*  | McMoRan      Exploration Co. Executive Services Program, as amended December 1,      2008                                                                                                                                                                  | X              |                           |          |            |
| 10.27*  | McMoRan      Form of Notice of Grants of Nonqualified Stock Options under the 2003      Stock Incentive Plan                                                                                                                                               |           | 10-Q                           | 001-07791     | 08/04/2005      |
| 10.28*  | McMoRan      Form of Restricted Stock Unit Agreement Under the 2003 Stock Incentive      Plan                                                                                                                                                              |           | 10-Q                           | 001-07791     | 08/09/2007      |
| 10.29*  | McMoRan      2004 Director Compensation Plan, as amended and restated                                                                                                                                                                                      |           | 10-Q                           | 001-07791     | 05/10/2007      |
| 10.30*  | Form      of Amendment No. 1 to Notice of Grant of Nonqualified Stock Options under      the 2004 Director Compensation Plan                                                                                                                               |           | 8-K                            | 001-07791     | 05/05/2006      |
| 10.31*  | Agreement      for Consulting Services between Freeport-McMoRan Inc. and B. M. Rankin,      Jr. effective as of January 1, 1991)(assigned to FM Services Company as of      January 1, 1996); as amended on December 15, 1997 and on December 7,      1998 |           | 10-K                           | 001-07791     | 03/25/1999      |
| 10.32*  | Supplemental      Letter Agreement between FM Services Company and B.M. Rankin, Jr.      effective as of January 1, 2009                                                                                                                                   | X              |                           |          |            |
| 10.33*  | McMoRan      Director Compensation                                                                                                                                                                                                                         |           | 10-Q                           | 001-07791     | 08/07/2008      |
| 10.34*  | McMoRan      Exploration Co. 2005 Stock Incentive Plan                                                                                                                                                                                                     |           | 10-Q                           | 001-07791     | 05/10/2007      |
| 10.35*  | Form      of Notice of Grant of Nonqualified Stock Options under the 2005 Stock      Incentive Plan                                                                                                                                                        |           | 8-K                            | 001-07791     | 05/06/2005      |
| 10.36*  | Form      of Restricted Stock Unit Agreement under the 2005 Stock Incentive      Plan                                                                                                                                                                      |           | 10-Q                           | 001-07791     | 08/09/2007      |
| 10.37*  | McMoRan      Exploration Co. Supplemental Executive Capital Accumulation      Plan                                                                                                                                                                         |           | 10-Q                           | 001-07791     | 05/08/2008      |
| 10.38*  | McMoRan      Exploration Co. Supplemental Executive Capital Accumulation Plan Amendment      One                                                                                                                                                           |           | 10-Q                           | 001-07791     | 05/08/2008      |
| 10.39*  | McMoRan      Exploration Co. Supplemental Executive Capital Accumulation Plan Amendment      Two                                                                                                                                                           | X              |                           |          |            |
| 10.40*  | McMoRan      Exploration Co. 2005 Supplemental Executive Capital Accumulation      Plan                                                                                                                                                                    | X              |                           |          |            |

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TABLE OFCONTENTS
|    |                                                                                                                                                                                                      | Filed          |                           |          |            |
|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|--------------------------------|---------------|-----------------|
| Exhibit |                                                                                                                                                                                                      | with      this | Incorporated      by Reference |
| Number  | Exhibit      Title                                                                                                                                                                                        | Form      10-K | Form                           | File      No. | Date      Filed |
| 10.41*  | McMoRan      Exploration Co. 2008 Stock Incentive Plan.                                                                                                                                                   |           | 8-K                            | 001-07791     | 06/11/2008      |
| 10.42*  | Form      of Notice of Grant of Nonqualified Stock Options under the 2008 Stock      Incentive Plan.                                                                                                 |           | 8-K                            | 001-07791     | 06/11/2008      |
| 10.43*  | Form      of Restricted Stock Unit Agreement under the 2008 Stock Incentive      Plan.                                                                                                                    |           | 8-K                            | 001-07791     | 06/11/2008      |
| 10.44*  | Form      of Notice of Grant of Nonqualified Stock Options and Restricted Stock      Units under the 2008 Stock Incentive Plan (for grants made to      non-management directors and advisory directors). |           | 8-K                            | 001-07791     | 06/11/2008      |
| 10.45*  | McMoRan      Severance Plan.                                                                                                                                                                              | X              |                           |          |            |
| 12.1    | Computation      of Ratio of Earnings to Fixed Charges                                                                                                                                                    | X              |                           |          |            |
| 14.1    | Ethics      and Business Conduct Policy                                                                                                                                                                   |           | 10-K                           | 001-07791     | 03/15/2004      |
| 21.1    | List      of subsidiaries                                                                                                                                                                                 | X              |                           |          |            |
| 23.1    | Consent      of Ernst & Young LLP                                                                                                                                                                     | X              |                           |          |            |
| 23.2    | Consent      of Ryder Scott Company, L.P.                                                                                                                                                                 | X              |                           |          |            |
| 24.1    | Certified      Resolution of the Board of Directors of McMoRan authorizing this report to      be signed on behalf of any officer or director pursuant to a Power of      Attorney.                       | X              |                           |          |            |
| 24.2    | Powers      of Attorney pursuant to which this report has been signed on behalf of      certain officers and directors of McMoRan.                                                                        | X              |                           |          |            |
| 31.1    | Certification      of Principal Executive Officer pursuant to Rule      13a–14(a)/15d-14(a)                                                                                                         | X              |                           |          |            |
| 31.2    | Certification      of Principal Financial Officer pursuant to Rule      13a–14(a)/15d-14(a)                                                                                                         | X              |                           |          |            |
| 32.1    | Certification      of Principal Executive Officer pursuant to 18 U.S.C. Section      1350                                                                                                                 | X              |                           |          |            |
| 32.2    | Certification      of Principal Financial Officer pursuant to 18 U.S.C. Section      1350                                                                                                                 | X              |                           |          |            |

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