**UNITED
      STATES****SECURITIES
      AND EXCHANGE COMMISSION****Washington,
      D.C. 20549****FORM
      10-Q****(Mark
      One)****[X]**
    **QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE****SECURITIES
      EXCHANGE ACT OF 1934****For
      the quarterly period ended March 31, 2005****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 its
charter)
 
 **Delaware**
    **72-1424200**(State
      or other jurisdiction of
      incorporation
      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)
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
__
 
 Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Securities Exchange Act of 1934). Yes X No
__
 
 On March
31, 2005, there were issued and outstanding 24,453,084 shares of the
registrant’s Common Stock, par value $0.01 per share.
 
 
   
 **McMoRan
      Exploration Co.****TABLE
      OF CONTENTS**PagePart
      I. Financial InformationFinancial
      Statements:Condensed
      Consolidated Balance Sheets (Unaudited)
    3Consolidated
      Statements of Operations (Unaudited)
    4Consolidated
      Statements of Cash Flow (Unaudited)
    5Notes
      to ConsolidatedFinancial Statements
    6Remarks
    10Report
      of Independent Registered Public Accounting Firm
    11Management's
      Discussion and Analysis
      of
      Financial Condition and Results of Operations
    12Quantitative
      and Qualitative Disclosures about Market Risks
    20Controls
      and Procedures
    21Part
      II. Other Information
    21Signature
    22Exhibit
      Index
    E-1
 
 
  
 **McMoRan
Exploration Co.**
 **Part
I. FINANCIAL INFORMATION**
 
 **Item
1.**  **Consolidated
Financial Statements.**
 
 **McMoRan
EXPLORATION CO.**
 **CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited** )
 
 March
      31,
    
    December
      31,2005
    
    2004(In
      Thousands)ASSETSCash
      and cash equivalents:Continuing
      operations, includes restricted cash of $3.2 million atMarch
      31, 2005 and $3.7 million at December 31, 2004
    
    $
    194,901
    
    $
    203,035Discontinued
      operations, all restricted
    
    
    984
    
    
    980Restricted
      investments
    
    
    15,150
    
    
    15,150Accounts
      receivable
    
    
    22,790
    
    
    27,403Prepaid
      expenses and product inventories
    
    
    2,083
    
    
    1,976Current
      assets from discontinued operations, excluding cash
    
    
    2,855
    
    
    2,563Total
      current assets
    
    
    238,763
    
    
    251,107Property,
      plant and equipment, net
    
    
    134,805
    
    
    97,262Discontinued
      sulphur business assets
    
    
    312
    
    
    312Restricted
      investments and cash
    
    
    21,033
    
    
    24,779Other
      assets
    
    
    9,986
    
    
    10,460Total
      assets
    
    $
    404,899
    
    $
    383,920LIABILITIES
      AND STOCKHOLDERS’ DEFICITAccounts
      payable
    
    $
    50,867
    
    $
    33,997Accrued
      liabilities
    
    
    31,456
    
    
    28,197Accrued
      interest
    
    
    5,523
    
    
    5,635Current
      portion of accrued oil and gas reclamation costs
    
    
    238
    
    
    238Current
      portion of accrued sulphur reclamation cost
    
    
    2,550
    
    
    2,550Current
      liabilities from discontinued operations
    
    
    4,658
    
    
    4,601Total
      current liabilities
    
    
    95,292
    
    
    75,2186%
      convertible senior notes
    
    
    130,000
    
    
    130,00051⁄4%
      convertible senior notes
    
    
    140,000
    
    
    140,000Accrued
      oil and gas reclamation costs
    
    
    20,172
    
    
    14,191Accrued
      sulphur reclamation costs
    
    
    12,326
    
    
    12,086Contractual
      postretirement obligation
    
    
    15,526
    
    
    15,695Other
      long-term liabilities
    
    
    15,717
    
    
    16,7115%
      mandatorily redeemable convertible preferred stock
    
    
    29,588
    
    
    29,565Stockholders'
      deficit
    
    
    (53,722
    )
    
    (49,546
    )Total
      liabilities and stockholders' deficit
    
    $
    404,899
    
    $
    383,920
  The
accompanying notes are an integral part of these consolidated financial
statements.
  3
 **McMoRan
EXPLORATION CO.**
 **CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited** )
 
 Three
      Months Ended March 31,2005
    
    2004(In
      Thousands, Except Per Share Amounts)Revenues:Oil
      & Gas
    
    $
    11,380
    
    $
    3,591Service
    
    
    3,287
    
    
    519Total
      revenues
    
    
    14,667
    
    
    4,110Costs
      and expenses:Production
      and delivery costs
    
    
    3,700
    
    
    1,538Depletion,
      depreciation and amortization
    
    
    3,916
    
    
    1,376Exploration
      expenses
    
    
    7,536
    
    
    3,326General
      and administrative expenses
    
    
    4,390
    
    
    2,665Insurance
      recovery
    
    
    (5,043
    )
    
    -Start-up
      costs for Main Pass Energy HubTM
    
    
    2,284
    
    
    4,283Total
      costs and expenses
    
    
    16,783
    
    
    13,188Operating
      loss
    
    
    (2,116
    )
    
    (9,078
    )Interest
      expense
    
    
    (3,787
    )
    
    (2,232
    )Other
      income, net
    
    
    1,599
    
    
    183Loss
      from continuing operations
    
    
    (4,304
    )
    
    (11,127
    )Loss
      from discontinued operations
    
    
    (1,029
    )
    
    (1,717
    )Net
      loss
    
    
    (5,333
    )
    
    (12,844
    )Preferred
      dividends and amortization of convertible preferred stockissuance
      costs
    
    
    (411
    )
    
    (412
    )Net
      loss applicable to common stock
    
    $
    (5,744
    )
    $
    (13,256
    )Basic
      and diluted net loss per share of common stock:Continuing
      operations
    
    
    $ (0.20
    )
    
    $ (0.68
    )Discontinued
      operations
    
    
    (0.04
    )
    
    (0.10
    )Net
      loss per share of common stock
    
    
    $  (0.24
    )
    
    $  (0.78
    )Basic
      and diluted average shares outstanding
    
    
    24,385
    
    
    17,035
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  4
 **McMoRan
EXPLORATION CO.**
 **CONSOLIDATED
STATEMENTS OF CASH FLOW (Unaudited** )
 Three
      Months EndedMarch
      31,2005
    
    2004(In
      Thousands)**Cash
      flow from operating activities:**Net
      loss
    $
    (5,333
    )
    $
    (12,844
    )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Loss
      from discontinued operations
    
    1,029
    
    
    1,717Depreciation
      and amortization
    
    3,916
    
    
    1,376Exploration
      drilling and related expenditures
    
    2,938
    
    
    733Compensation
      expense associated with stock-based awards
    
    263
    
    
    240Reclamation
      and mine shutdown expenditures
    
    (4
    )
    
    (45
    )Amortization
      of deferred financing costs
    
    557
    
    
    352Other
    
    (202
    )
    
    (34
    )(Increase)
      decrease in working capital:Accounts
      receivable
    
    6,751
    
    
    (5
    )Accounts
      payable and accrued liabilities
    
    18,525
    
    
    6,124Prepaid
      expenses and product inventories
    
    (46
    )
    
    317Net
      cash provided by (used in) continuing operations
    
    28,394
    
    
    (2,069
    )Net
      cash used in discontinued operations
    
    (1,021
    )
    
    (1,865
    )Net
      cash provided by (used in) operating activities
    
    27,373
    
    
    (3,934
    )**Cash
      flow from investing activities:**Exploration,
      development and other capital expenditures
    
    (40,223
    )
    
    (4,632
    )Proceeds
      from restricted investments
    
    3,900
    
    
    3,900Increase
      in restricted investments
    
    (154
    )
    
    (56
    )Net
      cash used in continuing operations
    
    (36,477
    )
    
    (788
    )Net
      cash used in discontinued operations
    
    -
    
    
    (6,285
    )Net
      cash used in investing activities
    
    (36,477
    )
    
    (7,073
    )**Cash
      flow from financing activities:**Dividends
      paid on convertible preferred stock
    
    (383
    )
    
    (383
    )Proceeds
      from exercise of stock options and other
    
    1,357
    
    
    282Net
      cash provided by (used in) continuing operations
    
    974
    
    
    (101
    )Net
      cash from discontinued operations
    
    -
    
    
    -Net
      cash provided by (used in) financing activities
    
    974
    
    
    (101
    )Net
      decrease in cash and cash equivalents
    
    (8,130
    )
    
    (11,108
    )Cash
      and cash equivalents at beginning of year
    
    204,015
    
    
    101,899Cash
      and cash equivalents at end of period
    
    195,885
    
    
    90,791Less
      restricted cash from continuing operations
    
    (3,180
    )
    
    -Less
      restricted cash from discontinued operations
    
    (984
    )
    
    (966
    )Unrestricted
      cash and cash equivalents at end of period
    $
    191,721
    
    $
    89,825
 The
accompanying notes are an integral part of these consolidated financial
statements.
  5
 **McMoRan
EXPLORATION CO.**
 **NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS**
 
 **1.**
    **BASIS
      OF PRESENTATION**
 The
financial statements of McMoRan Exploration Co. (McMoRan), a Delaware
Corporation, are prepared in accordance with U.S. generally accepted accounting
principles. The consolidated financial statements of McMoRan include the
accounts of those subsidiaries where McMoRan directly or indirectly has more
than 50 percent of the voting rights and for which the right to participate in
significant management decisions is not shared with other shareholders. McMoRan
consolidates its wholly owned McMoRan Oil & Gas LLC (MOXY) and
Freeport-McMoRan Energy LLC (Freeport Energy) subsidiaries. On December 27,
2004, Freeport Energy acquired the remaining ownership interest in K-Mc Venture
I LLC (K-Mc I) and began consolidating its wholly owned K-Mc I subsidiary.
McMoRan accounted for K-Mc I using the equity method for the periods between
December 16, 2002 and December 27, 2004. As a result of McMoRan’s exit from the
sulphur business, its sulphur results have been presented as discontinued
operations and the major classes of assets and liabilities related to the
sulphur business have been separately shown for the periods
presented.
 
 Certain
reclassifications of prior year amounts have been made to conform with the
current year presentation. McMoRan has classified as service revenue certain
management and other fees that were previously recorded as a reduction of its
production and delivery costs and/or general and administrative
expenses.
 
 **2.
EARNINGS PER SHARE**
 Basic and
diluted net loss per share of common stock were calculated by dividing the net
loss applicable to continuing operations, net loss from discontinued operations
and net loss applicable to common stock by the weighted-average number of common
shares outstanding during the periods presented. For purposes of the earnings
per share computations, the net loss applicable to continuing operations
includes preferred stock dividends and related amortization of the issuance
costs.
 
 McMoRan
had a net loss from continuing operations in both the first quarter of 2005 and
2004. Accordingly, the assumed exercise of stock options and stock warrants
whose exercise prices are less than the average market price of McMoRan’s common
stock during these periods, as well as the assumed conversion of McMoRan’s 5%
convertible preferred stock, 6% convertible senior notes and 51⁄4% convertible
senior notes, were excluded from the diluted net loss per share calculations.
These instruments were excluded because they are considered to be anti-dilutive,
meaning their inclusion would have decreased the reported net loss per share
from continuing operations for both periods presented. The excluded share
amounts are summarized below:
 
 First
      Quarter2005
    
    
    2004(in
      thousands)In-the-money
      stock optionsa,
      b
    
    
    3,190
    
    
    
    2,950Stock
      warrantsa,c
    
    
    1,818
    
    
    
    1,6995%
      convertible preferred stockd
    
    
    6,362
    
    
    
    6,3656%
      convertible senior notes e
    
    
    9,123
    
    
    
    9,12351⁄4%
      convertible senior notesf
    
    
    8,446
    
    
    
    N/A
 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 earning 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). The
      warrants are exercisable for McMoRan common stock at any time over their
      respective five-year terms at an exercise price of $5.25 per share. See
      Note 4 of McMoRan’s 2004 Form 10-K for additional information regarding
      the warrants.
 ****6
 d.
    At
      the election of the holder, and before the shares mature on June 30, 2012,
      each outstanding share of 5% mandatorily redeemable convertible preferred
      stock is convertible into 5.1975 shares of McMoRan common stock. For
      additional information regarding McMoRan’s convertible preferred stock see
      Note 5 of McMoRan’s 2004 Form 10-K.
 e.
    The
      notes, issued in July 2003, are convertible at the option of the holder at
      any time prior to their maturity on July 2, 2008 into shares of McMoRan
      common stock at a conversion price of $14.25 per share. Additional
      information regarding McMoRan’s 6% convertible senior notes is disclosed
      in Note 5 of its 2004 Form 10-K. Accrued interest on the convertible
      senior notes totaled $2.0 million during the first quarters of 2005 and
      2004.
 f.
    The
      notes, issued in October 2004, are convertible at the option of the holder
      at any time prior to their maturity on October 6, 2011 into shares of
      McMoRan common stock at a conversion price of $16.575 per share.
      Additional information regarding McMoRan’s 51⁄4% convertible senior notes is
      disclosed in Note 5 of its 2004 Form 10-K. Accrued interest on the 51⁄4%
      convertible senior notes totaled $1.8 million in the first quarter of
      2005.
 
 Outstanding
stock options excluded from the computation of diluted net loss per share of
common stock because their exercise prices were greater than the average market
price of the common stock during the periods presented are as
follows:
 
 First
      Quarter2005
    
    
    2004Outstanding
      options (in thousands)
    
    
    438
    
    
    
    1,932Average
      exercise price
    
    $
    21.76
    
    
    $
    18.51
 
 *Stock-Based
Compensation Plans.* McMoRan
accounts for its approved stock incentive or stock option plans, which are more
fully described in Note 8 of McMoRan’s 2004 Form 10-K, under the recognition and
measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to
Employees,” and related interpretations, which require compensation cost for
stock-based employee compensation plans to be recognized based on the difference
on the date of grant, if any, between the quoted market price of the stock and
the amount an employee must pay to acquire the stock. **** The
following table illustrates the effect on net loss and earnings per share if
McMoRan had applied the fair value recognition provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based
Compensation,” which requires compensation cost for all
stock-based compensation
plans to be recognized based on the use of a fair value method (in thousands,
except per share amounts):
 
 Three
      Months Ended
      March
      31,2005
    
    2004Basic
      and diluted net loss applicable to common stock, as
    reported
    
    $
    (5,744
    )
    $
    (13,256
    )Add:
      Stock-based employee compensation expense included in reported net loss
      for restricted stock units
    
    
    208
    
    
    203Deduct:
      Total stock-based employee compensation expense determined under fair
      value-based method for all awards
    
    
    (3,881
    )
    
    (4,631
    )Pro
      forma net loss applicable to common stock
    
    
    (9,417
    )
    
    (17,684
    )Earnings
      per share:Basic
      and diluted - as reported
    
    $
    (0.24
    )
    $
    (0.78
    )Basic
      and diluted - pro forma
    
    $
    (0.39
    )
    $
    (1.04
    )
 
 See Note
4 for information on a new accounting standard for share-based
payments.
 
 For the
pro forma computations, the values of option grants were calculated on the date
of the grants using the Black-Scholes option-pricing model. The pro forma
effects on net loss are not representative of future years because of the
potential changes in the factors used in calculating the Black-Scholes valuation
and the number and timing of option grants and the requirement to adopt a new
accounting standard by January 1, 2006
  7
 that will
require all stock options
to be charged to expense (Note 4). No other discounts or restrictions related to
vesting or the likelihood of vesting of stock options were applied. The table
below summarizes the weighted average assumptions used to value the options
under SFAS 123.
 
 First
      Quarter2005
    
    
    2004Fair
      value of stock options
    
    $
    10.65
    
    
    $
    11.02Risk
      free interest rate
    
    
    4.0
    %
    
    
    3.9
    %Expected
      volatility rate
    
    
    61
    %
    
    
    64
    %Expected
      life of options (in years)
    
    
    7
    
    
    
    7Assumed
      annual dividend
    
    
    -
    
    
    
    -
 
 **3.
OTHER MATTERS**
 Multi-Year
Exploration Venture
 During
2004, McMoRan established a multi-year exploration venture with a private
partner with a joint commitment to spend an initial $500 million to acquire and
exploit high-potential prospects, primarily in Deep Miocene formations on the
shelf of the Gulf of Mexico and in the Gulf Coast area. McMoRan and its
exploration partner will share equally in all future revenues and costs
associated with the exploration venture’s activities, except for the Dawson Deep
prospect at Garden Banks Block 625, where the exploration partner is
participating in 40 percent of McMoRan’s interests. Expenditures, including
related overhead costs, associated with the future operations of the exploration
venture will be shared equally between McMoRan and its exploration partner.
McMoRan estimates its management fee associated with the reimbursement of the
exploration venture’s overhead costs will approximate $7 million in 2005.
McMoRan recorded $1.8 million of this management fee as service revenue during
the first quarter of 2005. There was no exploration management fee during the
first quarter of 2004.
 
 Main
Pass Block 299
 McMoRan
acquired the remaining ownership interest in K-Mc I it did not previously own on
December 27, 2004 (Note 1). K-Mc I owns the oil facilities and related proved
oil reserves at Main Pass Block 299 (Main Pass). The storm center of Hurricane
Ivan passed within 20 miles east of Main Pass in September 2004. The K-Mc I Main
Pass structures did not incur significant damage from the storm but oil
production has been shut-in since this time because of extensive damage to a
third-party offshore terminal and connecting pipelines that provided throughput
service for the sale of Main Pass sour crude oil. McMoRan expects insurance
proceeds under its business interruption and property insurance policies to
partially mitigate the financial impact of the storm. As of March 31, 2005,
McMoRan had received a total of $3.6 million of insurance proceeds related to
its Main Pass business interruption claims, including $3.1 million that was
treated as a reduction to its acquisition cost of K-Mc I. At March 31, 2005,
McMoRan’s receivable for its business interruption claim totaled $4.5 million.
McMoRan received $2.3 million of these additional insurance proceeds in April
2005 and expects that it will
receive the remaining insurance proceeds during 2005. At March 31, 2005,
McMoRan’s property, plant and equipment included $3.4 million of costs
associated with its efforts to modify one Main Pass structure formerly used in
its discontinued sulphur mining business to accommodate transportation of oil
production from Main Pass by barge. McMoRan is currently seeking reimbursement
of these and subsequent modification costs under its insurance policy. McMoRan
expects production to resume at Main Pass during the second quarter of 2005.
 
 The Main
Pass oil lease was subject to a 25 percent overriding royalty retained by the
original third-party owner of the Main Pass oil lease after 36 million barrels
of oil were produced, but capped at a 50 percent net profits interest. In
February 2005, the original owner agreed to eliminate this royalty interest and
McMoRan agreed to assume the owner’s reclamation obligation associated with one
platform and its related facilities. McMoRan recorded $3.9 million to both
property, plant and equipment and accrued oil reclamation obligations related to
the assumption of this liability. The amount of the ultimate estimated liability
is $8.1 million on an undiscounted basis, adjusting for future inflation and
applying a 10 percent market risk premium. As a result of this transaction, the
original owner will be entitled to a 6.25 percent overriding royalty in new
wells, if any, drilled on the lease.
  8
 Stock-Based
Awards
 On
January 31, 2005, McMoRan’s Board of Directors granted 452,500 stock options,
including immediately exercisable options for 255,000 shares to its Co-Chairmen,
representing substantially all shares available for grants under McMoRan’s
existing stock-based compensation plans. Options for 813,500 additional shares,
including immediately exercisable options for 245,000 shares to McMoRan’s
Co-Chairmen, were also granted on this date but their issuance is contingent on
shareholder approval of a new stock incentive plan in May 2005. The immediately
exercisable options were granted to McMoRan’s Co-Chairmen in lieu of cash
compensation for 2005. All other stock options granted on January 31, 2005
become exercisable over a four-year period. Under current accounting standards,
with respect to the options for the 813,500 additional shares granted subject to
shareholder approval, the per share difference between the market price on
January 31, 2005 ($16.65 per share) and the market price on date of the plan’s
approval will be charged to earnings as the
options vest . The
closing price market price for McMoRan’s common stock on May 2, 2005 was $17.97
per share.
 
 Interest
Cost
 Interest
expense excludes capitalized interest of $0.6 million in the first quarter of
2005 and $0.1 million in the first quarter of 2004.
 
 Pension
Plan
 During
2000, McMoRan elected to terminate its defined benefit plan. The plan’s
termination is still pending approval from the Internal Revenue Service and the
Pension Benefit Guaranty Corporation. See Note 8 of McMoRan’s Annual Report on
Form 10-K for additional information regarding its defined benefit plan and its
status. The components of net periodic pension benefit cost for the three months
ended March 31, 2005 and 2004 for this plan follows (in thousands):
  2005
    
    2004Service
      cost
    $
    -
    
    $
    -Interest
      cost
    
    33
    
    
    75Return
      on plan assets
    
    (18
    )
    
    (85
    )Change
      in plan payout assumptions
    
    -
    
    
    -Net
      periodic benefit expense (credit)
    $
    15
    
    $
    (10
    )
 **4.
NEW ACCOUNTING STANDARD**
 In
December 2004, the Financial Accounting Standards Board issued SFAS No. 123
(revised 2004), “Share-Based Payment” (SFAS No. 123R). SFAS No. 123R requires
all share-based payments to employees, including grants of employee stock
options, to be recognized in the financial statements based on their fair
values. SFAS No. 123R’s effective date is interim periods beginning after June
15, 2005. However, in April 2005 the Securities and Exchange Commission provided
for a deferral of the effective date to fiscal years beginning after June 15,
2005. McMoRan is still reviewing the provisions of SFAS No. 123R and has not yet
determined if it will adopt SFAS No. 123R before January 1, 2006. Assuming
prospective adoption of SFAS 123R on January 1, 2006 and based on currently
outstanding employee stock options, McMoRan estimates that its charge to expense
related to the compensation from employee stock-based awards would approximate
$3.3 million in 2006, which would equate to $0.14 per share based on its basic
and diluted shares outstanding on March 31, 2005. This estimate excludes
consideration of the contingent option grants discussed in Note 3 above, whose
fair value will be determined on the date the proposed new stock incentive plan
is approved by the shareholders.
  9
 **5.
RATIO OF EARNINGS TO FIXED CHARGES**
 McMoRan
sustained losses from continuing operations totaling $4.3 million for the first
quarter of 2005 and $11.1 million for the first quarter of 2004, which were
inadequate to cover its fixed charges of $3.8 million and $2.2 million for each
of the respective first-quarter periods. For this calculation, earnings consist
of income from continuing operations before income taxes and fixed charges.
Fixed charges include interest and that portion of rent deemed representative of
interest.
 
 -----------------
 Remarks
 
 The
information furnished herein should be read in conjunction with McMoRan’s
financial statements contained in its 2004 Annual Report on Form 10-K. The
information furnished herein reflects all adjustments which are, in the opinion
of management, necessary for a fair presentation of the results for the periods.
All such adjustments are, in the opinion of management, of a normal recurring
nature.
  10
 REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders of McMoRan Exploration Co.:
 
 We have
reviewed the condensed consolidated balance sheet of McMoRan Exploration Co. (a
Delaware corporation) as of March 31, 2005, the related consolidated statements
of operations and cash flow for the three-month periods ended March 31, 2005 and
2004. These financial statements are the responsibility of the Company’s
management.
 
 We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with the standards of the Public Company Accounting Oversight Board, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
 
 Based on
our review, we are not aware of any material modifications that should be made
to the condensed consolidated interim financial statements referred to above for
them to be in conformity with U.S. generally accepted accounting
principles.
 
 We have
previously audited in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
McMoRan Exploration Co. as of December 31, 2004, and the related consolidated
statements of operations, stockholders’ equity (deficit), and cash flow for the
year then ended (not presented herein), and in our report dated March 11, 2005,
which included an explanatory paragraph for a change in accounting principle, we
expressed an unqualified opinion on those consolidated financial
statements . In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 2004, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
 
 
 /s/ ERNST
& YOUNG LLP
 
 New
Orleans, Louisiana
 May 2,
2005
 
 11
 Item
2.  Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
 **OVERVIEW**
 
 *In
management’s discussion and analysis “we,” “us,” and “our” refer to McMoRan
Exploration Co. and its wholly owned consolidated subsidiaries, McMoRan Oil
& Gas LLC (MOXY) and Freeport-McMoRan Energy LLC (Freeport Energy). You
should read the following discussions in conjunction with our consolidated
financial statements, the related discussion and analysis of financial condition
and results of operations and our discussion of “Business and Properties” in our
Form 10-K for the year ended December 31, 2004 (2004 Form 10-K), filed with the
Securities and Exchange Commission. The results of operations reported and
summarized below are not necessarily indicative of future operating results.
Unless otherwise specified, all references to Notes refers to Consolidated Notes
to Financial Statements included elsewhere in this Form 10-Q.*
 
 We engage
in the exploration, development and production of oil and gas offshore in the
Gulf of Mexico and in the Gulf Coast region, with a focus on the potentially
significant hydrocarbons that we believe are contained in large, deep geologic
structures located beneath the shallow waters of the Gulf of Mexico shelf and
often lying below shallow reservoirs where significant reserves have been
produced, commonly known as the “deep shelf”. We are also pursuing plans for the
potential development of the Main Pass Energy Hub TM (MPEH TM ) project
at our former sulphur mining facilities at Main Pass Block 299 (Main Pass) in
the Gulf of Mexico. This project includes the transformation of our former Main
Pass sulphur facilities into a hub for the receipt and processing of liquefied
natural gas (LNG) and the storage and distribution of natural gas. We were
previously engaged in the sulphur business until June 2002.
 
 Both
North American natural gas markets and world oil markets continue to reflect
conditions of high demand and tight supplies. Our average realizations during
the first quarter of 2005 were $6.84 per thousand cubic feet (Mcf) of natural
gas and $50.28 per barrel for oil (see “Results of Operations” below).
 
 **OIL
& GAS ACTIVITIES**
 
 Multi-Year
Exploration Venture
  During
2004, we established a multi-year exploration venture with a private partner for
a joint commitment to spend an initial $500 million to acquire and exploit
high-potential prospects, primarily Deep Miocene structures in the shallow
waters of the shelf of the Gulf of Mexico and Gulf Coast areas. As previously
reported, we and our exploration partner have participated in five discoveries
on the 10 prospects that have been drilled and evaluated and we have also
experienced positive drilling results at the Blueberry Hill well on Louisiana
State Lease 340, a potential sixth discovery. Production has commenced on three
of the discoveries and development plans are being pursued at the other two
discoveries and the potential discovery at Blueberry Hill .
  We are
currently participating in five exploratory wells as noted in the table
below.
  **Working**
      **Interest**
    **Net**
      **Revenue**
      **Interest**
    **Prospect
      Acreage****a**
    **Water
      Depth**
    **Proposed**
      **Total**
      **Depth****b**
    **Current**
      **Depth****c**
    **Spud
      Date**South
      Timbalier Blocks 97/98
      “**Korn**”******d
    18.8%
    15.4%
    9,800
    60'
    23,000'
    19,600’
    Feb.
      3, 2005Vermilion
      Blocks 16/17
      “**King
      Kong**”d,e
    40.0%
    29.2%
    1,850
    12'
    19,500'
    13,700’
    Feb.
      20, 2005Lake
      Sand Field Area
      “**Delmonico**”
    25.0%
    18.8%
    8,800
    9'
    19,000'
    15,800’
    March
      8, 2005Louisiana
      State Lease 5097 “**Little**
      **Bay**”e
    37.5%
    27.4%
    6,250
    10'
    20,000'
    12,900’
    March
      11, 2005Vermilion
      Block 43 No. 4d
    23.4%
    18.0%
    2,500
    30’
    18,800
    4,000
    April
      25, 2005
  a.
    Gross
      acres encompassing prospect to which we retain exploration
      rights.
 b.
    Planned
      target measured depth, which is subject to
change.
 12
 c.
    Approximatetotaldepth
      of well on May 2, 2005.
 d.
    Prospect
      will be eligible for deep gas royalty relief under current Minerals
      Management Service (MMS) guidelines, which could result in an increased
      net revenue interest for early production. If MMS approves the application
      for royalty relief, each lease may be exempt from paying MMS royalties on
      up to the initial 25 Bcf of production.
 e.
    Wells
      in which we are the operator.
  At March
31, 2005, our total leasehold and related drilling costs associated with these
in-progress wells totaled $12.3 million, reflecting $3.5 million for Korn, $3.7
million for King Kong, $2.0 million for Delmonico and $3.1 million for Little
Bay. In April 2005, drilling of a second exploratory well commenced at West
Cameron Block 43 (see “Production Update and Development Activities”
below).
  We expect
to participate in the drilling of at least seven additional exploration
prospects in 2005. We currently have rights to approximately 261,000 gross acres
and continue to identify prospects to be drilled on our lease acreage. We are
also pursuing opportunities through our exploration venture to acquire
additional acreage and prospects through farm-in or other
arrangements.
  Production
Update and Development Activities
 
 Our
first-quarter 2005 production averaged 17 million cubic feet of natural gas
equivalent per day (MMcfe/d). Our production benefited from the establishment of
production from the **Deep
Tern C-2** well at
Eugene Island Block 193 on December 30, 2004 and the **Minuteman** field at
Eugene Island Block 213 on February 25, 2005. Our second-quarter 2005 production
is expected to average 40 MMcfe/d, more than double our first quarter rates
primarily as a result of establishment of production from the **Hurricane
Upthrown** well at
South Marsh Island Block 217 and anticipated production for the **Deep
Tern C-1** sidetrack well at Eugene Island Block 193. Our estimated second-quarter 2005
rates exclude any anticipated oil production from Main Pass.
  The **Hurricane
Upthrown** discovery commenced production on March 30, 2005. The well is currently flowing
at a gross rate of approximately 53 MMcf/d of natural gas and 2,000 barrels of
oil per day, totaling approximately 65 MMcfe/d, 15 MMcfe/d net to us, on a 42/64
choke with flowing tubing pressure of 7,650 pounds per square inch (psi). The
Hurricane lease is eligible for royalty relief on the first 5 billion cubic feet
of gas equivalent (Bcfe) of gross production. Our net revenue interest will
approximate 22.9 percent until 5 Bcfe is produced and will revert to 19.4
percent thereafter. We are planning multiple wells in this high-potential area
Production from the Hurricane well utilizes the Tiger Shoal facilities, which
are also being used to produce the JB Mountain and Mound Point discoveries. We
have rights to approximately 7,700 gross acres in the Hurricane prospect area
which is located offshore Louisiana in 10 feet of water.
 
 The **Minuteman** well’s
current gross production approximates 13 MMcfe/d, 4 MMcfe/d net to us. The well
is being produced at our facilities at Eugene Island Block 215 located seven
miles away. The Eugene Island Block 213 lease is eligible for royalty relief on
the first 25 Bcf of gross natural gas production; consequently, our net revenue
interest will approximate 29.8 percent until 25 Bcf is produced and will revert
to 24.3 percent thereafter. We control approximately 10,000 acres in the
immediate area surrounding the Minuteman prospect, which is located
approximately 40 miles offshore Louisiana in 100 feet of water.
  The **Deep
Tern C-2** well
produced at an average gross rate of approximately 16 MMcfe/d , 7 MMcfe/d net to
us, during the first quarter of 2005. The Eugene Island Block 193 lease is
eligible for royalty relief on the first 10 Bcf of natural gas production; as a
result, our net revenue interest will approximate 45.3 percent until 10 Bcf
gross is produced. After 10 Bcf of production, our net revenue interest will be
37.2 percent in the deeper Basal Pliocene and Upper Miocene sections of the
well. We control 17,500 acres in the Deep Tern area which is located
approximately 50 miles offshore Louisiana in 90 feet of water.
  The **Deep
Tern C-1** sidetrack well reached a total depth of 17,080 feet in April 2005.  The
well commenced production to April 29, 2005 and is currently producing at a
gross rate of approximately 18
 13
 MMcfe/d,
4 MMcfe/d net to us, on a 17/64th choke with flowing tubing pressure of 9,500
psi.  We own a 20.6 percent net revenue net revenue interest in the C-1
well.
 As
previously reported, the **West
Cameron Block 43** No. 3
exploratory well was drilled to a total depth of 18,800 feet in the first
quarter of 2005. Wireline logs indicated that the well encountered three
hydrocarbon bearing sands in the lower Miocene with a total gross interval in
excess of 100 feet. In April 2005 drilling commenced on a second exploratory
well (West Cameron Block 43 No. 4), which is located 4,000 feet north of the
discovery well. The No 4 well is currently drilling below 4 ,000
feet. Development plans for the No. 3 will be determined following evaluation of
the results of the No 4 well. We hold a 23.4 percent working interest in the
West Cameron Block 43 well which is located in 30 feet of water, 8 miles
offshore Louisiana. The West Cameron Block 43 lease is eligible for royalty
relief on at least 15 Bcf of natural gas production; consequently, our net
revenue interest will approximate 21.9 percent until 15 Bcf is produced and will
be 18.0 percent thereafter.
  The **Blueberry
Hill** well at
Louisiana State Lease 340 reached a total depth of 23,903 feet in the first
quarter of 2005. Wireline logs indicated that the well encountered four
potentially productive hydrocarbon bearing sands. A 41⁄2 inch production liner was
run and cemented to protect the identified potential pay zones. The drilling rig
was moved off location while completion equipment is procured that will be
capable of handling the well’s anticipated high pressure. Subsequent completion
and testing of the well will determine future plans for this prospect. We
operate Blueberry Hill, located seven miles east of the JB Mountain discovery
and seven miles south southeast of the Mound Point Offset discovery. We hold a
35.3 percent working interest and a 24.2 percent net revenue interest in the
Blueberry Hill well. Our net investment in the Blueberry Hill well totaled $9.8
million at March 31, 2004.
  Development
plans are being finalized at **Dawson
Deep** on
Garden Banks Block 625. As previously reported, the “take point” well
encountered hydrocarbon-bearing sands as indicated by more than 100 feet of
total vertical thickness of resistivity in the shallow zones. An additional 100
feet of hydrocarbons were logged in the deepest zone which was the original
objective of this “take point” well. The well was sidetracked and drilled to a
total depth of 22,790 feet. We own a 30.0 percent working interest and a 24.0
percent net revenue interest in the Dawson Deep prospect. The Dawson Deep
prospect is located on a 5,760 acre block located approximately 150 miles
offshore Texas and is adjacent to the operator’s Gunnison spar facility.
  Main
Pass
 On
December 27, 2004, we acquired the remaining ownership interest in K-Mc I that
we did not previously own. K-Mc I owns the oil facilities and related proved oil
reserves at Main Pass. The storm center of Hurricane Ivan passed within 20 miles
east of Main Pass in September 2004. The K-Mc I Main Pass structures did not
incur significant damage from the storm but oil production from Main Pass has
been shut-in since this time following extensive damage to a third-party
offshore terminal and connecting pipelines that provided throughput service for
the sale of Main Pass’ sour crude oil. We expect insurance proceeds under our
business interruption and property policies to partially mitigate the financial
impact of the storm. As of March 31, 2005, we had received a total of $3.6
million of insurance proceeds, including $3.1 million that was treated as a
reduction of our acquisition cost of K-Mc I. At March 31, 2005, we had a
receivable balance totaling $4.5 million related to our ongoing business
interruption claim at Main Pass. We received $2.3 million of these additional
insurance proceeds in April 2005 and expect to receive the balance in 2005. At
March 31, 2005, our property, plant and equipment included $3.4 million of costs
associated with the ongoing efforts to modify one Main Pass structure formerly
used in our discontinued sulphur mining operations to accommodate transportation
of oil production from Main Pass by barge. We are currently seeking
reimbursement of these and any subsequent modification costs under our insurance
policy. We expect production will resume at Main Pass in the second quarter of
2005.
 
 The Main
Pass oil lease was subject to a 25 percent overriding royalty retained by the
original third party owner of the Main Pass oil lease after 36 million barrels
of oil were produced, but capped at a 50 percent net profits interest. In
February 2005, the original owner agreed to eliminate this royalty interest and
we agreed to assume its reclamation obligation associated with one platform and
the related facilities, which required us to record an increase of $3.9 million
to both property, plant and equipment and accrued oil and gas reclamation costs
(Note 3). As a result of the transaction, the
 14
 original
owner will be entitled to a 6.25 percent overriding royalty in new wells, if
any, drilled on the lease.
  Reversionary
Interests
 In
February 2002, we sold three oil and gas properties for $60.0 million and
retained a potential reversionary interest equal to 75 percent of the
transferred interests following payout of $60 million plus a specified annual
rate of return. The three properties sold were Vermilion Block 196 (Lombardi),
Main Pass Block 86 (Shiner), and 80 percent of McMoRan’s interest in Ship Shoal
Block 296 (Raptor). During the first quarter of 2005, we reached agreement with
the third-party purchaser to assign to us the 75 percent reversionary interest
in Raptor effective February 1, 2005. As a result, t he Raptor
field is no longer included in the payout calculation related to our potential
reversionary interest. A second
Shiner well commenced production in March 2005 and is also subject to our
potential reversionary interest. The four wells are currently producing at an
average rate of approximately 17 MMcfe/d, net to the third party’s interests. At
March 31, 2005, the remaining amount of net proceeds required to reach payout
approximated $7 million, a reduction of approximately $5 million from the
December 31, 2004 balance. Based on the estimated future production from these
properties and current natural gas and oil price projections, we estimate payout
for these properties could occur in the second quarter of 2005. The timing of
the reversion will depend upon many factors including oil and gas prices, flow
rates and expenditures.
  JB
Mountain and Mound Point Area Development Activities
 We are a
participant in a program that began in 2002 and includes the JB Mountain and
Mound Point Offset discoveries in the OCS 310 and Louisiana State Lease 340
areas, respectively. The program currently holds a 55 percent working interest
and a 38.8 percent net revenue interest in the JB Mountain prospect and a 30.4
percent working interest and a 21.6 percent net revenue interest in the Mound
Point Offset prospect. Under terms of the program, the third party partner is
funding all of the costs attributable to our interests in the properties, and
will own all of the program’s interests until the program’s aggregate production
totals 100 Bcfe attributable to the program’s net revenue interest, at which
point 50 percent of the program’s interests would revert to us. All exploration
and development costs associated with the program’s interest in any future wells
is to be funded by the third party partner during the period prior to when our
potential reversion occurs. We have reacquired approximately 45,000 gross acres
in the Louisiana State Lease 340/Mound Point and OCS 310/JB Mountain areas,
which were previously part of this program. This acreage includes the Hurricane
Upthrown and JB Mountain Deep prospects at OCS 310 and the Blueberry Hill
prospect, two Mound Point wells that were previously temporarily abandoned and
the Mound Point - West Fault Block prospect at Louisiana State Lease 340. We are
considering further operations with respect to the Mound Point wells that were
temporarily abandoned, which may include sidetracking, deepening or re-drilling
these two wells.
  There are
three producing wells and approximately 13,000 gross acres on Louisiana State
Lease 340 and OCS 310 that are subject to the 100 Bcfe arrangement. We believe
there are further exploration and development opportunities associated with this
acreage. The three producing wells in the program averaged an aggregate gross
rate of approximately 56 MMcfe/d during the first quarter of 2005.
  **MAIN
PASS ENERGY HUB** **TM** **PROJECT**
 
 
 We are
pursuing plans for the potential development of the MPEH TM Project.
As of March 31, 2005, we have incurred approximately $18.7 million of cash costs
associated with our pursuit of the establishment of the MPEH TM ,
including $2.3 million during the first quarter of 2005. We expect to spend
between $8-10 million to advance the licensing process and to pursue commercial
arrangements for the project over the remainder of 2005.
 
 We have
completed conceptual and preliminary engineering for the potential development
of the MPEH TM project.
In February 2004, pursuant to the requirements of the U.S. Deepwater Port Act,
we filed an application with the U.S. Coast Guard (Coast Guard) and the Maritime
Administration (MARAD) requesting a license to develop an LNG receiving terminal
at our Main Pass facilities located in the Gulf of Mexico, 38 miles east of
Venice, Louisiana. Pursuant with this federal law, the Coast Guard and MARAD
 15
  have a
330-day period from the date the application is deemed complete, subject to
possible suspensions of this timeframe, to either issue the license or deny the
application. On June 9, 2004, notice of acceptance of our license application as
complete was published in the Federal Register. In September 2004, the Coast
Guard requested additional information relating to environmental issues,
including the potential impact of the project on the marine habitat, and
suspended the statutory timeframe to allow the additional information to be
submitted and reviewed. The Coast Guard subsequently requested additional
information on air emissions, cavern design and other areas. We provided the
information and on April 21, 2005 the Coast Guard resumed the statutory review
period and we will continue to provide information as requested. As of April 21,
2005, there was an approximate eight-month period remaining under the statutory
timeframe and we expect a decision on our application in December
2005.
 We are in
discussions with potential LNG suppliers in the Atlantic Basin and with natural
gas consumers in the United States regarding commercial arrangements for the
facilities. We are also considering opportunities to participate in certain oil
and gas exploration and production activities as an extension of our proposed
LNG terminaling activities. We are advancing commercial discussions in parallel
with the permitting process.
 
 As
currently conceived, the proposed terminal would be capable of regasifying LNG
at a rate of 1 Bcf per day and is being designed to accommodate potential future
expansions. The capital cost for the terminal facilities is currently estimated
at $440 million. We are seeking a permit for a facility with capacity up to 1.6
Bcf per day, which if authorized by permit and built, would add approximately
$100 million to the estimated capital cost.
 
 We are
also considering significant additional investments to develop substantial
undersea cavern storage for natural gas and pipeline interconnects to the U.S.
pipeline distribution system. This would allow significant natural gas storage
capacity using the 2-mile diameter salt dome located at the site and would
provide suppliers with access to natural gas markets in the United States.
Current plans for the MPEH TM include
28 Bcf of initial cavern storage capacity and aggregate peak deliverability from
the proposed terminal, including deliveries from storage of up to 2.5 Bcf per
day. The estimated cost for these potential investments in pipelines and
storage, which could be owned or financed by third parties, is approximately
$450 million.
 
 The
MPEH TM is
located in 210 feet of water, which allows deepwater access for large LNG
tankers and is in close proximity to shipping channels. We plan to utilize the
substantial existing platforms and infrastructure at the site, which we believe
will provide us with significant timing advantages and cost savings. Safety and
security aspects of the facility are also enhanced by the offshore location. If
we receive our license in 2005, as anticipated, and obtain financing for the
project, we believe the facilities could be operational by 2009, which would
make MPEH TM one of
the first U.S. offshore LNG terminals.
 
 Currently
we own 100 percent of the MPEH TM project.
However two entities have separate options to participate as passive equity
investors for up to an aggregate 25 percent of our equity interest in the
project (see Notes 4 and 11 of our 2004 Form 10-K). Future financing
arrangements may also reduce our equity interest in the project
 
 For
additional information regarding our MPEH TM Project
see Items 1. and 2. “Business and Properties - Main Pass Energy Hub TM Project”
in our 2004 Form 10-K.
 
 **RESULTS
OF OPERATIONS**
 
 Our only
segment is “Oil and Gas,” which includes all oil and gas exploration and
production operations of MOXY. We are pursuing a new business segment, “Energy
Services,” whose start-up activities are reflected as a single expense line item
within the accompanying consolidated statements
of operations. See “Discontinued Operations” below for information regarding our
former sulphur segment. The activities of K-Mc I’s oil operations at Main Pass,
which have been shut-in since September 2004, are included in our consolidated
results for the first quarter of 2005. Prior to December 27, 2004, we accounted
for our investment in K-Mc I using the equity method of accounting.
 16
 We use
the successful efforts accounting method for our oil and gas operations, under
which our exploration costs, other than costs of successful drilling and
in-progress exploratory wells, are charged to expense as incurred. We anticipate
that we will continue to experience operating losses during the near-term,
primarily because of our expected exploration activities and the start-up costs
associated with establishing the MPEH TM . ****
 
 During
the first quarter of 2005, we had an operating loss of $2.1 million. The loss
was attributed to $7.5 million of exploration expenses, including nonproductive
exploratory well costs of $2.9 million, and $2.3 million of start-up costs
associated with the MPEH TM , which
included permitting fees and costs associated with the pursuit of commercial
arrangements for the project. Our operating costs were partially offset by a
$5.0 million insurance recovery associated with our Main Pass oil operations, of
which $4.5 million was classified as a receivable at March 31, 2004 (see “Oil
and Gas Activities - Main Pass” above). During the first quarter of 2004, we had
an operating loss of $9.1 million, attributable to $4.3 million of start-up
costs associated with the MPEH TM , and
$3.3 million of exploration expense, which included $0.7 million on
nonproductive exploratory well costs and additional costs associated with the
increase in our exploration activities following the announcement of the
multi-year exploration venture in January 2004. Summarized operating data is as
follows:
 
 Three
      Months Ended March 31,2005
    
    2004OPERATING
      DATA:Sales
      VolumesGas
      (thousand cubic feet, or Mcf)
    1,410,500
    
    408,500Oil
      and condensate (barrels)
    17,000
    
    25,600Plant
      products (equivalent barrels)a
    7,100
    
    6,700Average
      RealizationGas
      (per Mcf)
    $
      6.84
    
    $
      5.93Oil
      and condensate (per barrel)
    50.28
    
    35.10
 
 a.
    We
      received approximately $0.3 million and $0.2 million of revenues
      associated with plant products (ethane, propane, butane, etc.) during the
      first quarters of 2005 and 2004, respectively (see “Oil and Gas
      Operations” below).
 
 **Oil
and Gas Operations**
 A summary
of increases (decreases) in our oil and gas revenues between the periods follows
(in thousands):
 
 First
      QuarterOil
      and gas revenues - prior year period
    $
    3,591Increase
      (decrease)Price
      realizations:Oil
      and condensate
    
    258Gas
    
    1,284Sales
      volumes:Oil
      and condensate
    
    (302
    )Gas
    
    5,942Plant
      products revenues
    
    82Other
    
    525Oil
      and gas revenues - current year period
    $
    11,380
 
 Our
first-quarter 2005 oil and gas revenues reflect a significant increase in
volumes sold of natural gas (245 percent) and the average realization received
for gas (15 percent) compared to the first quarter of 2004. Oil and condensate
sales volumes decreased by 33 percent over the comparable first-quarter periods.
The average realizations for oil increased 43 percent. The increase in gas sales
volumes primarily reflects the establishment of production from the Deep Tern
C-2 well at Eugene Island Block 193 and the Minuteman well at Eugene Island
Block 213, as well as the increase in our net revenue interest in the West
 17
 Cameron
Block 616 field from 5 percent to approximately 19.3 percent following payout of
the field in September 2004. The decrease in oil production volumes primarily
reflects declining production from the Eugene Island Block 193/215 field
partially offset by production from the fields that have recently commenced
production.
  
 Our
service revenues totaled $3.3 million for the first quarter of 2005 compared to
$0.5 million last year. The increase is primarily attributable to the management
fee associated with the multi-year exploration venture (Note 3) and oil and gas
processing fees for third party production associated with the Main Pass oil
operations.
 
 Production
and delivery costs totaled $3.7 million in the first quarter of 2005 compared to
$1.5 million in the first quarter of 2004. This increase primarily reflects the
$2.2 million of production costs associated with the Main Pass oil operations of
K-Mc I during the first quarter of 2005 and additional costs relating to
increased natural gas production for the first quarter of 2005 as compared with
the first quarter of 2004.
 
 Depletion,
depreciation and amortization expense totaled $3.9 million in the first quarter
of 2004 compared to $1.4 million for the same period last year. The increase
reflects higher production volumes in the first quarter of 2005 compared to the
first quarter of 2004. Our depletion, depreciation and amortization expense
includes accretion expense of $0.3 million in first quarter of 2005, including
$0.1 million related to Main Pass, compared with $0.1 million in the first
quarter of 2004 associated with the requirements of Statement of Financial
Accounting Standard (SFAS) No. 143 “Accounting for Asset Retirement
Obligations.”
 
 Our
exploration expenses will fluctuate in future periods based on the structure of
our arrangements to drill exploratory wells (i.e. whether exploratory costs are
financed by other participants or us), the number, results and costs of our
exploratory drilling projects and the incurrence of geological and geophysical
costs, including the cost of seismic data. Summarized exploration expenses are
as follows (in millions):
 
 Three
      Months Ended
      March
      31,2005
    
    2004Geological
      and geophysical,including
      3-D seismic purchases
    $
    1.8
    
    $
    0.9Non
      productive exploratory costs, includingrelated
      lease costs
    
    2.9
    a
    
    0.7
    bOther
    
    2.8
    c
    
    1.7$
    7.5
    
    $
    3.3
 
 a.
    Includes
      nonproductive exploratory well costs associated with the “Caracara” well
      at Vermilion Blocks 227/228 ($1.3 million), the “King of the Hill” well at
      High Island Block 131($0.3 million), the “Gandalf ” well at Mustang Island
      Block 829 ($0.1 million) and the deeper zones at both the “Hurricane
      Upthrown” well at South Marsh Island Block 217 ($0.4 million) and the West
      Cameron Block 43 No. 3 exploratory well ($0.4 million). Amount also
      includes the write-off of approximately $0.4 million of leasehold costs
      associated with one onshore Louisiana prospect.
 b.
    Represents
      nonproductive exploratory well costs associated with South Marsh Island
      Block 217 (Hurricane prospect).
 c.
    Includes
      insurance costs associated with our exploration drilling activities.
      Increase over 2004 primarily reflects delay rental payments to maintain
      portions of our acreage position.
 
 **Other
Financial Results**
 General
and administrative expense totaled $4.4 million in the first quarter of 2005 and
$2.7 million in the first quarter of 2004. The increase primarily reflects an
increase in costs associated with ongoing legal proceedings described in Part II
- Legal Proceedings elsewhere in this Form 10-Q and higher personnel costs
associated with the multi-year exploration venture.
 18
  Interest
expense, net of capitalized interest, totaled $3.8 million in the first quarter
of 2005 and $2.2 million in the first quarter of 2004. Capitalized interest
totaled $0.6 million in the first quarter of 2005 and $0.1 million in the first
quarter of 2004. The increase between the comparable first quarter periods
reflects the issuance of $140 million of 51⁄4% convertible senior notes in October
2004.
 
 **CAPITAL
RESOURCES AND LIQUIDITY**
 
 The table
below summarizes our cash flow information by categorizing the information as
cash provided by or (used in) operating activities, investing activities and
financing activities and distinguishing between our continuing operations and
the discontinued operations (in millions) :
 
 Three
      Months Ended
      March
      312005
    
    
    2004Continuing
      operationsOperating
    $
    28.4
    
    
    $
    (2.1
    )Investing
    
    (36.5
    )
    
    
    (0.8
    )Financing
    
    1.0
    
    
    
    (0.1
    )
 
 Discontinued
      operationsOperating
    
    (1.0
    )
    
    
    (1.9
    )Investing
    
    -
    
    
    
    (6.3
    )Financing
    
    -
    
    
    
    -
  Total
      cash flowOperating
    
    27.4
    
    
    
    (3.9
    )Investing
    
    (36.5
    )
    
    
    (7.1
    )Financing
    
    1.0
    
    
    
    (0.1
    )
 
 **First-Quarter
2005 Cash Flows Compared with First-Quarter 2004**
 Operating
cash flow from our continuing operations during the first quarter of 2005
reflects increased oil and gas revenues, the advance billing and receipt of
certain exploratory drilling costs from our drilling partners, a decrease in the
amount of start-up costs associated with the MPEH TM and other
working capital changes, including the receipt of insurance proceeds related to
our Main Pass claim (see “Oil and Gas Activities-Main Pass” and Note
3) .
 
 Our
investing cash flows reflect exploration, development and other capital
expenditures for our in-progress exploratory wells and development wells as
discussed in “Oil and Gas Activities” above. These expenditures also include
nonproductive exploratory well costs as discussed in “Results of Operations”
above. Our exploration, development and other capital expenditures for 2005 are
expected to approximate $135 million. These planned capital expenditures may
increase as additional exploration opportunities are presented to us or to fund
the development costs associated with additional successful wells.
 
 Our
investing cash flows also reflect the liquidation of $3.9 million of our
previously escrowed U.S. government notes to pay the semi-annual interest
payments on our 6% convertible senior notes on January 2, 2005 and 2004.
Investing cash flow used by our discontinued sulphur operations totaled $6.3
million during the first quarter of 2004, which reflects the $7.0 million
payment to terminate the lease on the remaining sulphur railcars, net of
proceeds received from their sale to a third party.
 
 Our
continuing operations’ financing activities included payment of dividends on our
mandatorily redeemable preferred stock of $0.4 million in the first quarter of
2005 and 2004. These dividend payments were offset by proceeds received from the
exercise of stock options which totaled $1.3 million in the first quarter of
2005 and $0.3 million in the first quarter of 2004.
  19
 **DISCONTINUED
OPERATIONS**
 
 Our
discontinued operations resulted in a net loss of $1.0 million in the first
quarter of 2005 compared with $1.7 million in the first quarter of 2004. The
summarized results of the discontinued operations is as follows (in
thousands):
 
 
 First
      Quarter2005
    
    2004Sulphur
      retiree costsa
    
    $
    218
    
    $
    581Legal
      expensesb
    
    
    236
    
    
    556Caretaking
      costs
    
    
    190
    
    
    192Accretion
      expense - sulphurreclamation
      obligations
    
    
    240
    
    
    217Insurance
    
    
    90
    
    
    130General
      and administrative
    
    
    19
    
    
    83Other
    
    
    36
    
    
    (42
    )Loss
      from discontinued operations
    
    $
    1,029
    
    $
    1,717
 
 a.
    The
      decrease reflects lower expected costs associated with an obligation to
      reimburse a third party a portion of the postretirement benefit costs
      relating to certain retired sulphur employees. The decrease primarily
      resulted from certain plan changes made by the plan sponsor that decreased
      the number of former employees covered by the obligation and the amount of
      future benefits to be paid.
 b.
    The
      decrease reflects the July 2004 settlement of one of two related cases
      involving the reclamation of certain sulphur structures at Main Pass.
 
 **CAUTIONARY
STATEMENT**
 
 Management’s
Discussion and Analysis of Financial Condition and Results of Operations contain
forward-looking statements. All statements other than statements of historical
fact included in this report, including, without limitation, statements
regarding plans and objectives of our management for future operations and our
exploration and development activities are forward-looking
statements.
 
 This
report includes "forward looking statements" within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, including statements about our plans, strategies, expectations,
assumptions and prospects. "Forward-looking statements" are all statements other
than statements of historical fact, such as: statements regarding our business
plans for 2005; statements regarding our need for, and the availability of,
financing; and to satisfy the MMS reclamation obligations with respect to Main
Pass; drilling potential and results; anticipated flow rates of producing wells;
anticipated initial flow rates of new wells; reserve estimates and depletion
rates; general economic and business conditions; risks and hazards inherent in
the production of oil and natural gas; demand and potential demand for oil and
gas; trends in oil and gas prices; amounts and timing of capital expenditures
and reclamation costs; and other environmental issues. Further information
regarding these and other factors that may cause our future performance to
differ from that projected in the forward looking statements are described in
more detail under “Risk Factors” included in Items 1. and 2. “Business and
Properties” in our 2004 Form 10-K.
 -------------------------
 
 Item 3. Quantitative
and Qualitative Disclosures about Market Risk.
 There
have been no significant changes in our market risks since the year ended
December 31, 2004. For more information, please read the consolidated financial
statements and notes thereto included in our Annual Report on Form 10-K for the
year ended December 31, 2004.
  20
 Item 4. Controls
and Procedures.
 
 (a)  Evaluation
of disclosure controls and procedures . Our
chief executive officer and chief financial officer, with the participation of
management, have evaluated the effectiveness of our “disclosure controls and
procedures” (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934) as of the end of the period covered by this quarterly
report on Form 10-Q. Based on their evaluation, they have concluded that our
disclosure controls and procedures are effective in timely alerting them to
material information relating to McMoRan (including our consolidated
subsidiaries) required to be disclosed in our periodic Commission
filings.
 
 (b)  Changes
in internal controls . There
has been no change in our internal control over financial reporting that
occurred during the first fiscal quarter that has materially affected, or is
reasonably likely to materially affect our internal control over financial
reporting.
 
 PART
II--OTHER INFORMATION
 Item 1. Legal
Proceedings.
 Daniel
W. Krasner v. James R. Moffett; René L. Latiolais; J. Terrell Brown; Thomas D.
Clark, Jr.; B.M. Rankin, Jr.; Richard C. Adkerson; Robert M. Wohleber;
Freeport-McMoRan Sulphur Inc. and McMoRan Oil & Gas Co ., Civ.
Act. No. 16729-NC (Del. Ch. filed Oct. 22, 1998). Gregory
J. Sheffield and Moise Katz v. Richard C. Adkerson, J. Terrell Brown, Thomas D.
Clark, Jr., René L. Latiolais, James R. Moffett, B.M. Rankin, Jr., Robert M.
Wohleber and McMoRan Exploration Co ., (Court
of Chancery of the State of Delaware, filed December 15, 1998.) These two
lawsuits were consolidated in January 1999. The complaint alleges that
Freeport-McMoRan Sulphur Inc.’s directors breached their fiduciary duty to
Freeport-McMoRan Sulphur Inc.’s stockholders in connection with the combination
of Freeport-McMoRan Sulphur Inc. and McMoRan Oil & Gas Co. The plaintiffs
claim that the directors failed to take actions that were necessary to obtain
the true value of Freeport-McMoRan Sulphur Inc.  The plaintiffs also claim
that McMoRan Oil & Gas Co. knowingly aided and abetted the breaches of
fiduciary duty allegedly committed by the other defendants. In September 2002,
the court granted the defendants’ motion to dismiss. The plaintiffs appealed the
court’s decision and in June 2003, the Delaware Supreme Court reversed the trial
court’s dismissal and remanded the case to the trial court for further
proceedings. The
lawsuit was certified as a class action. Fact discovery has been completed. In
February 2005 the defendants filed a motion for summary judgment and oral
argument on this motion was held in April 2005. Trial is scheduled for September
2005. McMoRan will continue to defend this action vigorously.
 
 Other
than the proceeding discussed above, we may from time to time be involved in
various legal proceedings of a character normally incident to the ordinary
course of our business. We believe that potential liability from any of these
pending or threatened proceedings will not have a material adverse effect on our
financial condition or results of operations. We maintain liability insurance to
cover some, but not all, of the potential liabilities normally incident to the
ordinary course of our businesses as well as other insurance coverages customary
in our business, with coverage limits as we deem prudent.
 
 Item
6.  Exhibits.
 The
exhibits to this report are listed in the Exhibit Index appearing on page E-1
hereof.
 21
   McMoRan
Exploration Co.
 SIGNATURE
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 McMoRan
Exploration Co.
 
 By: /s/ C. Donald Whitmire, Jr.
 C. Donald
Whitmire, Jr.
 Vice President and Controller-
 Financial Reporting
 (authorized signatory and
 Principal Accounting Officer)
 Date: May
3, 2005
 
 22
   **McMoRan
Exploration Co.**
 **Exhibit
Index**
 **Exhibit
Number**
 2.1
    Agreement
      and Plan of Mergers dated as of August 1, 1998. (Incorporated by reference
      to Annex A to McMoRan’s Registration Statement on Form S-4 (Registration
      No. 333-61171) filed with the SEC on October 6, 1998 (the McMoRan
      S-4)).3.1
    Amended
      and Restated Certificate of Incorporation of McMoRan. (Incorporated by
      reference to Exhibit 3.1 to McMoRan’s 1998 Annual Report on Form 10-K (the
      McMoRan 1998 Form 10-K)).3.2
    Certificate
      of Amendment to the Amended and Restated Certificate of Incorporation of
      McMoRan. (Incorporated by reference to Exhibit 3.2 of McMoRan’s
      First-Quarter 2003 Form 10-Q).3.3
    Amended
      and Restated By-laws of McMoRan as amended effective February 2, 2004.
      (Incorporated by reference to Exhibit 3.3 to McMoRan’s 2003 Annual Report
      on Form 10-K (the McMoRan 2003 Form 10-K)).4.1
    Form
      of Certificate of McMoRan Common Stock (Incorporated by reference to
      Exhibit 4.1 of the McMoRan S-4).4.2
    Rights
      Agreement dated as of November 13, 1998. (Incorporated by reference to
      Exhibit 4.2 to McMoRan 1998 Form 10-K).4.3
    Amendment
      to Rights Agreement dated December 28, 1998. (Incorporated by reference to
      Exhibit 4.3 to McMoRan 1998 Form 10-K).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. (Incorporated by reference to Exhibit 4.4 to McMoRan’s
      Third Quarter 1999 Form 10-Q).4.5
    Form
      of Certificate of McMoRan 5% Convertible Preferred Stock (McMoRan
      Preferred Stock). (Incorporated by reference to Exhibit 4.5 to McMoRan’s
      Second Quarter 2002 Form 10-Q).4.6
    Certificate
      of Designations of McMoRan Preferred Stock. (Incorporated by reference to
      Exhibit 4.6 to McMoRan’s Third-Quarter 2002 Form 10-Q).4.7
    Warrant
      to Purchase Shares of Common Stock of McMoRan Exploration Co. dated
      December 16, 2002. (Incorporated by reference to Exhibit 4.7 to McMoRan’s
      2002 Form 10-K).4.8
    Warrant
      to Purchase Shares of Common Stock of McMoRan Exploration Co. dated
      September 30, 2003. (Incorporated by reference to Exhibit 4.8 to McMoRan’s
      2003 Form 10-K),4.9
    Registration
      Rights Agreement dated December 16, 2002 between McMoRan Exploration Co.
      and K1 USA Energy Production Corporation. (Incorporated by reference to
      Exhibit 4.8 to McMoRan’s 2002 Form 10-K).E-14.10
    Indenture
      dated as of July 2, 2003 by and between McMoRan and The Bank of New York,
      as trustee. (Incorporated by reference to Exhibit 4.9 to McMoRan’s
      Second-Quarter 2003 Form 10-Q).4.11
    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. (Incorporated by reference to Exhibit 4.11 to
      McMoRan’s Second-Quarter 2003 Form 10-Q).4.12
    Indenture
      dated October 6, 2004 by and among McMoRan and the Bank of New York, as
      trustee. (Incorporated by reference to Exhibit 99.3 to McMoRan’s Current
      Report on Form 8-K dated October 6, 2004 (filed October 7,
      2004).4.13
    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. (Incorporated by reference to Exhibit 99.4 to McMoRan’s
      Current Report on Form 8-K dated October 6, 2004 (filed October 7,
      2004).4.14
    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.
      (Incorporated by reference to Exhibit 99.5 to McMoRan’s Current Report on
      Form 8-K dated October 6, 2004 (filed October 7, 2004).10.1
    Main
      Pass 299 Sulphur and Salt Lease, effective May 1, 1988. (Incorporated by
      reference to Exhibit 10.1 to McMoRan’s 2001 Annual Report on Form 10-K
      (the McMoRan 2001 Form 10-K)).
 
 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. (Incorporated by
      reference to Exhibit 10.10 to McMoRan’s Second Quarter 2002 Form
      10-Q).10.3
    Amended
      and Restated Services Agreement dated as of January 1, 2002 between
      McMoRan and FM Services Company. (Incorporated by reference to Exhibit
      10.3 to McMoRan’s Second-Quarter 2003 Form 10-Q).10.4
    Letter
      Agreement dated August 22, 2000 between Devon Energy Corporation and
      Freeport Sulphur. (Incorporated by reference to Exhibit 10.36 to McMoRan’s
      Third-Quarter 2000 Form 10-Q).
 
 10.5
    Asset
      Purchase Agreement dated effective December 1, 1999 between SOI Finance
      Inc., Shell Offshore Inc. and MOXY. (Incorporated by reference to Exhibit
      10.33 in the McMoRan 1999 Form 10-K).10.6
    Employee
      Benefits Agreement by and between Freeport-McMoRan Inc. and Freeport
      Sulphur (Incorporated by reference to Exhibit 10.29 to McMoRan’s 2001 Form
      10-K).10.7
    Purchase
      and Sales agreement dated January 25, 2002 but effective January 1, 2002
      by and between MOXY and Halliburton Energy Services, Inc. (Incorporated by
      reference to Exhibit 10.1 to McMoRan’s Current Report on Form 8-K dated
      February 22, 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. (Incorporated
      by reference to Exhibit 10.37 to McMoRan’s First-Quarter 2002 Form 10-Q.)E-210.9
    Purchase
      and Sale Agreement dated May 9, 2002 by and between MOXY and El Paso
      Production Company. (Incorporated by reference to Exhibit 10.28 to
      McMoRan’s Second Quarter 2002 Form 10-Q).10.10
    Amendment
      to Purchase and Sale Agreement dated May 22, 2002 by and between MOXY and
      El Paso Production Company. (Incorporated by reference to Exhibit 10.29 to
      McMoRan’s Second Quarter 2002 Form 10-Q).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
      Exploration Co. (Incorporated by reference to Exhibit 10.18 to McMoRan’s
      2002 Form
      10-K).Executive
      and Director Compensation Plans and Arrangements (Exhibits 10.12 through
      10.29).10.12
    McMoRan
      Adjusted Stock Award Plan, as amended. (Incorporated by reference to
      Exhibit 10.15 to McMoRan’s 2003 Form 10-K)10.13
    McMoRan
      1998 Stock Option Plan, as amended. (Incorporated by reference to Exhibit
      10.16 to McMoRan’s 2003 Form 10-K)10.14
    McMoRan
      1998 Stock Option Plan for Non-Employee Directors, as amended.
      (Incorporated by reference to Exhibit 10.17 to McMoRan’s 2003 Form
      10-K)10.15
    McMoRan
      Form of Notice of Grant of Nonqualified Stock Options and Limited Rights
      under the 1998 Stock Option Plan. (Incorporated by reference to Exhibit
      10.18 to McMoRan’s Second-Quarter 2004 Form 10-Q)10.16
    McMoRan
      2000 Stock Incentive Plan, as amended. (Incorporated by reference to
      Exhibit 10.18 to McMoRan’s 2003 Form 10-K)10.17
    McMoRan
      Form of Notice of Grant of Nonqualified Stock Options and Limited Rights
      under the 2000 Stock Incentive Plan. (Incorporated by reference to Exhibit
      10.20 to McMoRan’s Second-Quarter 2004 Form 10-Q)10.18
    McMoRan
      2001 Stock Incentive Plan, as amended. (Incorporated by reference to
      Exhibit 10.19 to McMoRan’s 2003 Form 10-K)10.19
    McMoRan
      2003 Stock Incentive Plan, as amended. (Incorporated by reference to
      Exhibit 10.20 to McMoRan’s 2003 Form 10-K)10.20
    McMoRan’s
      Performance Incentive Awards Program as amended effective February 1,
      1999. (Incorporated by reference to Exhibit 10.18 to McMoRan’s 1998 Form
      10-K).10.21
    McMoRan
      Form of Notice of Grant of Nonqualified Stock Options and Limited Rights
      under the 2001 Stock Incentive Plan.(Incorporated by reference to Exhibit
      10.24 to McMoRan’s Second-Quarter 2004 Form 10-Q)10.22
    McMoRan
      Form of Restricted Stock Unit Agreement Under the 2001 Stock Incentive
      Plan. (Incorporated by reference to Exhibit 10.25 to McMoRan’s
      Second-Quarter 2004 Form 10-Q)E-310.23
    McMoRan
      Financial Counseling and Tax Return Preparation and Certification Program,
      effective September 30, 1998. (Incorporated by reference to Exhibit 10.26
      to McMoRan’s First-Quarter 2003 Form 10-Q)10.24
    McMoRan
      Form of Notice of Grants of Nonqualified Stock Options and Limited Rights
      under the 2003 Stock Incentive Plan.(Incorporated by reference to Exhibit
      10.27 to McMoRan’s Second-Quarter 2004 Form 10-Q)10.25
    McMoRan
      Form of Restricted Stock Unit Agreement Under the 2003 Stock Incentive
      Plan.(Incorporated by reference to Exhibit 10.28 to McMoRan’s
      Second-Quarter 2004 Form 10-Q)10.26
    McMoRan
      2004 Director Compensation Plan.(Incorporated by reference to Exhibit
      10.29 to McMoRan’s Second-Quarter 2004 Form 10-Q)10.27
    Agreement
      for Consulting Services between Freeport-McMoRan and B. M. Rankin, Jr.
      effective as of January 1, 1991)(assigned to FM Services as of January 1,
      1996); as amended on December 15, 1997 and on December 7, 1998.
      (Incorporated by reference to Exhibit 10.32 to McMoRan 1998 Form
      10-K).10.28
    Supplemental
      Agreement between FM Services and B.M. Rankin, Jr. effective as of January
      1, 2005. (Incorporated by reference to Exhibit 10.1 to McMoRan’s Current
      Report on Form 8-K dated January 19, 2005 (filed January 24,
      2005).10.29
    McMoRan
      Director Compensation. (Incorporated by reference to Exhibit 10.27 to
      McMoRan’s 2004 Form 10-K).15.1
    Letter
      dated May 2, 2005 from Ernst & Young LLP regarding unaudited interim
      financial statements.31.1
    Certification
      of Principal Executive Officer pursuant to Rule
      13a-14(a)/15d-14(a).31.2
    Certification
      of Principal Financial Officer pursuant to Rule
      13a-14(a)/15d-14(a).32.1
    Certification
      of Principal Executive Officer pursuant to 18 U.S.C. Section
      1350.32.2
    Certification
      of Principal Financial Officer pursuant to 18 U.S.C. Section
      1350.
 
 E-4