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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, 2007                                                                  |
| 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                   |
| Preferred      Stock Purchase Rights                                    |                                   | New      York Stock Exchange                   |

| Portions      of our Proxy Statement for our 2008 Annual Meeting to be held on June 5,      2008 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 andProperties                                                                                              | 1 |
| Item 1A.  Risk Factors                                                                                                    | 13  |
| Item 1B.  Unresolved Staff      Comments                                                                                  | 24  |
| Item 3. Legal Proceedings                                                                                                           | 24  |
| Item 4. Submission of Matters to a Vote of Security      Holders                                                                    | 24 |
| Executive Officers of the    Registrant                                                                                             | 24  |
|                                                                                                                                |   |
| Part II                                                                                                                             |   |
| Item 5. Market for Registrant’s Common Equity, Related      Stockholder Mattersand Issuer Purchases of Equity      Securities |  26  |
| Item 6. Selected Financial Data                                                                                                     | 28  |
| Items 7. and 7A. Management’s Discussion and Analysis of      Financial Condition and Results                                 |   |
| of Operation and Quantitative and Qualitative Disclosures      about Market Risk                                                    | 30  |
| Item 8. Financial Statements and Supplementary      Data                                                                            | 50  |
| Item 9. Changes in      and Disagreements with Accountants on Accounting and Financial      Disclosure                         | 99  |
| Item 9A. Controls and Procedures                                                                                                    | 99  |
| Item 9B.  Other Information                                                                                               | 99  |
|                                                                                                                                | 99  |
| Part III                                                                                                                            |   |
| Item 10. Directors, Executive Officers and Corporate      Governance                                                                | 99 |
| Item 11. Executive Compensation                                                                                                     | 99  |
| Item 12. Security Ownership of Certain      Beneficial Owners and Management and Related                                            |   |
| Stockholders Matters                                                                                                                | 100 |
| Item 13. Certain Relationships and Related Transactions,      and Director Independence                                             | 100  |
| Item 14. Principal Accounting Fees and      Services                                                                                | 100  |
|                                                                                                                                |   |
| Part IV                                                                                                                             |   |
|                                                                                                                                |   |
| Item 15. Exhibits and Financial Statement      Schedules                                                                            | 100  |
|                                                                                                                                |   |
| Glossary                                                                                                                            | 100  |
|                                                                                                                                |   |
| Signatures                                                                                                                          | S-1  |
|                                                                                                                                |   |
| Exhibit Index                                                                                                                       | E-1  |

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PART I

Items 1. and2.  Business and Properties

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

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

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

|   | • | employing      advanced seismic applications; and |
|--------|---------|---------------------------------------------------|

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

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|   | • | substantial      reserves, production and leasehold interests of approximately      1.25 million gross acres in an area on the outer continental shelf of      the Gulf of Mexico, where we have significant experience and      expertise; |
|--------|---------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | strong      cash flows, which will enable us to reduce our debt rapidly and invest in      high potential, high risk projects;and |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------|

|   | • | increased      scale of operations, technical depth and expanded financial resources      providing a strong platform from which we will be able to pursue growth      opportunities in our core area ofoperations. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Offshore      unloading provides savings compared with land-based      facilities. |
|--------|---------|------------------------------------------------------------------------------------|

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|   | * | Remote      offshore location near major shipping lanes avoids port congestion and      offers shipping logistical advantages;and |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------------|

|   | * | Water      depth of 210 feet allows access to the largest LNG      carriers. |
|--------|---|-----------------------------------------------------------------------------------|

|   | • | Eastern      Gulf of Mexico location offers a premium price to Henry    Hub. |
|--------|---------|------------------------------------------------------------------------------|

|   | * | Our      dedicated pipeline system would deliver to eight major interstate      pipelines; and |
|--------|---|------------------------------------------------------------------------------------------------|

|   | * | Onsite      gas conditioning would allow receipt of a wide range of LNG Btu      contents. |
|--------|---|--------------------------------------------------------------------------------------------|

|   | • | Seasonal      arbitrage opportunities through onsite gas cavern storage offer      significant added value. |
|--------|---------|-------------------------------------------------------------------------------------------------------------|

|   | * | Extensive      infrastructure allows futureexpansion; |
|--------|---|-------------------------------------------------------|

|   | * | Existing      platforms over a large salt dome provide extensive cavern storage      capacity; and |
|--------|---|----------------------------------------------------------------------------------------------------|

|   | * | MPEHtm      is the only facility in the United States combining LNG regas, gas      conditioning, and onsite cavernstorage. |
|--------|---|-----------------------------------------------------------------------------------------------------------------------------|

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|                        | Gas    |    | Oil      and condensate |   | Total   |
|-----------------------------|--------|---------|-------------------------|--------|---------|
|                        | (MMcf) |    | (MBbls)                 |   | (MMcfe) |
| Proved      developed:      |   |    |                    |   |    |   |   |   |
| Producing                   |   | 91,710  |                    |   | 8,049   |   |   | 140,006 |
| Non-producing               |   | 98,340  |                    |   | 9,122   |   |   | 153,069 |
| Shut-in                     |   | 13,545  |                    |   | 281     |   |   | 15,233 |
| Total      proved developed |   | 203,595 |                    |   | 17,452  |   |   | 308,308 |
| Proved      undeveloped     |   | 42,011  |                    |   | 2,265   |   |   | 55,600 |
| Total      proved reserves  |   | 245,606 |                    |   | 19,717  |   |   | 363,908 |

|                                                         | Proved      Reserves |
|--------------------------------------------------------------|----------------------|
|                                                         | Developed            |   | Undeveloped |   | Total |
| Estimated      undiscounted future net cash flows before     |                 |   |   |   |   |   |   |   |
| income      taxes                                            | $                    | 2,021,404 |   | $ | 306,687 |   | $ | 2,328,091 |
| Present      value of estimated future net cash flows before |                 |   |   |   |   |   |   |   |
| income      taxes a                                          | $                    | 1,589,089 |   | $ | 229,486 |   | $ | 1,818,575 |

| a.   | Calculated      based on the prices and costs prevailing at December 31, 2007 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 $92.69 per barrel of oil and $7.22 per Mcf of natural      gas at December 31, 2007. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                          |   | Years      Ended December 31, |   |
|---------------------------------------------------------------|--------|-------------------------------|--------|
|                                                          |   | 2007                          |   | 2006 |   | 2005 |   |
| Net      natural gas production (Mcf)                         |   | 38,994,000                    |   | 14,545,600 |   | 7,938,000 |   |
| Net      crude oil and condensate production, excluding Main  |   |                          |   |   |   |   |   |
| Pass      (Bbls)a                                             |   | 1,821,900                     |   | 779,000 |   | 387,100 |   |
| Net      crude oil production from Main Pass (Bbls)           |   | 564,000                       |   | 775,500 |   | 463,000 |   |
| Sales      prices:                                            |   |                          |   |   |   |   |   |
| Natural      gas (per Mcf)                                    |   | $      7.01                   |   | $      7.05 |   | $      9.24 |   |
| Crude      oil and condensate, including Main Pass (per Bbl)b |   | 76.55                         |   | 60.55 |   | 53.82 |   |
| Production      (lifting) costs: c                            |   |                          |   |   |   |   |   |
| Per      barrel for Main Pass d                               |   | $44.17                        |   | $35.76 |   | $41.46 |   |
| Per      Mcfe for other properties e                          |   | 1.88                          |   | 1.34 |   | 1.06 |   |

| a.   | The      volume produced during 2007 includes approximately 358,900 equivalent      barrels of oil and condensate associated with $19.3 million of plant      product revenues received for the value of such products recovered from      the processing of our natural gas production.  Our oil and      condensate production includes 178,700 and 106,700 equivalent barrels of      oil ($9.6 million and $5.0 million of revenues) associated with plant      products during 2006 and 2005,respectively. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Realization      does not include the effect of the plant product revenues discussed in (a)      above. |
|----------------|---------------------------------------------------------------------------------------------------------|

| c.   | 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. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Production      costs for Main Pass included approximately $1.8 million, $3.17 per barrel      in 2007, $3.6 million, $4.68 per barrel in 2006 and $3.9 million, $8.31      per barrel in 2005, of estimated repair costs for damages sustained during      Hurricane Katrina. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | 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 $19.7 million or $0.38 per Mcfe      in 2007, $4.5 million or $0.23 per Mcfe in 2006 and $1.2 million or $0.13      per Mcfe in 2005. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                             |   | Developed |   | Undeveloped |
|----------------------------------|--------|-----------|--------|-------------|
|                             |   | Gross     |   | Net         |   | Gross |   | Net |
|                             |   | Acres     |   | Acres       |   | Acres |   | Acres |
| Offshore      (federal waters)   |   | 709,391   |   | 412,034     |   | 593,435 |   | 162,641 |
| Onshore      Louisiana and Texas |   | 36,769    |   | 18,255      |   | 71,898 |   | 30,523 |
| Total      at December 31, 2007  |   | 746,160   |   | 430,289     |   | 665,333 |   | 193,164 |

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|                                        |     | Net      |        |   |              |   |   |
|---------------------------------------------|----------|----------|-------------|--------|-------------------|--------|--------|
|                                        | Working  | Revenue  | Water       | Total  | Production      a |
|                                        | Interest | Interest |  Depth | Depth  | Gross             |   | Net    |
|                                        | (%)      | (%)      | (feet)      | (feet) | (MMcfe/d)         |
| Louisiana      State Lease 18090            |     |     |        |   |              |   |   |
| “Long      Point” b             | 37.5     | 26.7     | 8           | 19,000 | 54                |   | 14     |
| St.      Mary Parish, LA               |     |     |        |   |              |   |   |
| “Laphroaig”      c              | 50.0     | 38.5     | <10      | 19,060 | 43                |   | 16     |
| Louisiana      State Lease 18350            |     |     |        |   |              |   |   |
| “Point      Chevreuil”          | 25.0     | 17.5     | <10      | 17,051 | 13                |   | 2      |
| Onshore      Vermilion Parish, LA           |     |     |        |   |              |   |   |
| “Liberty      Canal” c          | 37.5     | 27.6     | n/a      d  | 16,594 | 12                |   | 3      |
| South      Marsh Island Block 217      |     |     |        |   |              |   |   |
| “Hurricane”      b              | 27.5     | 19.4     | 10          | 19,664 | 11                |   | 3      |
| Vermilion      Blocks 16/17            |     |     |        |   |              |   |   |
| “King      Kong” c              | 40.0     | 29.2     | 13          | 18,918 | 3                 |   | 1      |
| South      Marsh Island Block 212           |     |     |        |   |              |   |   |
|  ”Flatrock”      b,      e | 25.0     | 18.8     | 10          | 18,400 | f                 |   | f      |
| South      Marsh Island Block 217      |     |     |        |   |              |   |   |
| “Hurricane      Deep” b,      e | 25.0     | 20.8     | <10      | 21,500 | g                 |   | g      |

| a.   | Reflects      average daily production rates for the fourth quarter of    2007. |
|----------------|---------------------------------------------------------------------------------|

| 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. |
|----------------|----------------------------|

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

| e.   | Prospect      will be eligible for deep gas royalty relief under current MMS guidelines,      which could result in an increased net revenue interest for early      production. The guidelines 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, the guidelines include price      threshold provisions that discontinue royalty relief if natural gas prices      exceed a specified level. The price threshold was not exceeded during      2007, 2006 or 2005. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f.   | The      well commenced production on January 28, 2008 and on March 14, 2007 is      producing at a gross rate of approximately 48 MMcfe/d and approximately 12      Mmcfe/d net to us. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g.   | The      well commenced production on January 24, 2008 and on March 14, 2007 is      currently producing at a rate of approximately 22 MMcfe/d and      approximately 5 MMcfe/d net to us. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                     |   |     |   | Net       |   |   |   |              |   |
|------------------------------------------|--------|----------|--------|-----------|--------|--------|--------|-------------------|--------|
|                                     |   | Working  |   | Revenue   |   | Water  |   | Production      a |   |
| Lease                                    |   | Interest |   | Interest  |   | Depth  |   | Gross             |   | Net |   |
|                                     |   | (%)      |   | (%)       |   | (feet) |   | (MMcfe/d)         |   |
|                                     |   |     |   |      |   |   |   |              |   |   |   |
| Eugene      Island Block 182 b      ,c   |   | 66.9     |   | 52.8-63.6 |   | 88     |   | 22                |   | 13 |   |
| Eugene      Island Blocks 251/262 b      |   | 56.9     |   | 43.9      |   | 160    |   | 23                |   | 10 |   |
| Main      Pass Block 299      b          |   | 100.0    |   | 83.3      |   | 210    |   | 11                |   | 9 |   |
| South      Marsh Island Block 49      b  |   | 100.0    |   | 83.3      |   | 98     |   | 10                |   | 8 |   |
| High      Island Block 474      c        |   | 69.2     |   | 57.8      |   | 180    |   | 14                |   | 8 |   |
| Grand      Isle Block 3      b           |   | 50.0     |   | 36.5      |   | 10     |   | 20                |   | 7 |   |
| South      Timbalier Block 148 b         |   | 58.2     |   | 40.0      |   | 86     |   | 17                |   | 7 |   |
| East      Cameron Block 373              |   | 40.0     |   | 33.3      |   | 348    |   | 19                |   | 6 |   |
| South      Marsh Island Block 141      b |   | 87.3     |   | 66.0      |   | 230    |   | 10                |   | 6 |   |
| West      Delta Block 133      b         |   | 75.0     |   | 54.3      |   | 373    |   | 11                |   | 6 |   |
| Vermilion      Block 215 b               |   | 92.0     |   | 76.8      |   | 115    |   | 8                 |   | 6 |   |

| a.   | Based      on average daily production rates for fourth quarter of    2007. |
|----------------|-----------------------------------------------------------------------------|

| b.   | Fields      operated by us. |
|----------------|-----------------------------|

| c.   | 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. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|               |   | 2007   |   | 2006   |   | 2005   |   |
|--------------------|--------|--------|--------|--------|--------|--------|--------|
|               |   | Gross  |   | Net    |   | Gross  |   | Net |   | Gross |   | Net |   |
| Exploratory        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Productive         |   | 4      |   | 1.150  |   | 6      |   | 2.375 |   | 4 |   | 1.426 |   |
| Dry                |   | 1      |   | 0.150  |   | 4      |   | 1.185 | a | 6 |   | 2.021 | b |
| In-progress        |   | 5      |   | 1.673  |   | 4      |   | 1.808 |   | 5 |   | 1.728 |   |
| Total              |   | 10     |   | 2.973  |   | 14     |   | 5.368 |   | 15 |   | 5.175 |   |
|               |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Development        |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Productive         |   | -      |   | -      |   | 7      |   | 2.613 |   | 2 |   | 0.667 |   |
| Dry                |   | 1      |   | 0.250  |   | -      |   | - |   | - |   | - |   |
| In-progress      c |   | 2      |   | 1.091  |   | 2      |   | 0.854 |   | 5 |   | 1.904 |   |
| Total              |   | 3      |   | 1.341  |   | 9      |   | 3.467 |   | 7 |   | 2.571 |   |

| 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 exploratory wells at South Marsh Island Block 230 (0.25 net) and West      Cameron Block 95 (0.50 net) that were determined to be non-productive in      early January 2006. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | 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 | 175   |   | 81.267 |   | 87 |   | 47.580 |   |
| Onshore  | 24    |   | 9.078  |   | 4 |   | 2.251 |   |
| Total    | 199   |   | 90.345 |   | 91 |   | 49.831 |   |

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Item1A.  Risk Factors

| ·   | make      it difficult for us to service ourdebt; |
|--------------------|---------------------------------------------------|

| ·   | increase      our vulnerability to adverse changes in economic and industry      conditions; |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | require      us to dedicate a substantial portion of our cash flow from operations and      proceeds of equity issuances or asset sales to pay or provide for our      indebtedness, thus reducing the |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | limit      our flexibility to plan for, or react to, changes in our businesses and      the markets in which we operate; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------|

| ·   | place      us at a competitive disadvantage to our competitors that have less debt;      and |
|--------------------|----------------------------------------------------------------------------------------------|

| ·   | limit      our ability to borrow money or sell stock to fund our working capital,      capital expenditures, acquisitions, and debt service requirements and      other financing needs. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

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

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

|   | • | the      operator’s expertise and financialresources; |
|--------|---------|-------------------------------------------------------------|

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

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

|   | • | the      market forces of supply and demand; |
|--------|---------|----------------------------------------------|

|   | • | regulatory      and political actions of domestic and foreign      governments; and |
|--------|---------|------------------------------------------------------------------------------------------|

|   | • | attempts      of international cartels to control or influence  prices. |
|--------|---------|-------------------------------------------------------------------------|

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

|   | • | the      other party to the 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. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

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

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

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

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

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Item1B.  Unresolved Staff Comments

Item3.  Legal Proceedings

Item4.  Submission of Matters to a Vote of SecurityHolders

| Name                     |   | Age    |   | Position      or Office                    |
|--------------------------|--------|--------|--------|--------------------------------------------|
| James      R. Moffett    |   | 69     |   | Co-Chairman      of the Board              |
|                     |   |   |   |                                       |
| Richard      C. Adkerson |   | 61     |   | Co-Chairman      of the Board              |
|                     |   |   |   |                                       |
| Glenn      A. Kleinert   |   | 65     |   | President      and Chief Executive Officer |
|                     |   |   |   |                                       |
| C.      Howard Murrish   |   | 67     |   | Executive      Vice President              |

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| Name                   |   | Age    |   | Position      or Office                             |
|------------------------|--------|--------|--------|-----------------------------------------------------|
| Nancy      D. Parmelee |   | 56     |   | Senior      Vice President, Chief Financial Officer |
|                   |   |   |   | and      Secretary                                  |
|                   |   |   |   |                                                |
| Kathleen      L. Quirk |   | 44     |   | Senior      Vice President Finance and Business     |
|                   |   |   |   | Development      and Treasurer                      |
|                   |   |   |   |                                                |
| John      G. Amato     |   | 64     |   | General      Counsel                                |

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PART II

Item5.  Market for Registrant's Common Equity, Related Stockholder Mattersand Issuer Purchases of Equity Securities

|                |   | 2007   |   | 2006   |   |
|---------------------|--------|--------|--------|--------|--------|
|                |   | High   |   | Low    |   | High |   | Low |   |
| First      Quarter  |   | $15.53 |   | $11.01 |   | $21.12 |   | $16.77 |   |
| Second      Quarter |   | 15.73  |   | 12.51  |   | 19.63 |   | 14.37 |   |
| Third      Quarter  |   | 17.93  |   | 12.94  |   | 19.42 |   | 16.60 |   |
| Fourth      Quarter |   | 15.81  |   | 10.70  |   | 18.46 |   | 13.95 |   |

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|                                | December      31, |
|-------------------------------------|-------------------|
|                                | 2002              | 2003 | 2004 | 2005 | 2006 | 2007 |
| McMoRan      Exploration Co.        | $100.00           | $  367.65 | $      366.67 | $  387.65 | $  278.82 | $  256.67 |
| Hemscott      Independent Oil & |              |   |   |   |   |   |
| Gas      Industry Group             | 100.00            | 155.97 | 209.55 | 325.27 | 378.00 | 553.99 |
| S&P      500 Stock Index        | 100.00            | 128.68 | 142.69 | 149.70 | 173.34 | 182.87 |

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Item6.  Selected Financial Data

|                                      |   | 2007a                                                        |      | 2006   |   | 2005    |   | 2004   |    | 2003   |   |
|-------------------------------------------|--------|--------------------------------------------------------------|-----------|--------|--------|---------|--------|--------|---------|--------|--------|
| Financial      Data                       |   | (Financial      Data in Thousands, Except Per Share Amounts) |      |
| Years Ended December      31:             |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Revenues      b                           |   | $                                                            | 481,167   |   | $      | 209,738 |   | $      | 130,127 |   | $      | 29,849 |   | $ | 17,284 |   |
| Depreciation      and amortization        |   |                                                         | 256,007   |   |   | 104,724 |   |   | 25,896  |   |   | 5,904 |   |   | 14,112 |   |
| Exploration      expenses                 |   |                                                         | 58,954    |   |   | 67,737  |   |   | 63,805  |   |   | 36,903 |   |   | 14,109 |   |
| Start-up      costs for Main Pass Energy  |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Hub™      c                         |   |                                                         | 9,754     |   |   | 10,714  |   |   | 9,749   |   |   | 11,461 |   |   | 11,411 |   |
| Exploration      expense reimbursement d  |   |                                                         | -         |   |   | (10,979 | )      |   | -       |   |   | - |   |   | - |   |
| Litigation      settlement e              |   |                                                         | -         |   |   | (446    | )      |   | 12,830  |   |   | - |   |   | - |   |
| Insurance      recovery f                 |   |                                                         | (2,338    | )      |   | (3,306  | )      |   | (8,900  | )      |   | (1,074 | ) |   | - |   |
| Operating      income (loss)              |   |                                                         | 3,509     |   |   | (32,567 | )      |   | (22,373 | )      |   | (43,940 | ) |   | (38,947 | ) |
| Interest      expense, net                |   |                                                         | 66,366    |   |   | 10,203  |   |   | 15,282  |   |   | 10,252 |   |   | 4,599 |   |
| Loss      from continuing operations      |   |                                                         | (63,561   | )      |   | (44,716 | )      |   | (31,470 | )      |   | (52,032 | ) |   | (41,847 | ) |
| Income      (loss) from discontinued      |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |   |   |   |
| operations      g                         |   |                                                         | 3,827     |   |   | (2,938  | )      |   | (8,242  | )      |   | 361 |   |   | (11,233 | ) |
| Cumulative      effect of change in       |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |   |   |   |
| accounting      principle                 |   |                                                         | -         |   |   | -       |   |   | -       |   |   | - |   |   | 22,162 | h |
| Net      loss applicable to common stock  |   |                                                         | (63,906   | )      |   | (49,269 | )      |   | (41,332 | )      |   | (53,313 | ) |   | (32,656 | ) |
|                                      |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |
| Basic      and diluted net loss per share |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |
| of      common stock:                     |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Continuing      operations                |   | $                                                            | (1.97     | )      | $      | (1.66   | )      | $      | (1.35   | )      | $      | (2.85 | ) | $ | (2.62 | ) |
| Discontinued      operations              |   |                                                         | 0.11      |   |   | (0.10   | )      |   | (0.33   | )      |   | 0.02 |   |   | (0.68 | ) |
| Cumulative      effect of change in       |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |   |   |   |
| accounting      principle                 |   |                                                         | -         |   |   | -       |   |   | -       |   |   |      -        |   |   |  1.33 |   |
| Basic      and diluted net loss per share |   | $                                                            | (1.86     | )      | $      | (1.76   | )      | $      | (1.68   | )      | $      | (2.83 | ) | $ | (1.97 | ) |
|                                      |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |
| Average      basic and diluted common     |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |   |   |   |
| shares      outstanding                   |   |                                                         | 34,283    |   |   | 27,930  |   |   | 24,583  |   |   | 18,828 |   |   | 16,602 |   |
|                                      |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |   |   |   |
| At December      31:                      |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Working      capital (deficit)            |   | $                                                            | (221,302  | )      | $      | (25,906 | )      | $      | 67,135  |   | $      | 175,889 |   | $ | 83,143 |   |
| Property,      plant and equipment, net   |   |                                                         | 1,503,359 |   |   | 282,538 |   |   | 192,397 |   |   | 97,262 |   |   | 26,185 |   |
| Total      assets                         |   |                                                         | 1,715,288 |   |   | 408,677 |   |   | 407,636 |   |   | 383,920 |   |   | 169,280 |   |
| Oil      and gas reclamation obligations  |   |                                                         | 294,737   |   |   | 25,876  |   |   | 26,484  |   |   | 14,429 |   |   | 7,273 |   |
| Long-term      debt                       |   |                                                         | 689,000   |   |   | 244,620 |   |   | 270,000 |   |   | 270,000 |   |   | 130,000 |   |
| Mandatorily      redeemable convertible   |   |                                                         |      |   |   |    |   |   |    |   |   |   |   |   |   |   |
| preferred      stock                      |   |                                                         | -         |   |   | 29,043  |   |   | 28,961  |   |   | 29,565 |   |   | 30,586 |   |
| Stockholders’      equity (deficit) |   | $                                                            | 372,229   |   | $      | (68,443 | )      | $      | (86,590 | )      | $      | (49,546 | ) | $ | (84,593 | ) |

| a.   | Amounts      in 2007 primarily reflect the acquisition of oil and gas properties from      Newfield Exploration Company, the financing transactions associated with      the funding of the acquisition, subsequent refinancing transactions, the      assumption of related reclamation obligations and the operating results      for the period of August 6, 2007 through December 31, 2007 (Notes 2, 5, 6,      8 and 14). |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| b.   | Includes      service revenues totaling $5.9 million in 2007, $13.0 million in 2006,      $12.0 million in 2005, $14.2 million in 2004 and $1.2 million in      2003.  The service revenues primarily reflect recognition of the      management fees received associated with our exploration venture      activities (Note 3), oil processing and other third party management fees      and reimbursements of standard industry overhead fees (Note      1). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Reflects      costs associated with pursuit of the licensing, design and financing plans      necessary to establish an energy hub, including an LNG terminal, at Main      Pass Block 299 (Main Pass) in the Gulf of Mexico (Notes 4 and      5). |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Reflects      $20.0 million received upon inception of an exploration agreement in      fourth quarter of 2006 (Note 3).  We recorded $19.0 million of      this payment as exploration expense reimbursement with the remainder as a      reduction of property, plant and equipment, less an $8.0 million payment      to our previous exploration venture partner for relinquishing certain of      their exploration rights. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | Reflects      settlement of class action litigation case, net of insurance proceeds      (Note 13). |
|----------------|-----------------------------------------------------------------------------------------------------|

| f.   | Reflects      proceeds received in connection with our oil and gas hurricane-related      insurance claims (Note 5). |
|----------------|----------------------------------------------------------------------------------------------------------------------|

| g.   | Amounts      include charges for modification of previously estimated reclamation plans      for remaining closed sulphur facilities at Port Sulphur, Louisiana as a      result of hurricane damages ($3.4 million in 2006 and $3.5 million in      2005).  Amounts also include year-end reductions ($4.6 million      in 2007, $3.2 million in 2006, $3.5 million in 2005 and $5.2 million in      2004) in the contractual liability associated with postretirement benefit      costs relating to certain retired former sulphur employees (Note      13).  The amount for 2003 includes a $5.9 million estimated loss      on the disposal of certain sulphur assets, which were sold during      2004. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| h.   | Reflects      implementation of Statement of Financial Accounting Standard No. 143      “Accounting for Asset      Retirement Obligations” effective January 1, 2003 (Note      1). |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                      | 2007a  |       | 2006   |   | 2005       |   | 2004   |      | 2003   |   |
|-------------------------------------------|--------|------------|--------|--------|------------|--------|--------|-----------|--------|--------|
| Operating      Data                       |   |       |   |   |       |   |   |      |   |   |   |   |   |   |   |
| Sales      Volumes:                       |   |       |   |   |       |   |   |      |   |   |   |   |   |   |   |
| Gas      (thousand cubic feet, or Mcf)    |   | 38,994,000 |   |   | 14,545,600 |   |   | 7,938,000 |   |   | 1,978,500 |   |   | 2,011,100 |   |
| Oil      (barrels) b                      |   | 2,380,500  |   |   | 1,379,300  |   |   | 716,400   |   |   | 61,900 |   |   | 107,600 |   |
| Plant      products (equivalent barrels)c |   | 358,900    |   |   | 178,700    |   |   | 106,700   |   |   | 22,900 |   |   | 20,700 |   |
| Average      realization:                 |   |       |   |   |       |   |   |      |   |   |   |   |   |   |   |
| Gas      (per Mcf)                        | $      | 7.01       |   | $      | 7.05       |   | $      | 9.24      |   | $      | 6.08 |   | $ | 5.64 |   |
| Oil      (per barrel)                     |   | 76.55      |   |   | 60.55      |   |   | 53.82     |   |   | 39.83 |   |   | 30.76 |   |

| a.   | For      the period from August 6, 2007 to December 31, 2007, the sales volumes      associated with the acquired Newfield properties totaled 25.5 Bcf of      natural gas and approximately 1,476,500 barrels of oil and      condensate. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | A      joint venture, in which we held a 33.3 percent interest, acquired the Main      Pass oil operations in December 2002.  We acquired the interest      in the joint venture not owned by us in December 2004.  The Main      Pass oil operations were shut-in for a substantial portion of 2005      resulting from damages sustained from hurricanes (Note 5).  Oil      sales from Main Pass totaled 558,600 barrels in 2007, 779,000 barrels in      2006, 436,000 barrels in 2005, and 4,200 barrels in      2003.  Amounts during 2003 represent the sale of the remaining      Main Pass product inventory from      December 2002.   Main Pass produces sour crude oil, which      sells at a discount to other crudeoils. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Revenues      from plant products (ethane, propane, butane, etc.) totaled $19.3 million      in 2007, $9.6 million in 2006, $5.0 million in 2005, $0.6 million in 2004      and $0.8 million in 2003. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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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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|                                                                              |  WorkingInterest      (%) | NetRevenueInterest      (%) |  Prospect      Acreage      a | Water      Depth (feet) | Proposed      TotalDepth      b (feet) |  Recent      Depth      (feet) | Spud      Date           |
|-----------------------------------------------------------------------------------|--------------------------------|-----------------------------|------------------------------------|-------------------------|---------------------------------------------|-------------------------------------|--------------------------|
| South      Marsh Island Block 212   “Flatrock No. 2” c | 25.0                           | 18.8                        | 3,805                              | 10                      | c                                           | 17,684      c                       | October      7, 2007     |
| South      Marsh Island Block 212 “Flatrock No. 3”                    | 25.0                           | 18.8                        | 3,805                              | 10                      | 18,800                                      | 17,100                              | November      5, 2007    |
| South      Timbalier Block 168 “Blackbeard West”                      | 26.8                           | 22.3                        | 24,512                             | 70                      | 31,200                                      | 30,067                              | March      2008          |
| Louisiana      State Lease 340 “Mound Point East”                     | 40.7      d                    | 23.2                        | 2,385                              | 5                       | 18,050                                      | N/A                                 | Second      Quarter 2008 |

| a.   | Gross      acres encompassing prospect to which we retain exploration      rights. |
|----------------|------------------------------------------------------------------------------------|

| b.   | Planned      target vertical depth, which is subject to  change. |
|----------------|------------------------------------------------------------------|

| c.   | The      Flatrock No. 2 well has been drilled to its total depth and completion      activities are in progress with initial production expected by mid-year      2008. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Reflects      working interest before casing point elections, which may reduce working      interest to 32.5 percent. |
|----------------|-----------------------------------------------------------------------------------------------------------------------|

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| Revenues:                                |   |          |   |
|------------------------------------------|--------|---------------|--------|
| Oil      and natural gas                 | $      | 290,856       |   |
| Service                                  |   | 4,557         |   |
|   Total      revenues          |   |  295,413 |   |
| Cost      and Expenses:                  |   |          |   |
| Production      and delivery costs       |   | 57,099        | a      |
| Depreciation      and amortization       |   | 170,012       |   |
| Exploration      expenses                |   | 112           | b      |
| General      and administrative expenses |   | 2,463         | c      |
| Total      costs and expenses            |   | 229,686       |   |
| Operating      income                    | $      | 65,727        |   |

| a.   | Includes      lease operating expenses of $36.7 million, $6.8 million for workover      costs, $11.8 million for well insurance expense and $1.8 million for      transportation, production taxes and other related  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 Newfield properties and excludes      all compensation costs associated with newly hired employees, which are      not allocated to the acquired properties.  Amounts primarily      reflect costs associated with information systems implementations in the      fourth quarter of 2007 and rent expense for our new office space in      Houston, Texas. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                        |   | 2007   |    | 2006   |   |
|-------------------------------------------------------------|--------|--------|---------|--------|--------|
| Oil      and natural gas revenues – prior year period |   | $      | 196,717 |   | $      | 118,176 |   |
| Increase      (decrease)                                    |   |   |    |   |   |   |   |
| Price      realizations:                                    |   |   |    |   |   |   |   |
| Natural      gas                                            |   |   | 6,421   |   |   | (31,829 | ) |
| Oil      and condensate                                     |   |   | 6,725   |   |   | 8,953 |   |
| Sales      volumes:                                         |   |   |    |   |   |   |   |
| Natural      gas                                            |   |   | (7,215  | )      |   | 61,032 |   |
| Oil      and condensate                                     |   |   | (15,702 | )      |   | 36,012 |   |
| Properties      acquired from Newfield                      |   |   | 290,856 |   |   | - |   |
| Plant      products revenue                                 |   |   | (2,058  | )      |   | 4,545 |   |
| Other                                                       |   |   | (494    | )      |   | (172 | ) |
| Oil      and natural gas revenues - current year period     |   | $      | 475,250 |   | $      | 196,717 |   |

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|                                     |              |   | Per   |   |   |   | Per   |   |   |   | Per   |
|------------------------------------------|-------------------|--------|-------|--------|--------|--------|-------|--------|--------|--------|-------|
|                                     | 2007              |   | Mcfe  |   | 2006   |   | Mcfe  |   | 2005   |   | Mcfe  |
| Lease      operating expense             | $  69.8 |   | $1.26 |   | $30.4  |   | $1.27 |   | $19.3  |   | $1.50 |
| Workover      costs                      | 19.7              |   | 0.35  |   | 4.5    |   | 0.19  |   | 1.3    |   | 0.10  |
| Insurance                                | 23.2              |   | 0.42  |   | 8.5    |   | 0.36  |   | 2.1    |   | 0.16  |
| Transportation      and production taxes | 9.1               |   | 0.16  |   | 5.1    |   | 0.21  |   | 2.5    |   | 0.20  |
| Other                                    | 0.3               |   | 0.01  |   | 4.6    |   | 0.19  |   | 4.4    |   | 0.34  |
| Total      production and delivery costs | $122.1            |   | $2.20 |   | $53.1  |   | $2.22 |   | $29.6  |   | $2.30 |

|                                    |   |   | Per    |   |              |   | Per    |   |   |   | Per    |
|-----------------------------------------|--------|--------|--------|--------|-------------------|--------|--------|--------|--------|--------|--------|
|                                    | 2007   |   | Mcfe   |   | 2006              |   | Mcfe   |   | 2005   |   | Mcfe   |
| Depletion      and depreciation expense | $228.5 |   | $4.12  |   | $  69.4 |   | $2.91  |   | $24.5  |   | $1.90  |
| Accretion      expense                  | 13.9   |   | 0.25   |   | 2.1               |   | 0.08   |   | 1.4    |   | 0.11   |
| Impairment      charges/losses          | 13.6   |   | 0.25   |   | 33.2              |   | 1.39   |   | -      |   | -      |
| Total      depletion, depreciation and  |   |   |   |   |              |   |   |   |   |   |   |
| amortization      expense               | $256.0 |   | $4.62  |   | $104.7            |   | $4.38  |   | $25.9  |   | $2.01  |

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|                                   | Years      Ended December 31, |   |
|----------------------------------------|-------------------------------|--------|
|                                   |                          | 2007   |   |   | 2006 |   |   | 2005 |   |
| Geological      and geophysical,       |                          |   |   |   |   |   |   |   |   |
| including      3-D seismic purchases a | $                             | 29.9   | b | $ | 15.2 |   | $ | 7.4 |   |
| Dry      hole costs                    |                          | 22.8   | c |   | 45.6 | d |   | 49.6 | e |
| Insurance      and other               |                          | 6.3    |   |   | 6.9 |   |   | 6.8 |   |
|                                   | $                             | 59.0   |   | $ | 67.7 |   | $ | 63.8 |   |

| a.   | Includes      compensation costs associated with stock-based awards totaling $6.3      million in 2007, $8.1 million in 2006 and $1.1 million in      2005. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Includes      $13.0 million of seismic data purchases primarily associated with the      exploration acreage acquired fromNewfield. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Includes      nonproductive exploratory drilling and related costs primarily associated      with the “Cas” well |
|----------------|------------------------------------------------------------------------------------------------------------------------------|

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| d.   | Includes nonproductive exploratory drilling      and related costs for wells at Grand Isle Block 18 ($7.0 million),      Vermilion Block 54 ($7.8 million), Louisiana State Lease 18091 ($14.9      million), South Pass Block 26 ($8.3 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 at West      Cameron Block 95 ($2.7 million) and South Marsh Island Block 230 ($2.5      million), which were evaluated as nonproductive in January      2006. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | Includes      nonproductive exploratory well drilling and related costs at South Marsh      Island Block 230 ($5.9 million) and West Cameron Block 95 ($10.8 million)      during the fourth quarter of 2005.  Nonproductive exploratory      well costs during 2005 also included Louisiana State Lease 1706 ($9.8      million), South Timbalier Blocks 97/98 ($6.9 million), Louisiana State      Lease 5097 ($12.1 million) and $1.3 million of well drilling costs at      Vermilion Block 207 incurred after December 31, 2004.  We also      charged approximately $1.4 million of expiring leasehold costs to      exploration expense in 2005. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                         | For      Year Ended December 31, |     |
|------------------------------|----------------------------------|----------|
|                         | 2007                             |     | 2006 |   | 2005 |   |
| Continuing      operations   |                             |     |   |   |   |   |   |   |   |
| Operating                    | $                                | 219.0    |   | $ | 99.5 |   | $ | 78.2 |   |
| Investing                    |                             | (1,195.2 | ) |   | (231.1 | ) |   | (143.1 | ) |
| Financing                    |                             | 974.6    |   |   | 22.8 |   |   | 1.2 |   |
|                         |                             |     |   |   |   |   |   |   |   |
| Discontinued      operations |                             |     |   |   |   |   |   |   |   |
| Operating                    | $                                | (11.4    | ) | $ | (4.3 | ) | $ | (4.7 | ) |
| Investing                    |                             | -        |   |   | - |   |   | (0.1 | ) |
| Financing                    |                             | -        |   |   | - |   |   | - |   |
|                         |                             |     |   |   |   |   |   |   |   |
| Total cash      flow         |                             |     |   |   |   |   |   |   |   |
| Operating                    | $                                | 207.6    |   | $ | 95.2 |   | $ | 73.5 |   |
| Investing                    |                             | (1,195.2 | ) |   | (231.1 | ) |   | (143.2 | ) |
| Financing                    |                             | 974.6    |   |   | 22.8 |   |   | 1.2 |   |

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|       | Debt      and     |   |      |   |       |   |               |   |      |   |   |
|------------|-------------------|--------|-----------|--------|------------|--------|--------------------|--------|-----------|--------|--------|
|       | Convertible       |   | Interest  |   | Retirement |   | Oil      & Gas |   | Lease     |   |   |
|       | Securities      a |   | Paymentsb |   | Benefitsc  |   | Obligationsd       |   | Paymentse |   | Total  |
| 2008       | $                 | 111.5  |      | $      | 69.7       |   | $                  | 1.6    |      | $      | 72.7   |   | $ | 1.4 |   | $ | 256.9 |
| 2009       |              | -      |      |   | 63.7       |   |               | 1.6    |      |   | 15.0   |   |   | 1.3 |   |   | 81.6 |
| 2010       |              | -      |      |   | 63.7       |   |               | 1.6    |      |   | 15.0   |   |   | 1.2 |   |   | 81.5 |
| 2011       |              | 115.0  |      |   | 63.7       |   |               | 1.6    |      |   | 5.0    |   |   | 1.1 |   |   | 186.4 |
| 2012       |              | 274.0  |      |   | 48.5       |   |               | 1.5    |      |   | 5.0    |   |   | 1.1 |   |   | 330.1 |
| Thereafter |              | 300.0  |      |   | 66.8       |   |               | 6.9    |      |   | 5.0    |   |   | 1.7 |   |   | 380.4 |
| Total      | $                 | 800.5  |      | $      | 376.1      |   | $                  | 14.8   |      | $      | 117.7  |   | $ | 7.8 |   | $ | 1,316.9 |

| a.   | Amounts      due upon maturity subject to change based on future conversions by the      holders of the securities.  Subsequent to December 31, 2007,      through March 13, 2008 a total of $24.5 million of our 6% convertible      senior notes was converted to equity through a series or privately      negotiated transactions (see “Debt Conversion Transactions”      above). |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Reflects      interest and unused commitment fees on the debt balances and availability      as of December 31, 2007.  Assumes a 6.98 percent effective      annual interest rate on our credit facility and a 1.88 percent and 0.38      percent interest on outstanding letters of credit ($100 million) and      unused commitment fee, respectively.  Interest on the      convertible senior notes is fixed.  If the interest rate on the      credit facility changed by 50 basis points our interest expense would      change by $6.3 million.  If the amount outstanding on our credit      facility changed by $10.0 million, our interest expense would change by      $3.2 million. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Includes      anticipated payments under our employee retirement health care plan      through 2018 (Note 10) and our future reimbursements associated with the      contractual liability covering certain of our former sulphur retiree’s      medical costs (Note 13). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | These      oil & gas obligations primarily reflect our net working interest share      of authorized exploration and development project costs at December 31,      2007 (see below for total estimated exploration and development      expenditures for 2008). Also includes escrow payments to support the      funding requirements related to the acquired Newfield properties’      reclamation obligations.  These payments total $15 million      annually, payable in quarterly installments over the next three years      (twelve |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| e.   | Amount primarily reflects leases for office      space in two buildings in Houston, Texas, which terminate in April      2009 and July 2014, respectively and office space in Lafayette, Louisiana      which terminates in November 2011. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                             | Oil      and Gas |    | Sulphur |
|----------------------------------|------------------|---------|---------|
|                             | 2007             |    | 2006    |   | 2007 |   | 2006 |
| Undiscounted      cost estimates | $                | 448,095 |    | $ | 41,600 |   | $ | 38,712 |   | $ | 42,244 |
| Discounted      cost estimates   | $                | 294,737 |    | $ | 25,175 |   | $ | 21,300 |   | $ | 23,094 |

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|                                        | Inflation      Rate |   | Market      Risk Premium |   |
|---------------------------------------------|---------------------|--------|--------------------------|--------|
|                                        | +1%                 |   | -1%                      |   | +1% |   | -1% |   |
| Oil      & Gas reclamation obligations: |                |   |                     |   |   |   |   |   |   |   |   |   |
|     Undiscounted        | $                   | 23.8   |                     | $      | (21.5 | ) | $ | 4.2 |   | $ | (3.6 | ) |
|     Discounted          |                | 11.5   |                     |   | (10.9 | ) |   | 2.7 |   |   | (2.8 | ) |
| Sulphur      reclamation obligations:       |                |   |                     |   |   |   |   |   |   |   |   |   |
|     Undiscounted        |                | 5.3    |                     |   | (4.4 | ) |   | 0.3 |   |   | (0.3 | ) |
|     Discounted          |                | 1.5    |                     |   | (1.8 | ) |   | 0.1 |   |   | (0.1 | ) |

| 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,                                 |      |
|-------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|-----------|
|                                                                                            |   | 2007                                              |      | 2006 |   |
|                                                                                            |   | (In      Thousands, Except Share Related Amounts) |      |
| ASSETS                                                                                          |   |                                              |      |   |   |   |   |
| Current      assets:                                                                            |   |                                              |      |   |   |   |   |
| Cash      and cash equivalents                                                                  |   | $                                                 | 4,830     |   | $ | 17,830 |   |
| Restricted      investments                                                                     |   |                                              | -         |   |   | 5,930 |   |
| Accounts      receivable                                                                        |   |                                              | 128,690   |   |   | 45,636 |   |
| Inventories                                                                                     |   |                                              | 11,507    |   |   | 25,034 |   |
| Prepaid      expenses                                                                           |   |                                              | 14,331    |   |   | 16,190 |   |
| Fair      value of oil and gas derivative contracts                                             |   |                                              | 16,623    |   |   | - |   |
| Current      assets from discontinued operations, including restricted cash      of             |   |                                              |      |   |   |   |   |
| $0.5      million and $0.4 million, respectively                                                |   |                                              | 3,029     |   |   | 6,492 |   |
| Total      current assets                                                                       |   |                                              | 179,010   |   |   | 117,112 |   |
| Property,      plant and equipment, net                                                         |   |                                              | 1,503,359 |   |   | 282,538 |   |
| Sulphur      business assets                                                                    |   |                                              | 349       |   |   | 362 |   |
| Restricted      investments and cash                                                            |   |                                              | 7,036     |   |   | 3,288 |   |
| Fair      value of oil and gas derivative contracts                                             |   |                                              | 4,317     |   |   | - |   |
| Deferred      financing costs                                                                   |   |                                              | 21,217    |   |   | 5,377 |   |
| Total      assets                                                                               |   | $                                                 | 1,715,288 |   | $ | 408,677 |   |
|                                                                                            |   |                                              |      |   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY (DEFICIT)                                       |   |                                              |      |   |   |   |   |
| Current      liabilities:                                                                       |   |                                              |      |   |   |   |   |
| Accounts      payable                                                                           |   | $                                                 | 97,821    |   | $ | 85,608 |   |
| Accrued      liabilities                                                                        |   |                                              | 68,292    |   |   | 32,740 |   |
| 6%      convertible senior notes                                                                |   |                                              | 100,870   |   |   | - |   |
| Other      short term borrowings                                                                |   |                                              | 10,665    |   |   | - |   |
| Accrued      interest and dividends payable                                                     |   |                                              | 13,055    |   |   | 5,479 |   |
| Current      portion of accrued oil and gas reclamation costs                                   |   |                                              | 80,839    |   |   | 2,604 |   |
| Current      portion of accrued sulphur reclamation costs                                       |   |                                              | 12,145    |   |   | 12,909 |   |
| Fair      value of oil and gas derivative contracts                                             |   |                                              | 14,001    |   |   | - |   |
| Current      liabilities from discontinued operations                                           |   |                                              | 2,624     |   |   | 3,678 |   |
| Total      current liabilities                                                                  |   |                                              | 400,312   |   |   | 143,018 |   |
| Senior      secured revolving credit facility                                                   |   |                                              | 274,000   |   |   | 28,750 |   |
| 5¼%      convertible senior notes                                                          |   |                                              | 115,000   |   |   | 115,000 |   |
| 6%      convertible senior notes                                                                |   |                                              | -         |   |   | 100,870 |   |
| 11.875%      senior notes                                                                       |   |                                              | 300,000   |   |   | - |   |
| Accrued      oil and gas reclamation costs                                                      |   |                                              | 213,898   |   |   | 23,272 |   |
| Accrued      sulphur reclamation costs                                                          |   |                                              | 9,155     |   |   | 10,185 |   |
| Contractual      postretirement obligation                                                      |   |                                              | 6,216     |   |   | 9,831 |   |
| Fair      value of oil and gas derivative contracts                                             |   |                                              | 7,516     |   |   | - |   |
| Other      long-term liabilities                                                                |   |                                              | 16,962    |   |   | 17,151 |   |
| Total      liabilities                                                                          |   |                                              | 1,343,059 |   |   | 448,077 |   |
| Commitments      and contingencies                                                              |   |                                              |      |   |   |   |   |
| Mandatorily      redeemable convertible preferred stock, net of unamortized offering      costs |   |                                              |      |   |   |   |   |
| of      $0.8 million at December 31, 2006                                                       |   | $                                                 | -         |   | $ | 29,043 |   |

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|                                                                                |   | December      31,                                 |      |
|-------------------------------------------------------------------------------------|--------|---------------------------------------------------|-----------|
|                                                                                |   | 2007                                              |      | 2006 |   |
|                                                                                |   | (In      Thousands, Except Share Related Amounts) |      |
| Stockholders'      equity (deficit):                                                |   |                                              |      |   |   |   |   |
| Preferred      stock, par value $0.01, 50,000,000 shares authorized,      2,587,500 |   |                                              |      |   |   |   |   |
| shares      issued and outstanding ($100 per share liquidation preference)      at  |   |                                              |      |   |   |   |   |
| December      31, 2007 (Note 8)                                                     |   | $                                                 | 258,750   |   | $ | - |   |
| Common      stock, par value $0.01, 150,000,000 shares authorized,      55,741,251  |   |                                              |      |   |   |   |   |
| shares      and 30,740,275 shares issued and outstanding, respectively              |   |                                              | 558       |   |   | 307 |   |
| Capital      in excess of par value of common stock                                 |   |                                              | 718,472   |   |   | 477,178 |   |
| Accumulated      deficit                                                            |   |                                              | (559,459  | ) |   | (499,725 | ) |
| Accumulated      other comprehensive loss                                           |   |                                              | (653      | ) |   | (1,273 | ) |
| Common      stock held in treasury, 2,471,674 shares and 2,433,545    shares,       |   |                                              |      |   |   |   |   |
| at      cost, respectively                                                          |   |                                              | (45,439   | ) |   | (44,930 | ) |
| Stockholders’      equity (deficit)                                           |   |                                              | 372,229   |   |   | (68,443 | ) |
| Total      liabilities, mandatorily redeemable convertible preferred stock      and |   |                                              |      |   |   |   |   |
| stockholders’      equity (deficit)                                           |   | $                                                 | 1,715,288 |   | $ | 408,677 |   |

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|                                                               | Years      Ended December 31,                 |    |
|--------------------------------------------------------------------|-----------------------------------------------|---------|
|                                                               | 2007                                          |    | 2006 |   | 2005 |   |
|                                                               | (In      Thousands, Except Per Share Amounts) |    |
| Revenues:                                                          |                                          |    |   |   |   |   |   |   |   |
| Oil      and natural gas                                           | $                                             | 475,250 |   | $ | 196,717 |   | $ | 118,176 |   |
| Service                                                            |                                          | 5,917   |   |   | 13,021 |   |   | 11,951 |   |
| Total      revenues                                                |                                          | 481,167 |   |   | 209,738 |   |   | 130,127 |   |
|                                                               |                                          |    |   |   |   |   |   |   |   |
| Costs      and expenses:                                           |                                          |    |   |   |   |   |   |   |   |
| Production      and delivery costs                                 |                                          | 122,127 |   |   | 53,134 |   |   | 29,569 |   |
| Depletion,      depreciation and amortization expense              |                                          | 256,007 |   |   | 104,724 |   |   | 25,896 |   |
| Exploration      expenses                                          |                                          | 58,954  |   |   | 67,737 |   |   | 63,805 |   |
| General      and administrative expenses                           |                                          | 27,973  |   |   | 20,727 |   |   | 19,551 |   |
| Loss      on oil and gas derivative contracts                      |                                          | 5,181   |   |   | - |   |   | - |   |
| Start-up      costs for Main Pass Energy Hub™      Project   |                                          | 9,754   |   |   | 10,714 |   |   | 9,749 |   |
| Exploration      expense reimbursement (Note 3)                    |                                          | -       |   |   | (10,979 | ) |   | - |   |
| Litigation      settlement, net of insurance proceeds (Note 13)    |                                          | -       |   |   | (446 | ) |   | 12,830 |   |
| Insurance      recoveries (Note 5)                                 |                                          | (2,338  | ) |   | (3,306 | ) |   | (8,900 | ) |
| Total      costs and expenses                                      |                                          | 477,658 |   |   | 242,305 |   |   | 152,500 |   |
| Operating      income (loss)                                       |                                          | 3,509   |   |   | (32,567 | ) |   | (22,373 | ) |
| Interest      expense, net                                         |                                          | (66,366 | ) |   | (10,203 | ) |   | (15,282 | ) |
| Other      (expense) income, net                                   |                                          | (704    | ) |   | (1,946 | ) |   | 6,185 |   |
| Loss      from continuing operations before income taxes           |                                          | (63,561 | ) |   | (44,716 | ) |   | (31,470 | ) |
| Provision      for income taxes                                    |                                          | -       |   |   | - |   |   | - |   |
| Loss      from continuing operations                               |                                          | (63,561 | ) |   | (44,716 | ) |   | (31,470 | ) |
| Income      (loss) from discontinued operations                    |                                          | 3,827   |   |   | (2,938 | ) |   | (8,242 | ) |
| Net      loss                                                      |                                          | (59,734 | ) |   | (47,654 | ) |   | (39,712 | ) |
| Preferred      dividends and amortization of convertible preferred |                                          |    |   |   |   |   |   |   |   |
| stock      issuance costs                                          |                                          | (4,172  | ) |   | (1,615 | ) |   | (1,620 | ) |
| Net      loss applicable to common stock                           | $                                             | (63,906 | ) | $ | (49,269 | ) | $ | (41,332 | ) |
|                                                               |                                          |    |   |   |   |   |   |   |   |
| Basic      and diluted net loss per share of common stock:         |                                          |    |   |   |   |   |   |   |   |
| Net      loss from continuing operations                           |                                          | $(1.97  | ) |   | $(1.66 | ) |   | $(1.35 | ) |
| Net      income (loss) from discontinued operations                |                                          | 0.11    |   |   | (0.10 | ) |   | (0.33 | ) |
| Net      loss per share of common stock                            |                                          | $(1.86  | ) |   | $(1.76 | ) |   | $(1.68 | ) |
|                                                               |                                          |    |   |   |   |   |   |   |   |
| Average      common shares outstanding:                            |                                          |    |   |   |   |   |   |   |   |
| Basic      and diluted                                             |                                          | 34,283  |   |   | 27,930 |   |   | 24,583 |   |

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|                                                         |   | Years      Ended December 31, |       |
|--------------------------------------------------------------|--------|-------------------------------|------------|
|                                                         |   | 2007                          |       | 2006 |   | 2005 |   |
|                                                         |   | (In      Thousands)           |       |
| Cash      flow from operating activities:                    |   |                          |       |   |   |   |   |   |   |   |
| Net      loss                                                |   | $                             | (59,734    | ) | $ | (47,654 | ) | $ | (39,712 | ) |
| Adjustments      to reconcile net loss to net cash           |   |                          |       |   |   |   |   |   |   |   |
| provided      by operating activities:                       |   |                          |       |   |   |   |   |   |   |   |
| (Income)      loss from discontinued operations              |   |                          | (3,827     | ) |   | 2,938 |   |   | 8,242 |   |
| Depletion,      depreciation and amortization expense        |   |                          | 256,007    |   |   | 104,724 |   |   | 25,896 |   |
| Exploration      drilling and related expenditures           |   |                          | 22,832     |   |   | 45,591 |   |   | 49,621 |   |
| Compensation      associated with stock-based awards         |   |                          | 13,107     |   |   | 15,822 |   |   | 1,677 |   |
| Loss      on induced conversion of convertible senior notes  |   |                          | -          |   |   | 4,301 |   |   | - |   |
| Amortization      of deferred financing costs                |   |                          | 14,713     |   |   | 1,891 |   |   | 2,225 |   |
| Loss      on oil and gas derivative contracts                |   |                          | 5,181      |   |   | - |   |   | - |   |
| Reclamation      expenditures                                |   |                          | (10,622    | ) |   | (670 | ) |   | (4 | ) |
| Purchase      of oil and gas derivative contracts            |   |                          | (4,604     | ) |   | - |   |   | - |   |
| Other                                                        |   |                          | 269        |   |   | 997 |   |   | (261 | ) |
| (Increase)      decrease in restricted cash                  |   |                          | (3,748     | ) |   | 278 |   |   | 3,448 |   |
| (Increase)      decrease in working capital:                 |   |                          |       |   |   |   |   |   |   |   |
| Accounts      receivable-customers                           |   |                          | (51,433    | ) |   | (2,423 | ) |   | (14,750 | ) |
| Accounts      receivable-joint interest partners             |   |                          | (10,099    | ) |   | (3,364 | ) |   | 11,084 |   |
| Accounts      receivable-other                               |   |                          | (2,228     | ) |   | 1,264 |   |   | 1,484 |   |
| Accounts      payable and accrued liabilities                |   |                          | 27,195     |   |   | 7,743 |   |   | 36,469 |   |
| Inventories                                                  |   |                          | 13,527     |   |   | (17,050 | ) |   | (7,127 | ) |
| Prepaid      expenses                                        |   |                          | 12,526     |   |   | (14,845 | ) |   | (48 | ) |
| Net      cash provided by continuing operations              |   |                          | 219,062    |   |   | 99,543 |   |   | 78,244 |   |
| Net      cash used in discontinued operations                |   |                          | (11,424    | ) |   | (4,352 | ) |   | (4,706 | ) |
| Net      cash provided by operating activities               |   |                          | 207,638    |   |   | 95,191 |   |   | 73,538 |   |
|                                                         |   |                          |       |   |   |   |   |   |   |   |
|                                                         |   |                          |       |   |   |   |   |   |   |   |
| Cash      flow from investing activities:                    |   |                          |       |   |   |   |   |   |   |   |
| Exploration,      development and other capital expenditures |   |                          | (153,210   | ) |   | (252,369 | ) |   | (161,262 | ) |
| Acquisition      of Newfield properties, net                 |   |                          | (1,047,936 | ) |   | - |   |   | - |   |
| Property      insurance reimbursement                        |   |                          | -          |   |   | 3,947 |   |   | 3,500 |   |
| Proceeds      from restricted investments                    |   |                          | 6,056      |   |   | 16,505 |   |   | 15,150 |   |
| Increase      in restricted investments                      |   |                          | (126       | ) |   | (229 | ) |   | (502 | ) |
| Proceeds      from sale of oil and gas properties            |   |                          | -          |   |   | 1,071 |   |   | - |   |
| Net      cash used in continuing activities                  |   |                          | (1,195,216 | ) |   | (231,075 | ) |   | (143,114 | ) |
| Net      cash used in discontinued operations                |   |                          | -          |   |   | - |   |   | (66 | ) |
| Net      cash used in investing activities                   |   | $                             | (1,195,216 | ) | $ | (231,075 | ) | $ | (143,180 | ) |
|                                                         |   |                          |       |   |   |   |   |   |   |   |

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|                                                             |   | Years      Ended December 31, |     |
|------------------------------------------------------------------|--------|-------------------------------|----------|
|                                                             |   | 2007                          |     | 2006 |   | 2005 |   |
|                                                             |   | (In      Thousands)           |     |
| Cash      flow from financing activities:                        |   |                          |     |   |   |   |   |   |   |   |
| Net      borrowings under revolving credit facility              |   | $                             | 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 on convertible preferred stock               |   |                          | (1,121   | ) |   | (1,494 | ) |   | (1,129 | ) |
| Proceeds      from exercise of stock warrants                    |   |                          | 9,148    |   |   | - |   |   | - |   |
| Proceeds      from exercise of stock options and other           |   |                          | 1,280    |   |   | 389 |   |   | 2,363 |   |
| Payments      for induced conversion of convertible senior notes |   |                          | -        |   |   | (4,301 | ) |   | - |   |
| Net      cash provided by continuing operations                  |   |                          | 974,578  |   |   | 22,813 |   |   | 1,234 |   |
| Net      cash activity from discontinued operations              |   |                          | -        |   |   | - |   |   | - |   |
| Net      cash provided by financing activities                   |   |                          | 974,578  |   |   | 22,813 |   |   | 1,234 |   |
| Net      decrease in cash and cash equivalents                   |   |                          | (13,000  | ) |   | (113,071 | ) |   | (68,408 | ) |
| Cash      and cash equivalents at beginning of year              |   |                          | 17,830   |   |   | 130,901 |   |   | 199,309 |   |
| Cash      and cash equivalents at end of year                    |   | $                             | 4,830    |   | $ | 17,830 |   | $ | 130,901 |   |
|                                                             |   |                          |     |   |   |   |   |   |   |   |
|                                                             |   |                          |     |   |   |   |   |   |   |   |
| Interest      paid                                               |   | $                             | 67,622   |   | $ | 9,382 |   | $ | 15,150 |   |
| Income      taxes paid                                           |   | $                             | -        |   | $ | - |   | $ | - |   |
|                                                             |   |                          |     |   |   |   |   |   |   |   |

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|                                                               |   | Years      Ended December 31,             |          |
|--------------------------------------------------------------------|--------|-------------------------------------------|---------------|
|                                                               |   | 2007                                      |          | 2006 |   | 2005 |   |
|                                                               |   | (In      Thousands, Except Share Amounts) |          |
| Preferred      stock:                                              |   |                                      |          |   |   |   |   |   |   |   |
| Balance      at beginning of year                                  |   | $                                         | -             |   | $ | - |   | $ | - |   |
| Shares      sold in equity offering, representing 2,587,500 shares |   |                                      | 258,750       |   |   | - |   |   | - |   |
| Balance      end of year, representing 2,587,500 shares            |   |                                      | 258,750       |   |   | - |   |   | - |   |
|                                                               |   |                                      |          |   |   |   |   |   |   |   |
| Common      stock:                                                 |   |                                      |          |   |   |   |   |   |   |   |
| Balance      at beginning of year representing 30,740,275 shares   |   |                                      |          |   |   |   |   |   |   |   |
| in      2007, 27,122,538 shares in 2006 and 26,670,574 shares      |   |                                      |          |   |   |   |   |   |   |   |
| in      2005                                                       |   |                                      | 307           |   |   | 271 |   |   | 267 |   |
| Shares      issued in equity offering representing 16,887,500      |   |                                      |          |   |   |   |   |   |   |   |
| shares      (at $12.40 per share) (Note 8)                         |   |                                      | 169           |   |   | - |   |   | - |   |
| Shares      issued in debt conversion transactions representing    |   |                                      |          |   |   |   |   |   |   |   |
| 3,552,494      shares                                              |   |                                      | -             |   |   | 36 |   |   | - |   |
| Exercise      of stock warrants representing 1,742,424 shares      |   |                                      | 17            |   |   | - |   |   | - |   |
| Exercise      of stock options and other representing 219,633      |   |                                      |          |   |   |   |   |   |   |   |
| shares      in 2007, 56,927 shares in 2006 and 302,408             |   |                                      |          |   |   |   |   |   |   |   |
| shares      in 2005                                                |   |                                      | 3             |   |   | - |   |   | 3 |   |
| Mandatorily      redeemable preferred stock conversions            |   |                                      |          |   |   |   |   |   |   |   |
| representing      6,205,419 shares in 2007, 8,316 shares in 2006   |   |                                      |          |   |   |   |   |   |   |   |
| and      149,556 shares in 2005                                    |   |                                      | 62            |   |   | - |   |   | 1 |   |
| Balance      at end of year representing, 55,795,251 shares in     |   |                                      |          |   |   |   |   |   |   |   |
| 2007,      30,740,275 shares in 2006 and 27,122,538 shares in      |   |                                      |          |   |   |   |   |   |   |   |
| 2005                                                               |   |                                      | 558           |   |   | 307 |   |   | 271 |   |
|                                                               |   |                                      |          |   |   |   |   |   |   |   |
| Capital      in Excess of Par Value:                               |   |                                      |          |   |   |   |   |   |   |   |
| Balance      at beginning of year                                  |   |                                      | 477,178       |   |   | 410,139 |   |   | 406,458 |   |
| 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                 |   |                                      | -             |   |   | 52,513 |   |   | - |   |
| 5%      mandatorily redeemable preferred stock conversions         |   |                                      | 29,786        |   |   | 40 |   |   | 719 |   |
| Stock-based      compensation expense                              |   |                                      | 13,107        |   |   | 15,822 |   |   | 1,168 |   |
| Exercise      of stock warrants                                    |   |                                      | 9,130         |   |   | - |   |   | - |   |
| Exercise      of stock options                                     |   |                                      | 1,787         |   |   | 389 |   |   | 2,363 |   |
| Shares      tendered for exercise of stock options                 |   |                                      | -             |   |   | - |   |   | 1,051 |   |
| Dividends      on preferred stock and amortization of related      |   |                                      |          |   |   |   |   |   |   |   |
| issuance      cost                                                 |   |                                      | (4,171        | ) |   | (1,615 | ) |   | (1,620 | ) |
| Unamortized      value of restricted stock units on adoption       |   |                                      |          |   |   |   |   |   |   |   |
| of      new accounting standard                                    |   |                                      | -             |   |   | (110 | ) |   | - |   |
| Balance      at end of year                                        |   |                                      | 718,472       |   |   | 477,178 |   |   | 410,139 |   |
|                                                               |   |                                      |          |   |   |   |   |   |   |   |
| Unamortized      value of restricted stock units:                  |   |                                      |          |   |   |   |   |   |   |   |
| Balance      beginning of year                                     |   |                                      | -             |   |   | (110 | ) |   | (619 | ) |
| Unamortized      value of restricted stock units on adoption       |   |                                      |          |   |   |   |   |   |   |   |
| of      new accounting standard                                    |   |                                      | -             |   |   | 110 |   |   | - |   |
| Amortization      of related deferred compensation                 |   |                                      | -             |   |   | - |   |   | 509 |   |
| Balance      end of year                                           |   |                                      | -             |   |   | - |   |   | (110 | ) |
|                                                               |   |                                      |          |   |   |   |   |   |   |   |
| Accumulated      Deficit:                                          |   |                                      |          |   |   |   |   |   |   |   |
| Balance      at beginning of year                                  |   |                                      | (499,725      | ) |   | (452,071 | ) |   | (412,359 | ) |
| Net      loss                                                      |   |                                      | (59,734       | ) |   | (47,654 | ) |   | (39,712 | ) |
| Balance      at end of year                                        |   | $                                         | (559,459      | ) | $ | (499,725 | ) | $ | (452,071 | ) |

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|                                                                |   | Years      Ended December 31,             |    |
|---------------------------------------------------------------------|--------|-------------------------------------------|---------|
|                                                                |   | 2007                                      |    | 2006 |   | 2005 |   |
|                                                                |   | (In      Thousands, Except Share Amounts) |    |
| Accumulated      Other Comprehensive Loss:                          |   |                                      |    |   |   |   |   |   |   |   |
| Balance      at beginning of year                                   |   | $                                         | (1,273  | ) | $ | - |   | $ | - |   |
| Adoption      of SFAS No. 158 (Note 1)                              |   |                                      | -       |   |   | (1,273 | ) |   | - |   |
| Amortization      of previously unrecognized pension                |   |                                      |    |   |   |   |   |   |   |   |
| components,      net                                                |   |                                      | 31      |   |   | - |   |   | - |   |
| Change      in unrecognized net gains/losses of pension plans       |   |                                      | 589     |   |   | - |   |   | - |   |
| Balance      at end of year                                         |   |                                      | (653    | ) |   | (1,273 | ) |   | - |   |
|                                                                |   |                                      |    |   |   |   |   |   |   |   |
| Common      Stock Held in Treasury:                                 |   |                                      |    |   |   |   |   |   |   |   |
| Balance      at beginning of year representing, 2,433,545 shares in |   |                                      |    |   |   |   |   |   |   |   |
| 2007,      2,428,121 in 2006 and 2,345,759 shares in 2005           |   |                                      | (44,930 | ) |   | (44,819 | ) |   | (43,293 | ) |
| Tender      of 38,129 shares in 2007, 5,424 shares in 2006 and      |   |                                      |    |   |   |   |   |   |   |   |
| 82,362      shares in 2005 associated with the exercise of stock    |   |                                      |    |   |   |   |   |   |   |   |
| options      and the vesting of restricted stock                    |   |                                      | (509    | ) |   | (111 | ) |   | (1,526 | ) |
| Balance      at end of year representing 2,471,674 shares in 2007,  |   |                                      |    |   |   |   |   |   |   |   |
| 2,433,545      shares in 2006 and 2,428,121 shares in 2005          |   |                                      | (45,439 | ) |   | (44,930 | ) |   | (44,819 | ) |
|                                                                |   |                                      |    |   |   |   |   |   |   |   |
| Total      stockholders’ equity (deficit)                     |   | $                                         | 372,229 |   | $ | (68,443 | ) | $ | (86,590 | ) |

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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. |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

|                           |   | December      31, |    |
|--------------------------------|--------|-------------------|---------|
|                           |   | 2007              |    | 2006 |   |
| Accounts      receivable:      |   |              |    |   |   |   |   |
| Customers                      |   | $                 | 91,176  |   | $ | 19,151 |   |
| Joint      interest partners   |   |              | 33,683  |   |   | 24,883 |   |
| Other                          |   |              | 3,831   |   |   | 1,602 |   |
| Total      accounts receivable |   | $                 | 128,690 |   | $ | 45,636 |   |

| ·   | 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 |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

| ·   | 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 twice every      year.  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 $6.3 million in 2007, $5.3 million in 2006 and $2.1      million in 2005. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | Year      Ended December 31, |   |
|--------|------------------------------|--------|
|   | 2007                         |   | 2006 |   | 2005 |   |
| A      |                         | 27     | % |   | 20 | % |   | 14 | % |
| B      |                         | 24     |   |   | - |   |   | - |   |
| C      |                         | 13     |   |   | - |   |   | - |   |
| D      |                         | <10 |   |   | 26 |   |   | 27 |   |
| E      |                         | <10 |   |   | 25 |   |   | <10 |   |
| F      |                         | <10 |   |   | 16 |   |   | <10 |   |
| G      |                         | -      |   |   | - |   |   | 27 |   |
| H      |                         | <10 |   |   | - |   |   | 15 |   |

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|                                                          | 2007   |    | 2006   |   | 2005    |   |
|---------------------------------------------------------------|--------|---------|--------|--------|---------|--------|
| Net      loss                                                 | $      | (59,734 | )      | $      | (47,654 | )      | $ | (39,712 | ) |
| Other      comprehensive income (loss)                        |   |    |   |   |    |   |   |   |   |
| Amortization      of previously unrecognized pension          |   |    |   |   |    |   |   |   |   |
| components,      net                                          |   | 31      |   |   | -       |   |   | - |   |
| Change      in unrecognized net gains/losses of pension plans |   | 589     |   |   | -       |   |   | - |   |
| Accumulated      other comprehensive loss                | $      | (59,114 | )      | $      | (47,654 | )      | $ | (39,712 | ) |

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|                                                           |   | Years      Ended December 31, |   |
|----------------------------------------------------------------|--------|-------------------------------|--------|
|                                                           |   | 2007                          |   | 2006 |   | 2005 |   |
|                                                           |   |                          |   |   |   |   |   |   |   |   |
| In-the-money      stock options a,      b                      |   |                          | 1,727  |   |   | 1,097 |   |   | 1,336 |   |
| Shares      issuable upon exercise of stock warrants a,      c |   |                          | 1,467  |   |   | 1,753 |   |   | 1,800 |   |
| Shares      issuable upon assumed conversion of                |   |                          |   |   |   |   |   |   |   |   |
| 5%      mandatorily redeemable preferred stock d               |   |                          | 3,103  |   |   | 6,205 |   |   | 6,214 |   |
| Shares      issuable upon assumed conversion of                |   |                          |   |   |   |   |   |   |   |   |
| 6¾%      mandatorily convertible preferred stock e        |   |                          | 2,525  |   |   | - |   |   | - |   |
| Shares      issuable upon assumed conversion of                |   |                          |   |   |   |   |   |   |   |   |
| 6%      convertible senior notes f                             |   |                          | 7,079  |   |   | 7,079 |   |   | 9,123 |   |
| Shares      issuable upon assumed conversion of                |   |                          |   |   |   |   |   |   |   |   |
| 5¼%      convertible senior notes g                       |   |                          | 6,938  |   |   | 6,938 |   |   | 8,446 |   |

| 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. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 and the shares included in this      calculation represent the 348 days the warrants were outstanding in      2007.  The remaining warrants, which expire in September 2008,      are exercisable for McMoRan common stock at any time at an exercise price      of $5.25 per share (Note 5). |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| d.   | Amount      represents total equivalent common stock shares assuming conversion of 5%      mandatorily redeemable preferred stock (Note 8).  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, 2006 and  2005. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| e.   | Amount      represents total equivalent common stock shares assuming conversion of 6¾%      mandatorily convertible preferred stock (Note 8).  The 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 and related costs      totaled $2.6 million in 2007. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f.   | Amount      represents total equivalent common stock shares assuming conversion of 6%      convertible senior notes (Note 6). Related      net interest expense totaled $6.6 million in 2007, $4.7 million in 2006      and $8.1 million in 2005. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g.   | Amount      represents total equivalent common stock shares assuming conversion of 5¼%      convertible senior notes (Note 6).  Net interest expense on the      5¼% convertible senior notes totaled $6.1 million in 2007, $4.2 million in      2006 and $7.2 million in 2005. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                 | Year      Ended December 31, |   |
|----------------------------------------------------------------------|------------------------------|--------|
|                                                                 | 2007                         |   | 2006 |   | 2005 |   |
| Cost      of options awarded to employees (including Directors)      | $                            | 12,415 | a | $ | 15,129 | a | $ | 858 | b |
| Cost      of options awarded to non-employees and Advisory Directors |                         | 630    |   |   | 588 |   |   | 310 |   |
| Cost      of restricted stock units                                  |                         | 62     |   |   | 105 |   |   | 509 |   |
| Total      stock-based compensation cost                             | $                            | 13,107 |   | $ | 15,822 |   | $ | 1,677 |   |

| a.   | Includes      $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 2007 and 2006,      respectively.  Also includes $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      (see “Accounting for Stock-Based Compensation” above) during 2007 and      2006, respectively. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Reflects      compensation charge resulting from difference between the market price on      the award date and the market price on the ultimate date of grant (Note      10).  The amortization of the remaining $1.0 million of      compensation costs resulting from these types of stock option grants      ceased upon adoption of SFAS No.123R.  |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                     | 2007   |   | 2006   |   | 2005   |   |
|------------------------------------------|--------|--------|--------|--------|--------|--------|
| General      and administrative expenses | $      | 6,334  |   | $      | 7,120  |   | $ | 615 |   |
| Exploration      expenses                |   | 6,296  |   |   | 8,104  |   |   | 1,052 |   |
| Main      Pass Energy Hub start-up costs |   | 477    |   |   | 598    |   |   | 10 |   |
| Total      stock-based compensation cost | $      | 13,107 |   | $      | 15,822 |   | $ | 1,677 |   |

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|                                                      | 2007   |   |   | 2006   |   |
|-----------------------------------------------------------|--------|--------|--------|--------|--------|
| Fair      value (per share) of stock option on grant date | $      | 6.94   | a      |   | $      | 11.85 | b |
| Expected      and weighted average volatility             |   | 52.23  | %      |   |   | 55.5 | % |
| Expected      life of options (in years)                  |   | 6.29   | a      |   |   | 7 | b |
| Risk-free      interest rate                              |   | 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 2007) with an expected life of 6.56 years and fair value      of stock options on grant date of $7.02 per  share. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | 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. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                       | 2005   |    |
|----------------------------------------------------------------------------|--------|---------|
| Basic      net loss applicable to common stock, as reported                | $      | (41,332 | ) |
| Add:  Stock-based      employee compensation expense recorded in |   |    |   |
| net      loss for restricted stock units and employee stock options        |   | 1,367   |   |
| Deduct:      Total stock-based employee compensation expense               |   |    |   |
| determined      under fair value based method for all awards               |   | (11,439 | ) |
| Pro      forma diluted net loss applicable to common stock                 | $      | (51,404 | ) |
|                                                                       |   |    |   |
| Net      loss per share:                                                   |   |    |   |
| Basic      and diluted – as reported                                 | $      | (1.68   | ) |
| Basic      and diluted  – pro forma                        | $      | (2.09   | ) |

| Fair      value (per share) of stock options | $      | 11.45 |   |
|----------------------------------------------|--------|-------|--------|
| Risk      free interest rate                 |   | 4.5   | %      |
| Expected      volatility rate                |   | 61    | %      |
| Expected      life of options (in years)     |   | 7     |   |
| Assumed      annual dividend                 |   | -     |   |

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| Cash      paid for acquired assets at closing (August 6, 2007) | $      | 1,076,286 |     |
|----------------------------------------------------------------|--------|-----------|----------|
| Estimated      oil & gas reclamation costs                 |   | 267,537   |     |
| Net      assets acquired at closing                            |   | 1,343,823 |     |
| Post      closing adjustments                                  |   | (35,649   | )      a |
| Other      acquisition related costs                           |   | 13,416    |     |
| Net      assets acquired                                       | $      | 1,321,590 |     |

| 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). |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Accounts      receivable                                       | $      | 35,649    |   |
|----------------------------------------------------------------|--------|-----------|--------|
| Oil      and gas property, plant and equipment                 |   | 1,321,590 |   |
| Asset      retirement obligations                              |   | (267,537  | )      |
| 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 |   |

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|                             |   | (Unaudited) |
|----------------------------------|--------|-------------|
|                             |   | Developed   |   | Undeveloped |
|                             |   | Gross       |   | Net |   | Gross |   | Net |
|                             |   | Acres       |   | Acres |   | Acres |   | Acres |
| Offshore      (federal waters)   |   | 709,391     |   | 412,034 |   | 593,435 |   | 162,641 |
| Onshore      Louisiana and Texas |   | 36,769      |   | 18,255 |   | 71,898 |   | 30,523 |
| Total      at December 31, 2007  |   | 746,160     |   | 430,289 |   | 665,333 |   | 193,164 |

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|                                                      |   | December      31, |      |
|-----------------------------------------------------------|--------|-------------------|-----------|
|                                                      |   | 2007              |      | 2006 |   |
| Oil      and gas property, plant and equipment            |   | $                 | 1,984,328 |   | $ | 521,372 |   |
| Other                                                     |   |              | 31        |   |   | 31 |   |
|                                                      |   |              | 1,984,359 |   |   | 521,403 |   |
| Accumulated      depletion, depreciation and amortization |   |              | (481,000  | ) |   | (238,865 | ) |
| Property,      plant and equipment, net                   |   | $                 | 1,503,359 |   | $ | 282,538 |   |

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|                                                     |   | December      31, |   |
|----------------------------------------------------------|--------|-------------------|--------|
|                                                     |   | 2007              |   | 2006 |   |
| Employee      postretirement medical liability (Note 10) |   | $                 | 5,303  |   | $ | 5,668 |   |
| Accrued      workers compensation and group insurance    |   |              | 2,325  |   |   | 2,242 |   |
| Sulphur-related      environmental liability (Note 13)   |   |              | 3,161  |   |   | 3,161 |   |
| Defined      benefit pension plan liability (Note 10)    |   |              | 2,255  |   |   | 2,141 |   |
| Nonqualified      pension plan liability                 |   |              | 1,199  |   |   | 1,012 |   |
| Deferred      compensation and other                     |   |              | -      |   |   | 208 |   |
| Liability      for management services (Note 13)         |   |              | 2,719  |   |   | 2,719 |   |
|                                                     |   | $                 | 16,962 |   | $ | 17,151 |   |

|                             | December      31, 2007 |   | December      31, 2006 |   |
|----------------------------------|------------------------|--------|------------------------|--------|
|                             | Gross                  |   |                   |   |   |   | Gross |   |   |   |   |   |
|                             | Carrying               |   | Accumulated            |   |   |   | Carrying |   | Accumulated |   |   |   |
|                             | Amount                 |   | Amortization           |   | Net |   | Amount |   | Amortization |   | Net |   |
| 11.875%      Senior Notes        |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (due      November 2014)         | $                      | 8,055  |                   | $      | (150 | ) | $ | 7,905 |   | $ | - |   | $ | - |   | $ | - |   |
| Revolving      Credit Facility   |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Matures      August 2012)       |                   | 11,136 |                   |   | (893 | ) |   | 10,243 |   |   | 640 |   |   | (94 | ) |   | 546 |   |
| 6%      Convertible Senior       |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notes      (due July 2008)       |                   | 5,706  |                   |   | (5,160 | ) |   | 546 |   |   | 5,706 |   |   | (4,068 | ) |   | 1,638 |   |
| 5¼%      Convertible Senior |                   |   |                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Notes      (due October 2011)    |                   | 7,032  |                   |   | (4,509 | ) |   | 2,523 |   |   | 7,032 |   |   | (3,839 | ) |   | 3,193 |   |
|                             | $                      | 31,929 |                   | $      | (10,712 | ) | $ | 21,217 |   | $ | 13,378 |   | $ | (8,001 | ) | $ | 5,377 |   |

|                                          | December      31, |     |
|-----------------------------------------------|-------------------|----------|
|                                          | 2007              |     | 2006 |   |
| Senior      secured revolving credit facility | $                 | 274,000  |   | $ | 28,750 |   |
| 11.875%      senior notes                     |              | 300,000  |   |   | - |   |
| 5¼%      convertible senior notes        |              | 115,000  |   |   | 115,000 |   |
| 6%      convertible senior notes              |              | 100,870  |   |   | 100,870 |   |
| Other                                         |              | 10,665   |   |   | - |   |
| Total      debt                               |              | 800,535  |   |   | 244,620 |   |
| Less      current maturities                  |              | (111,535 | ) |   | - |   |
| Long-term      debt                           | $                 | 689,000  |   | $ | 244,620 |   |

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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 |
| 2008   |            16.4            |   | $ |  8.60 |   |              6.6 |   | $ |  6.00 |   | 23.0 |
| 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 |
| 2008   |             693 |   | $ |  73.50 |   |             288 |   | $ |  50.00 |   | 981 |
| 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. |
|----------------|-------------------------------|

|                                          | Years      Ended December 31, |    |
|-----------------------------------------------|-------------------------------|---------|
|                                          | 2007                          |    | 2006 |   | 2005 |   |
| Gas      puts                                 | $                             | 1,433   |   | $ | - |   | $ | - |   |
| Oil      puts                                 |                          | 630     |   |   | - |   |   | - |   |
| Gas      swaps                                |                          | (17,665 | ) |   | - |   |   | - |   |
| Oil      swaps                                |                          | 20,783  |   |   | - |   |   | - |   |
| Loss      on oil and gas derivative contracts | $                             | 5,181   |   | $ | - |   | $ | - |   |

|                             | 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, |   |
|--------------------------------------------------|--------|-------------------------------|--------|
|                                             |   | 2007                          |   | 2006 |   | 2005 |   |
| Sulphur      retiree costs a                     |   |                          | (3,155 | ) |   | (1,436 | ) |   | (2,513 | ) |
| Caretaking      costs                            |   |                          | 901    |   |   | 1,889 |   |   | 1,476 |   |
| Accretion      expense – sulphur           |   |                          |   |   |   |   |   |   |   |   |
| reclamation      obligations                     |   |                          | 1,738  |   |   | 4,417 | b |   | 7,205 | b |
| Insurance                                        |   |                          | 463    |   |   | 881 |   |   | 1,030 |   |
| General      and administrative, legal and other |   |                          | 174    |   |   | 176 |   |   | 583 |   |
| Other                                            |   |                          | (3,948 | )c |   | (2,989 | )d |   | 461 |   |
| (Income)      loss from discontinued operations  |   | $                             | (3,827 | ) |   | 2,938 |   |   | 8,242 |   |

| a.   | Reflects      postretirement benefit costs associated with certain retired former      sulphur employees (Note 13).  The amount during 2007 reflects a      $4.6 million reduction in the contractual liability resulting from      decreased health care claim costs.  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 |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| b.   | Includes      a $3.4 million charge to expense at December 31, 2006 to increase the      accrued reclamation costs for the Port Sulphur facilities to their      estimated fair value.  The increase incorporated the planned      acceleration of certain of these closure costs as well as higher costs      associated with a portion of the facilities.  In 2005, $6.5      million was charged to expense to reflect modification of our then      existing reclamation plan for PortSulphur. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| 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, 2007 |
|--------------------------------------------------------------------------|--------|--------------------------------------------------|--------|--------------------------------------------------------------|
| 2005      Stock Incentive Plan (“the 2005 Plan”)             |   | 3,500,000                                        |   | 14,000                                                       |
| 2004      Director Compensation Plan (“2004 Directors Plan”) |   | 175,000                                          |   | 114,386                                                      |
| 2003      Stock Incentive Plan (“the 2003 Plan”)             |   | 2,000,000                                        |   | -                                                            |
| 2001      Stock Incentive Plan (“the 2001 Plan”)             |   | 1,250,000                                        |   | -                                                            |
| 2000      Stock Option Plan (“the 2000 Plan”)                |   | 600,000                                          |   | 1,500                                                        |
| 1998      Stock Option Plan (“the 1998 Plan”)                |   | 775,000                                          |   | 10,875                                                       |
| 1998      Stock Option Plan for Non Employee Directors                   |   |                                             |   |                                                         |
| (the      Directors Plan”)                                         |   | 75,000                                           |   | 1,000                                                        |
| 1998      Adjusted Stock Award Plan                                      |   | 794,250                                          |   | -                                                            |

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|                    |   | 2007           |   | 2006              |   | 2005           |
|-------------------------|--------|----------------|--------|-------------------|--------|----------------|
|                    |   | Number      of |   | Average           |   | Number      of |   | Average |   | Number      of |   | Average |
|                    |   | Options        |   | Option      Price |   | Options        |   | Option      Price |   | Options |   | Option      Price |
| Beginning      of year  |   | 7,095,991      |   | $15.50            |   |           | 5,845,416 |   | $14.57 |   |   | 4,820,860 |   | $13.97 |   |
| Granted                 |   | 1,353,250      |   | 12.29             |   |           | 1,365,500 |   | 19.79 |   |   | 1,310,500 |   | 16.74 |   |
| Exercised               |   | (213,695       | )      | 8.37              |   |           | (26,823 | ) | 14.52 |   |   | (255,699 | ) | 13.32 |   |
| Expired/forfeited       |   | (481,446       | )      | 18.33             |   |           | (88,102 | ) | 20.71 |   |   | (30,245 | ) | 22.25 |   |
| End      of year        |   | 7,754,100      |   | 14.96             |   |           | 7,095,991 |   | 15.50 |   |   | 5,845,416 |   | 14.57 |   |
| Exercisable      at end |   |           |   |              |   |           |   |   |   |   |   |   |   |   |   |
| of      year            |   | 5,636,100      |   |              |   |           | 5,169,822 |   |   |   |   | 4,167,393 |   |   |   |

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|                                                | Pension      Benefits |   | Other      Benefits |   |
|-----------------------------------------------------|-----------------------|--------|---------------------|--------|
|                                                | 2007                  |   | 2006                |   | 2007 |   | 2006 |   |
| Change      in benefit obligation:                  |                  |   |                |   |   |   |   |   |   |   |   |   |
| Benefit      obligation at the beginning of year    | $                     | (4,372 | )                   | $      | (4,502 | ) | $ | (6,293 | ) | $ | (6,300 | ) |
| Service      cost                                   |                  | -      |                |   | - |   |   | (26 | ) |   | (20 | ) |
| Interest      cost                                  |                  | (214   | )                   |   | (217 | ) |   | (330 | ) |   | (347 | ) |
| Actuarial      gains                                |                  | -      |                |   | - |   |   | 588 |   |   | 108 |   |
| Participant      contributions                      |                  | -      |                |   | - |   |   | (206 | ) |   | (207 | ) |
| Benefits      paid                                  |                  | 807    |                |   | 347 |   |   | 423 |   |   | 473 |   |
| Benefit      obligation at end of year              |                  | (3,779 | )                   |   | (4,372 | ) |   | (5,844 | ) |   | (6,293 | ) |
|                                                |                  |   |                |   |   |   |   |   |   |   |   |   |
| Change      in plan assets:                         |                  |   |                |   |   |   |   |   |   |   |   |   |
| Fair      value of plan assets at beginning of year |                  | 2,231  |                |   | 2,549 |   |   | - |   |   | - |   |
| Return      on plan assets                          |                  | 100    |                |   | 29 |   |   | - |   |   | - |   |
| Employer/participant      contributions             |                  | -      |                |   | - |   |   | 423 |   |   | 473 |   |
| Benefits      paid                                  |                  | (807   | )                   |   | (347 | ) |   | (423 | ) |   | (473 | ) |
| Fair      value of plan assets at end of year       |                  | 1,524  |                |   | 2,231 |   |   | - |   |   | - |   |
|                                                |                  |   |                |   |   |   |   |   |   |   |   |   |
| Funded      status                                  | $                     | (2,255 | )                   | $      | (2,141 | ) | $ | (5,844 | ) | $ | (6,293 | ) |
|                                                |                  |   |                |   |   |   |   |   |   |   |   |   |
| Weighted-average      assumptions (percent):        |                  |   |                |   |   |   |   |   |   |   |   |   |
| Discount      rate                                  |                  | N/A    | a                   |   | N/A | a |   | 6.00 |   |   | 5.75 |   |
| 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 invests almost the entire amount of its      plan asset portfolio in short-term fixed income securities, with the      remainder invested in overnight money market  accounts. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                     |   | Pension      Benefits |   | Other      Benefits |   |
|------------------------------------------|--------|-----------------------|--------|---------------------|--------|
|                                     |   | 2007                  |   | 2006                |   | 2005 |   | 2007 |   | 2006 |   | 2005 |   |
| Service      cost                        |   | $                     | -      |                | $      | - |   | $ | - |   | $ | 26 |   | $ | 20 |   | $ | 19 |   |
| Interest      cost                       |   |                  | 214    |                |   | 217 |   |   | 243 |   |   | 330 |   |   | 347 |   |   | 358 |   |
| Return      on plan assets               |   |                  | (100   | )                   |   | (29 | ) |   | (96 | ) |   | - |   |   | - |   |   | - |   |
| Amortization      of prior service costs |   |                  | -      |                |   | - |   |   | - |   |   | (40 | ) |   | (40 | ) |   | (47 | ) |
| Recognition      of net actuarial loss   |   |                  | -      |                |   | - |   |   | - |   |   | 71 |   |   | 148 |   |   | 114 |   |
| Net      periodic benefit cost           |   | $                     | 114    |                | $      | 188 |   | $ | 147 |   | $ | 387 |   | $ | 475 |   | $ | 444 |   |

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|                                                                 |   | December      31,  |     |
|----------------------------------------------------------------------|--------|-------------------------|----------|
|                                                                 |   | 2007                    |     | 2006 |   |
| Federal      and state net operating loss carryforwards (expiring in |   |                    |     |   |   |   |   |
| varying      amounts from 2008-2027)                                 |   | $                       | 172,644  |   | $ | 170,266 |   |
| Property,      plant and equipment                                   |   |                    | (43,000  | ) |   | 35,931 |   |
| Reclamation      and shutdown reserves                               |   |                    | 110,613  |   |   | 18,073 |   |
| Deferred      compensation, postretirement and pension benefits and  |   |                    |     |   |   |   |   |
| accrued      liabilities                                             |   |                    | 16,644   |   |   | 13,827 |   |
| Other                                                                |   |                    | 7,653    |   |   | 5,940 |   |
| Less      valuation allowance                                        |   |                    | (264,554 | ) |   | (244,037 | ) |
| Net                                                                  |   | $                       | -        |   | $ | - |   |

|                               | 2007   |    | 2006    |   | 2005   |   |
|------------------------------------|--------|---------|---------|--------|--------|--------|
|                               | Amount |    | Percent |   | Amount |   | Percent |   | Amount |   | Percent |   |
| Income      tax benefit computed   |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| at      the federal statutory      |   |    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| income      tax rate               | $      | 20,907  |    |   | 35     | %      | $ | 16,679 |   |   | 35 | % | $ | 13,899 |   |   | 35 | % |
| Change      in valuation allowance |   | (20,517 | )       |   | (34    | )      |   | (17,030 | ) |   | (36 | ) |   | (9,951 | ) |   | (25 | ) |
| Other                              |   | (390    | )       |   | (1     | )      |   | 351 |   |   | 1 |   |   | (3,948 | )a |   | (10 | ) |
| Income      tax provision          | $      | -       |    |   | -      | %      | $ | - |   |   | - | % | $ | - |   |   | - | % |

|   | a.      Amount primarily reflects the $12.8 million litigation settlement charge      (Note 13), which is not deductible for income tax  purposes. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                      | Years      Ended December 31, |    |
|-----------------------------------------------------------|-------------------------------|---------|
|                                                      | 2007                          |    | 2006 |   | 2005 |   |
| Oil      and Natural Gas                                  |                          |    |   |   |   |   |   |   |   |
| Asset      retirement obligation at beginning of year     | $                             | 25,876  |   | $ | 21,760 |   | $ | 14,429 |   |
| Liabilities      settled                                  |                          | (6,720  | ) |   | (670 | ) |   | (4 | ) |
| Accretion      expense a                                  |                          | 12,222  |   |   | 2,088 |   |   | 1,442 |   |
| Liabilities      assumed in Newfield property acquisition |                          | 267,537 |   |   | - |   |   | - |   |
| Incurred      liabilities                                 |                          | 272     |   |   | 2,534 |   |   | 6,978 | b |
| Revision      for changes in estimates                    |                          | (4,450  | ) |   | 164 |   |   | (1,085 | ) |
| Asset      retirement obligations at end of year          | $                             | 294,737 |   | $ | 25,876 |   | $ | 21,760 |   |
|                                                      |                          |    |   |   |   |   |   |   |   |
| Sulphur                                                   |                          |    |   |   |   |   |   |   |   |
| Asset      retirement obligations at beginning of year:   | $                             | 23,094  |   | $ | 21,786 |   | $ | 14,636 |   |
| Liabilities      settled                                  |                          | (3,532  | )c |   | (3,109 | )c |   | (55 | ) |
| Accretion      expense                                    |                          | 1,738   |   |   | 1,392 |   |   | 960 |   |
| Revision      for changes in estimates                    |                          | -       |   |   | 3,025 | d |   | 6,245 | d |
| Asset      retirement obligation at end of year           | $                             | 21,300  |   | $ | 23,094 |   | $ | 21,786 |   |

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

| b.   | Includes      $3.9 million reclamation liability assumed in connection with the      termination of the overriding royalty interest in Main Pass’ oil      production (Note 5).  Also includes $2.2 million of assumed      reclamation liabilities related to interests in properties which reverted      to McMoRan effective June 1, 2005. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 9).  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,  |      |
|                                                |   | 2007                    |      | 2006 |   |
|                                                |   | (In      Thousands)     |      |
| Unproved      properties a                          |   | $                       | 70,421    |   | $ | 45,237 |   |
| Proved      properties b                            |   |                    | 1,913,907 |   |   | 476,135 |   |
| Subtotal                                            |   |                    | 1,984,328 |   |   | 521,372 |   |
| Less      accumulated depreciation and amortization |   |                    | (481,000  | ) |   | (238,865 | ) |
| Net      oil and gas properties                     |   | $                       | 1,503,328 |   | $ | 282,507 |   |

| a.   | Includes      costs associated with in-progress wells and wells not fully evaluated,      including related leasehold acquisition costs, totaling $55.6 million at      December 31, 2007 and $38.4 million at December 31,  2006. |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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, 2007      and $16.5 million at December 31,2006. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                            |   | Years      Ended December 31, |      |
|---------------------------------|--------|-------------------------------|-----------|
|                            |   | 2007                          |      | 2006 |   | 2005 |   |
|                            |   | (In      Thousands)           |      |
| Acquisition      of properties: |   |                          |      |   |   |   |   |   |   |   |
| Proved                          |   | $                             | 1,314,136 | a | $ | - |   | $ | - |   |
| Unproved                        |   |                          | 8,313     | a |   | 2,310 |   |   | 3,542 |   |
| Exploration      costs          |   |                          | 140,874   |   |   | 124,590 |   |   | 88,294 |   |
| Development      costs          |   |                          | 59,287    |   |   | 134,338 |   |   | 90,617 |   |
|                            |   | $                             | 1,522,610 |   | $ | 261,238 |   | $ | 182,453 |   |

| a.   | Includes      the costs associated with acquisition of properties from Newfield (Note      2), including $7.5 million attributable to unproved      properties. |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                       | Years      Ended December 31, |     |
|------------------------------------------------------------|-------------------------------|----------|
|                                                       | 2007                          |     | 2006 |   | 2005 |   |
| Beginning      of year                                     | $                             | 38,456   |   | $ | 19,619 |   | $ | 39,270 |   |
| Additions      to capitalized exploratory well             |                          |     |   |   |   |   |   |   |   |
| costs      pending determination of proved reserves        |                          | 157,216  |   |   | 242,558 |   |   | 163,638 |   |
| Reclassifications      to wells, facilities, and equipment |                          |     |   |   |   |   |   |   |   |
| based      on determination of proved reserves             |                          | (117,259 | ) |   | (178,777 | ) |   | (136,465 | ) |
| Amounts      charged to exploration expense                |                          | (22,433  | ) |   | (44,944 | ) |   | (46,824 | ) |
| End      of year                                           | $                             | 55,980   |   | $ | 38,456 |   | $ | 19,619 |   |

|                                 | Oil    |   | Natural      Gas |   |
|--------------------------------------|--------|--------|------------------|--------|
|                                 | 2007   |   | 2006             |   | 2005 |   | 2007 |   | 2006 |   | 2005 |   |
| Proved      reserves:                |   |   |             |   |   |   |   |   |   |   |   |   |
| Beginning      of year               | 5,772  | a      | 7,131            |   | 4,789 |   | 41,202 |   | 38,944 |   | 21,187 |   |
| Revisions      of previous estimates | 361    | a      | (343             | )      | 1,137 |   | (3,192 | ) | (349 | ) | (2,150 | ) |
| Discoveries      and extensions      | 484    |   | 536              |   | 1,602 | b | 25,552 |   | 17,153 |   | 27,845 | b |
| Production                           | (2,181 | )      | (1,552           | )      | (850 | ) | (38,994 | ) | (14,546 | ) | (7,938 | ) |
| Purchase      of reserves            | 15,281 | c      | -                |   | 453 | d | 221,038 | c | - |   | - |   |
| End      of year                     | 19,717 |   | 5,772            | a      | 7,131 |   | 245,606 |   | 41,202 |   | 38,944 |   |
|                                 |   |   |             |   |   |   |   |   |   |   |   |   |

----

TABLE OF CONTENTS

|                            | Oil    |   | Natural      Gas |   |
|---------------------------------|--------|--------|------------------|--------|
|                            | 2007   |   | 2006             |   | 2005 |   | 2007 |   | 2006 |   | 2005 |   |
| Proved      developed reserves: |   |   |             |   |   |   |   |   |   |   |   |   |
| Beginning      of year          | 5,526  | a      | 6,248            |   | 4,640 |   | 34,949 |   | 29,101 |   | 14,765 |   |
| End      of year                | 17,452 |   | 5,526            | a      | 6,248 |   | 203,595 |   | 34,949 |   | 29,101 |   |

| a.   | Includes      approximately 46 MBbls of oil associated with the West Cameron Block 43      field that were included in the estimated proved reserve amounts at      December 31, 2006 but which McMoRan determined was not recoverable in      early 2007 (Note 1). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | The      estimated proved reserves include 3,363 MMcf of natural gas and 80 MBbls      of oil associated with the reversions of interest to McMoRan from      properties it sold in 2002 (Note5). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Reflects      the estimated proved reserves of the properties acquired from Newfield at      the August 6, 2007 closing date (Note2). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------|

| d.   | In      February 2005, McMoRan negotiated the termination of an overriding      royalty/net profit interest in the oil production at Main Pass by assuming      a reclamation obligation related to the field (Notes 5 and      13). |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                                            |   | December      31,  |      |
|---------------------------------------------------------------------------------|--------|-------------------------|-----------|
|                                                                            |   | 2007                    |      | 2006 |   |
|                                                                            |   | (In      Thousands)     |      |
| Future      cash inflows                                                        |   | $                       | 3,601,360 |   | $ | 560,852 |   |
| Future      costs applicable to future cash flows:                              |   |                    |      |   |   |   |   |
| Production      costs                                                           |   |                    | (687,588  | ) |   | (199,246 | ) |
| Development      and abandonment costs                                          |   |                    | (585,681  | ) |   | (46,591 | ) |
| Future      income taxes                                                        |   |                    | (266,928  | ) |   | (772 | ) |
| Future      net cash flows                                                      |   |                    | 2,061,163 |   |   | 314,243 | a |
| Discount      for estimated timing of net cash flows (10% discount rate)      b |   |                    | (422,897  | ) |   | (44,281 | ) |
|                                                                            |   | $                       | 1,638,266 |   | $ | 269,962 | a |

| a.   | Amount      includes $7.9 million of estimated undiscounted future net cash flows and      $6.9 million of estimated discounted future cash flows associated with      proved reserves attributable to the West Cameron Block 43 field that were      determined not to be recoverable in early 2007 (Note  1). |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | 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. |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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TABLE OF CONTENTS

|                                                           |   | Years      Ended December 31, |      |
|----------------------------------------------------------------|--------|-------------------------------|-----------|
|                                                           |   | 2007                          |      | 2006 |   | 2005 |   |
|                                                           |   | (In      Thousands)           |      |
| Beginning      of year                                         |   | $                             | 269,962   |   | $ | 383,139 |   | $ | 117,289 |   |
| Revisions:                                                     |   |                          |      |   |   |   |   |   |   |   |
| Changes      in prices                                         |   |                          | 494,774   |   |   | (106,961 | ) |   | 70,657 |   |
| Accretion      of discount                                     |   |                          | 26,996    |   |   | 38,313 |   |   | 11,729 |   |
| Change      in reserve quantities                              |   |                          | 196,253   |   |   | (21,317 | ) |   | (15,051 | ) |
| Other      changes, including revised estimates of development |   |                          |      |   |   |   |   |   |   |   |
| costs      and rates of production                             |   |                          | (186,238  | ) |   | (11,739 | ) |   | 9,204 |   |
| Discoveries      and extensions, less related costs            |   |                          | 132,808   |   |   | 93,125 |   |   | 257,432 | a |
| Development      costs incurred during the year                |   |                          | 8,559     |   |   | 35,123 |   |   | 8,640 |   |
| Change      in future income taxes                             |   |                          | (179,725  | ) |   | 3,862 |   |   | (4,445 | ) |
| Revenues,      less production costs                           |   |                          | (353,123  | ) |   | (143,583 | ) |   | (88,607 | ) |
| Purchase      of reserves in place                             |   |                          | 1,228,000 | b |   | - |   |   | 16,291 | c |
| End      of year                                               |   | $                             | 1,638,266 |   | $ | 269,962 |   | $ | 383,139 |   |

| a.   | Amount      includes $65.5 million relating to the reversion of interests back to      McMoRan in properties it previously sold in February 2002 (Note      5). |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Reflects      the fair value of the proved reserves for the properties acquired from      Newfield at the August 6, 2007 closing date (Note  2). |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------|

| c.   | Reflects      the termination of an overriding royalty/net profit interest in the oil      production at Main Pass (Note 5). |
|----------------|------------------------------------------------------------------------------------------------------------------------------|

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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                                     |   |                | -       |   |   | -         |   |         | 349     |         |   | - |   |   | 349 |   |
| 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    |   |         | 127     |         |   | - |   |   | 32,570 |   |
| 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 |   |

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TABLE OFCONTENTS

|                                                      |   |                |    |   |   | Freeport |   |         |    | Consolidated |   |
|-----------------------------------------------------------|--------|---------------------|---------|--------|--------|----------|--------|--------------|---------|--------------|--------|
|                                                      |   | Parent              |    | MOXY   |   | Energy   |   | Eliminations |    | McMoRan      |   |
|                                                      |   | (In      Thousands) |    |
| ASSETS                                                    |   |                |    |   |   |     |   |         |    |         |   |   |   |   |   |   |
| Current      assets:                                      |   |                |    |   |   |     |   |         |    |         |   |   |   |   |   |   |
| Cash      and cash equivalents                            |   | $                   | 16,593  |   | $      | 1,030    |   | $            | 207     |         | $      | - |   | $ | 17,830 |   |
| Restricted      investments                               |   |                | 5,930   |   |   | -        |   |         | -       |         |   | - |   |   | 5,930 |   |
| Accounts      receivable                                  |   |                | 30      |   |   | 45,606   |   |         | -       |         |   | - |   |   | 45,636 |   |
| Inventories                                               |   |                | -       |   |   | 25,034   |   |         | -       |         |   | - |   |   | 25,034 |   |
| Prepaid      expenses                                     |   |                | 644     |   |   | 12,450   |   |         | 3,096   |         |   | - |   |   | 16,190 |   |
| Current      assets from discontinued                     |   |                |    |   |   |     |   |         |    |         |   |   |   |   |   |   |
| operations                                                |   |                | -       |   |   | -        |   |         | 6,492   |         |   | - |   |   | 6,492 |   |
| Total      current assets                                 |   |                | 23,197  |   |   | 84,120   |   |         | 9,795   |         |   | - |   |   | 117,112 |   |
| Property,      plant and equipment, net                   |   |                | -       |   |   | 282,507  |   |         | 31      |         |   | - |   |   | 282,538 |   |
| Discontinued      sulphur assets                          |   |                | -       |   |   | -        |   |         | 362     |         |   | - |   |   | 362 |   |
| Investment      in subsidiaries                           |   |                | 164,661 |   |   | -        |   |         | -       |         |   | (164,661 | ) |   | - |   |
| Amounts      due from affiliates                          |   |                | -       |   |   | 5,105    |   |         | -       |         |   | (5,105 | ) |   | - |   |
| Deferred      financing costs and other                   |   |                |    |   |   |     |   |         |    |         |   |   |   |   |   |   |
| assets                                                    |   |                | 7,993   |   |   | 545      |   |         | 127     |         |   | - |   |   | 8,665 |   |
| Total      assets                                         |   | $                   | 195,851 |   | $      | 372,277  |   | $            | 10,315  |         | $      | (169,766 | ) | $ | 408,677 |   |
|                                                      |   |                |    |   |   |     |   |         |    |         |   |   |   |   |   |   |
| LIABILITIES      AND STOCKHOLDERS’ EQUITY (DEFICIT) |   |                |    |   |   |     |   |         |    |         |
| Currentliabilities:                                       |   |                |    |   |   |     |   |         |    |         |   |   |   |   |   |   |
| Accounts      payable                                     |   |                | 23      |   |   | 85,347   |   |         | 238     |         |   | - |   | $ | 85,608 |   |
| Accrued      liabilities                                  |   |                | 842     |   |   | 28,004   |   |         | 3,894   |         |   | - |   |   | 32,740 |   |
| Current      portion of oil and gas                       |   |                |    |   |   |     |   |         |    |         |   |   |   |   |   |   |
| accrued      reclamation costs                            |   |                | -       |   |   | 2,604    |   |         | -       |         |   | - |   |   | 2,604 |   |
| Other      current liabilities                            |   |                | 4,825   |   |   | 654      |   |         | -       |         |   | - |   |   | 5,479 |   |
| Current      liabilities from discontinued                |   |                |    |   |   |     |   |         |    |         |   |   |   |   |   |   |
| operations                                                |   |                | -       |   |   | -        |   |         | 16,587  |         |   | - |   |   | 16,587 |   |
| Total      current liabilities                            |   |                | 5,690   |   |   | 116,609  |   |         | 20,719  |         |   | - |   |   | 143,018 |   |
| Long-term      debt                                       |   |                | 215,870 |   |   | 28,750   |   |         | -       |         |   | - |   |   | 244,620 |   |
| Amounts      due to affiliates                            |   |                | 1,678   |   |   | -        |   |         | 3,427   |         |   | (5,105 | ) |   | - |   |
| Accrued      oil and gas reclamation costs                |   |                | -       |   |   | 23,272   |   |         | -       |         |   | - |   |   | 23,272 |   |
| Accrued      sulphur reclamation costs                    |   |                | -       |   |   | -        |   |         | 10,185  |         |   | - |   |   | 10,185 |   |
| Other      long-term liabilities                          |   |                | 12,012  |   |   | 2,091    |   |         | 12,879  |         |   | - |   |   | 26,982 |   |
| Total      liabilities                                    |   |                | 235,250 |   |   | 170,722  |   |         | 47,210  |         |   | (5,105 | ) |   | 448,077 |   |
| Commitments      and contingencies                        |   |                |    |   |   |     |   |         |    |         |   |   |   |   |   |   |
| Mandatorily      redeemable preferred stock               |   |                | 29,043  |   |   | -        |   |         | -       |         |   | - |   |   | 29,043 |   |
| Stockholders’      equity (deficit)                 |   |                | (68,442 | )      |   | 201,555  |   |         | (36,895 | )            |   | (164,661 | ) |   | (68,443 | ) |
| Total      liabilities and stockholders’            |   |                |    |   |   |     |   |         |    |         |   |   |   |   |   |   |
| equity      (deficit)                                     |   | $                   | 195,851 |   | $      | 372,277  |   | $            | 10,315  |         | $      | (169,766 | ) | $ | 408,677 |   |
|                                                      |   |                |    |   |   |     |   |         |    |         |   |   |   |   |   |   |

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TABLE OFCONTENTS

|                                             |   |                |    |   |   | Freeport |   |         |   | Consolidated |   |
|--------------------------------------------------|--------|---------------------|---------|--------|--------|----------|--------|--------------|--------|--------------|--------|
|                                             |   | Parent              |    | MOXY   |   | Energy   |   | Eliminations |   | McMoRan      |   |
|                                             |   | (In      Thousands) |    |
| Revenues:                                        |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Oil      and gas                                 |   | $                   | -       |   | $      | 475,250  |   | $            | -      |         | $      | - |   | $ | 475,250 |   |
| Service                                          |   |                | -       |   |   | 6,421    |   |         | -      |         |   | (504 | ) |   | 5,917 |   |
| Total      revenues                              |   |                | -       |   |   | 481,671  |   |         | -      |         |   | (504 | ) |   | 481,167 |   |
| Costs      and expenses:                         |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Production      and delivery costs               |   |                | -       |   |   | 122,679  |   |         | (48    | )            |   | (504 | ) |   | 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   |   |   | 462,982  |   |         | 9,916  |         |   | (504 | ) |   | 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              |   |                | (6,464  | )      |   | -        |   |         | -      |         |   | 6,464 |   |   | - |   |
|    consolidated      subsidiaries |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| 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     |   |   | 12,033   |   |         | 501    |         |   | (291 | ) |   | 13,021 |   |
| Total      revenues                           |   |                | 778     |   |   | 197,885  |   |         | 11,366 |         |   | (291 | ) |   | 209,738 |   |
| Costs      and expenses:                      |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Production      and delivery costs            |   |                | -       |   |   | 48,483   |   |         | 4,942  |         |   | (291 | ) |   | 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   |   |   | 221,703  |   |         | 15,702 |         |   | (291 | ) |   | 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 | ) |
|                                          |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |

----

TABLE OF CONTENTS

|                                          |   |                |    |   |   | Freeport |   |         |   | Consolidated |   |
|-----------------------------------------------|--------|---------------------|---------|--------|--------|----------|--------|--------------|--------|--------------|--------|
|                                          |   | Parent              |    | MOXY   |   | Energy   |   | Eliminations |   | McMoRan      |   |
|                                          |   | (In      Thousands) |    |
| Revenues:                                     |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Oil      and gas                              |   | $                   | -       |   | $      | 95,646   |   | $            | 22,530 |         | $      | - |   | $ | 118,176 |   |
| Service                                       |   |                | 1,796   |   |   | 8,416    |   |         | 2,153  |         |   | (414 | ) |   | 11,951 |   |
| Total      revenues                           |   |                | 1,796   |   |   | 104,062  |   |         | 24,683 |         |   | (414 | ) |   | 130,127 |   |
| Costs      and expenses:                      |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Production      and delivery costs            |   |                | -       |   |   | 10,843   |   |         | 19,140 |         |   | (414 | ) |   | 29,569 |   |
| Depreciation      and amortization            |   |                | -       |   |   | 23,206   |   |         | 2,690  |         |   | - |   |   | 25,896 |   |
| Exploration      expenses                     |   |                | -       |   |   | 63,805   |   |         | -      |         |   | - |   |   | 63,805 |   |
| General      and administrative expenses      |   |                | 9,799   |   |   | 9,017    |   |         | 735    |         |   | - |   |   | 19,551 |   |
| Start-up      costs for Main Pass             |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| Energy      HubTM                             |   |                | -       |   |   | -        |   |         | 9,749  |         |   | - |   |   | 9,749 |   |
| Insurance      recovery and other             |   |                | 12,830  |   |   | -        |   |         | (8,900 | )            |   | - |   |   | 3,930 |   |
| Total      costs and expenses                 |   |                | 22,629  |   |   | 106,871  |   |         | 23,414 |         |   | (414 | ) |   | 152,500 |   |
| Operating      income (loss)                  |   |                | (20,833 | )      |   | (2,809   | )      |         | 1,269  |         |   | - |   |   | (22,373 | ) |
| Interest      expense                         |   |                | (15,273 | )      |   | (9       | )      |         | -      |         |   | - |   |   | (15,282 | ) |
| Equity      in earnings (losses) of           |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| consolidated      subsidiaries                |   |                | (7,511  | )      |   | -        |   |         | -      |         |   | 7,511 |   |   | - |   |
| Other      income (expense), net              |   |                | 3,905   |   |   | 2,012    |   |         | 268    |         |   | - |   |   | 6,185 |   |
| Income      (loss) from continuing operations |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| before      income taxes                      |   |                | (39,712 | )      |   | (806     | )      |         | 1,537  |         |   | 7,511 |   |   | (31,470 | ) |
| Provision      for income taxes               |   |                | -       |   |   | -        |   |         | -      |         |   | - |   |   | - |   |
| Income      (loss) from continuing operations |   |                | (39,712 | )      |   | (806     | )      |         | 1,537  |         |   | 7,511 |   |   | (31,470 | ) |
| Loss      from discontinued operations        |   |                | -       |   |   | -        |   |         | (8,242 | )            |   | - |   |   | (8,242 | ) |
| Net      income (loss)                        |   |                | (39,712 | )      |   | (806     | )      |         | (6,705 | )            |   | 7,511 |   |   | (39,712 | ) |
| Preferred      dividends and amortization     |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| of      convertible preferred stock           |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| issuance      costs                           |   |                | (1,620  | )      |   | -        |   |         | -      |         |   | - |   |   | (1,620 | ) |
| Net      income (loss) applicable to          |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |
| common      stock                             |   | $                   | (41,332 | )      | $      | (806     | )      | $            | (6,705 | )            | $      | 7,511 |   | $ | (41,332 | ) |
|                                          |   |                |    |   |   |     |   |         |   |         |   |   |   |   |   |   |

----

TABLE OFCONTENTS

|                                         |   |                |     |   |   | 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    |   | $            | (6,040  | ) | $ | 219,062 |   |
| Net      cash provided by (used in)          |   |                |     |   |   |       |   |         |    |   |   |   |   |
| discontinued      operations                 |   |                | -        |   |   | 302        |   |         | (11,726 | ) |   | (11,424 | ) |
| 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 |   |
|                                         |   |                |     |   |   |       |   |         |    |   |   |   |   |

----

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  |   |         | (6,311  | ) |   | 99,543 |   |
| Net      cash provided by (used in)          |   |                |    |   |   |     |   |         |    |   |   |   |   |
| discontinued      operations                 |   |                | -       |   |   | 77       |   |         | (4,429  | ) |   | (4,352 | ) |
| 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 |   |
|                                         |   |                |    |   |   |     |   |         |    |   |   |   |   |

----

TABLE OFCONTENTS

|                                         |   |                |    |   |   | Freeport |   | Consolidated |   |
|----------------------------------------------|--------|---------------------|---------|--------|--------|----------|--------|--------------|--------|
|                                         |   | Parent              |    | MOXY   |   | Energy   |   | McMoRan      |   |
|                                         |   | (In      Thousands) |    |
| Cash      flow from operating activities:    |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Net      cash provided by (used in)          |   |                |    |   |   |     |   |         |   |   |   |   |   |
| continuing      operations                   |   | $                   | (18,518 | )      | $      | 87,611   |   | $            | 9,151  |   | $ | 78,244 |   |
| Net      cash used in discontinued           |   |                |    |   |   |     |   |         |   |   |   |   |   |
| operations                                   |   |                | -       |   |   | -        |   |         | (4,706 | ) |   | (4,706 | ) |
| Net      cash provided by (used in)          |   |                |    |   |   |     |   |         |   |   |   |   |   |
| operating      activities                    |   | $                   | (18,518 | )      | $      | 87,611   |   | $            | 4,445  |   | $ | 73,538 |   |
|                                         |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Cash      flow from investing activities:    |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Exploration,      development and other      |   |                |    |   |   |     |   |         |   |   |   |   |   |
| capital      expenditures                    |   |                | -       |   |   | (153,746 | )      |         | (7,516 | ) |   | (161,262 | ) |
| Property      insurance reimbursement        |   |                | -       |   |   | -        |   |         | 3,500  |   |   | 3,500 |   |
| Proceeds      from restricted investments    |   |                | 15,150  |   |   | -        |   |         | -      |   |   | 15,150 |   |
| Increase      in restricted investments      |   |                | (502    | )      |   | -        |   |         | -      |   |   | (502 | ) |
| Net      cash used in investing activities   |   |                | 14,648  |   |   | (153,746 | )      |         | (4,016 | ) |   | (143,114 | ) |
| Net      cash used in discontinued           |   |                |    |   |   |     |   |         |   |   |   |   |   |
|  operations                             |   |                | -       |   |   | -        |   |         | (66    | ) |   | (66 | ) |
| Net      cash provided by (used in)          |   |                |    |   |   |     |   |         |   |   |   |   |   |
| investing      activities                    |   |                | 14,648  |   |   | (153,746 | )      |         | (4,082 | ) |   | (143,180 | ) |
|                                         |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Cash      flow from financing activities:    |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Dividends      paid on convertible preferred |   |                |    |   |   |     |   |         |   |   |   |   |   |
| stock                                        |   |                | (1,129  | )      |   | -        |   |         | -      |   |   | (1,129 | ) |
| Proceeds      from exercise of stock         |   |                |    |   |   |     |   |         |   |   |   |   |   |
| options,      warrants and other             |   |                | 2,363   |   |   | -        |   |         | -      |   |   | 2,363 |   |
| Investment      from parent                  |   |                | (70,380 | )      |   | 55,000   |   |         | 15,380 |   |   | - |   |
| Net      cash provided by (used in)          |   |                |    |   |   |     |   |         |   |   |   |   |   |
|  financing      activities              |   |                | (69,146 | )      |   | 55,000   |   |         | 15,380 |   |   | 1,234 |   |
|                                         |   |                |    |   |   |     |   |         |   |   |   |   |   |
| Net      increase (decrease) in cash and     |   |                |    |   |   |     |   |         |   |   |   |   |   |
| cash      equivalents                        |   |                | (73,016 | )      |   | (11,135  | )      |         | 15,743 |   |   | (68,408 | ) |
| Cash      and cash equivalents at beginning  |   |                |    |   |   |     |   |         |   |   |   |   |   |
| of      year                                 |   |                | 116,361 |   |   | 82,050   |   |         | 898    |   |   | 199,309 |   |
| Cash      and cash equivalents at end        |   |                |    |   |   |     |   |         |   |   |   |   |   |
| of      year                                 |   | $                   | 43,345  |   | $      | 70,915   |   | $            | 16,641 |   | $ | 130,901 |   |
|                                         |   |                |    |   |   |     |   |         |   |   |   |   |   |

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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) |    |
| 2007               |   |                                          |    |         |   |          |   |                  |    |   |   |   |   |   |   |   |
| 1st      Quarter   |   | $                                             | 51,697  |         | $      | (11,923       | )b     | $                     | (14,903 | )c | $ | (0.53 | ) | $ | (0.53 | ) |
| 2nd      Quarter   |   |                                          | 45,348  |         |   | 685           | d      |                  | (6,486  | ) |   | (0.23 | ) |   | (0.23 | ) |
| 3rd      Quarter e |   |                                          | 133,252 |         |   | (25,663       | )f     |                  | (52,184 | )g |   | (1.50 | ) |   | (1.50 | ) |
| 4th      Quarter e |   |                                          | 250,870 | h            |   | 40,410        | i      |                  | 9,667   | j |   | 0.21 |   |   | 0.20 |   |
|               |   | $                                             | 481,167 |         | $      | 3,509         |   | $                     | (63,906 | ) |   |   |   |   |   |   |

|             |   |                                          |    | Operating    |   | Net           |   | Net      Income       |    |
|------------------|--------|-----------------------------------------------|---------|--------------|--------|---------------|--------|-----------------------|---------|
|             |   |                                          |    | Income       |   | Income        |   | (Loss)      per Share |    |
|             |   | Revenues                                      |    |  (Loss) |   | (Loss)      a |   | Basic                 |    | Diluted |   |
|             |   | (In      Thousands, Except Per Share Amounts) |    |
| 2006             |   |                                          |    |         |   |          |   |                  |    |   |   |   |   |   |   |   |
| 1st      Quarter |   | $                                             | 39,745  |         | $      | (6,378        | )k     | $                     | (13,485 | )l | $ | (0.50 | ) | $ | (0.50 | ) |
| 2nd      Quarter |   |                                          | 53,330  |         |   | 17,828        |   |                  | 14,090  |   |   | 0.50 |   |   | 0.32 |   |
| 3rd      Quarter |   |                                          | 60,415  |         |   | (13,719       | )m     |                  | (18,992 | ) |   | (0.67 | ) |   | (0.67 | ) |
| 4th      Quarter |   |                                          | 56,248  |         |   | (30,298       | )n     |                  | (30,882 | )o |   | (1.09 | ) |   | (1.09 | ) |
|             |   | $                                             | 209,738 |         | $      | (32,567       | )      | $                     | (49,269 | ) |   |   |   |   |   |   |
|             |   |                                          |    |         |   |          |   |                  |    |   |   |   |   |   |   |   |

| 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.   | Includes      a $3.2 million charge to increase the accrual for estimated reclamation      costs on two fields and $1.3 million of nonproductive exploratory well      drilling and related costs. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| d.   | Includes      nonproductive exploratory well drilling and related costs of $2.2      million. |
|----------------|-----------------------------------------------------------------------------------------------|

| e.   | Amounts      associated with the properties acquired from Newfield were recorded      prospectively from the August 6, 2007 closing date to December 31,      2007. |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f.   | Includes      a $13.6 million impairment charge to write off McMoRan’s interest in the      Cane Ridge well at Louisiana State Lease 18055, nonproductive exploratory      well drilling and related costs of $20.3 million primarily reflecting the      results for the Cas well at South Timbalier Block 70, $12.5 million of      seismic data purchases for exploration acreage acquired from Newfield and      a gain of $10.7 million for non cash mark-to-market adjustments associated      with McMoRan’s oil and gas derivative contracts (Note  7). |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g.   | Includes      $3.0 million prepayment premium paid to terminate the $100 million senior      secured term loan on August 7,2007. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------|

| h.   | Includes      $195.4 million associated with the properties acquired from      Newfield. |
|----------------|------------------------------------------------------------------------------------------|

| i.   | Includes      the first full quarter of costs associated the properties acquired from      Newfield totaling $24.2 million of production and delivery costs and      $111.9 million of depreciation, depletion and      amortization.  Also includes a loss of $15.9 million for non      cash mark-to-mark adjustments associated with McMoRan’s oil and gas      derivative contracts. |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| j.   | 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 6) and a $4.6 million reduction in      contractual liability covering certain retired former sulphur employees      (Note 13). |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| k.   | Includes      nonproductive exploratory well drilling and related costs of $12.3      million. |
|----------------|------------------------------------------------------------------------------------------------|

| l.   | Includes      $4.3 million charge related to McMoRan’s debt conversion transactions      (Note 6). |
|----------------|----------------------------------------------------------------------------------------------------------|

| m.   | Includes      $18.5 million of nonproductive exploratory well drilling and related      costs. |
|----------------|------------------------------------------------------------------------------------------------|

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| n.   | Includes      $33.9 million of impairment charges, $12.7 million of nonproductive      exploratory well drilling and related costs and an $11.0 million of net      exploration expense reimbursements associated with exploration agreements      (Note 3). |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o.   | Includes      $3.2 million reduction in contractual liability covering certain retired      former sulphur employees (Note 13). |
|----------------|---------------------------------------------------------------------------------------------------------------------------------|

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

Item9A.  Controls and Procedures

Item9B.  Other Information

PART III

Item10.  Directors, Executive Officers and CorporateGovernance

Item11.  Executive Compensation

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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

Item 15.  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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| *                                       | 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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|                              |                                                                                                                                                                                                                                                                                                                                                     | 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      |
| 4.1                               | Form      of Certificate of McMoRan Common Stock                                                                                                                                                                                                                                                                                                         |           | S-4                            | 333-61171     | 10/06/1998      |
| 4.2                               | Rights      Agreement dated as of November 13, 1998                                                                                                                                                                                                                                                                                                      |           | 10-K                           | 001-07791     | 03/25/1999      |
| 4.3                               | Amendment      to Rights Agreement dated December 28, 1998                                                                                                                                                                                                                                                                                               |           | 10-K                           | 001-07791     | 03/25/1999      |
| 4.4                               | 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      |
| 4.5                               | Warrant      to Purchase Shares of Common Stock of McMoRan dated September 30,      2003                                                                                                                                                                                                                                                                 |           | 10-K                           | 001-07791     | 03/15/2004      |
| 4.6                               | Registration      Rights Agreement dated December 16, 2002 between McMoRan and K1 USA Energy      Production Corporation                                                                                                                                                                                                                                 |           | 10-K                           | 001-07791     | 03/27/2003      |
| 4.7                               | Indenture      dated as of July 2, 2003 by and between McMoRan and The Bank of New York,      as trustee                                                                                                                                                                                                                                                 |           | 10-Q                           | 001-07791     | 08/14/2003      |
| 4.8                               | Collateral      Pledge and Security Agreement dated as of July 2, 2003 by and among      McMoRan, as pledgor, The Bank of New York, as trustee, and the Bank of New      York, as collateral agent                                                                                                                                                       |           | 10-Q                           | 001-07791     | 08/14/2003      |
| 4.9                               | 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      |
| 4.10                              | Indenture      dated October 6, 2004 by and among McMoRan and the Bank of New York, as      trustee                                                                                                                                                                                                                                                      |           | 8-K                            | 001-07791     | 10/07/2004      |
| 4.11                              | 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      |
| 4.12                              | 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      |

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| 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 |
| 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  | Credit      Agreement dated as of August 12 2007, among McMoRan Exploration Col, as      borrower, JPMorgan Chase Bank, N.A., as administrative agent, and the      lenders party thereto                                                                                                                                                                                                |   | 10-Q | 001-07791 | 11/01/2007 |
| 10.15* | McMoRan      Adjusted Stock Award Plan, as amended and      restated                                                                                                                                                                                                                                                                                                                     |   | 10-Q | 001-07791 | 05/10/2007 |

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| 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 |
| 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 effective February 1,      1999                                                                                                                                                       |   | 10-K   | 001-07791 | 03/25/1999 |
| 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                                                                                                                                                                                                    |   | 8-K    | 001-07791 | 05/05/2006 |
| 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, 2008                                                                                                                                   | X      |   |      |       |
| 10.33* | McMoRan      Director Compensation                                                                                                                                                                                                                         |   | 10-K   | 001-07791 | 03/15/2005 |
| 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 |  8/09/2007 |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------|-----------------|-----------------|
| 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 officer 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      |       |            |            |

| * | Indicates      management contract or compensatory plan or  arrangement. |
|---|--------------------------------------------------------------------------|

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