April 1 2002
McMoRan leaves sulphur biz
McMoRan Exploration Co. today announced that its sulphur operating subsidiary, Freeport-McMoRan Sulphur LLC, (FSC) is to sell its sulphur transportation and terminaling assets to a new sulphur services joint venture (Gulf Sulphur Services LTD, LLP) to be owned by IMC Global Inc. and Savage Industries Inc.
FSC and IMC have agreed to settle all outstanding litigation matters between the companies. The deal will give FSC gross proceeds of $58 million which will be used to repay borrowings under its credit facility and for other working capital requirements. Borrowings under FSC's bank credit facility totaled $56 million as of March 29, 2002. McMoRan expects that this agreement will allow it to extend its credit facility maturity to May 31, 2002 to provide for the closing of the transaction.
The previously negotiated services contracts with major U.S. sulphur producers provide the foundation for the business of the Gulf Sulphur Services joint venture, which will be operated by Savage. The assets to be transferred will include FSC's terminal facilities at Galveston, Texas, its terminals at Tampa and Pensacola, Florida, its marine transportation assets and other assets and commercial contracts associated with its sulphur transportation and terminaling business. FSC's terminal facility at Port Sulphur, Louisiana is not being transferred to the joint venture and is being marketed separately by FSC.
The transaction is expected to be completed in May 2002, at which time FSC's contract for sulphur supply to IMC would be terminated. IMC plans to enter into new supply agreements directly with recovered sulphur producers. As a result of this transaction, McMoRan anticipates recording an approximate $10 million charge to expense in its December 31, 2001 financial statements to writedown the value of the sulphur transportation and terminaling assets to net realizable value.
McMoRan also announced today that FSC has completed its previously announced agreement with Offshore Specialty Fabricators Inc. (OSFI) for the reclamation of its Main Pass 299 and Caminada facilities. FSC's consideration to OSFI includes the Main Pass 299 oil values and other consideration, including the living quarters removed last year from Main Pass 299, a marine vessel and a base at Venice, Louisiana. This transaction is expected to satisfy all reclamation requirements of the Minerals Management Services (MMS), estimated to be approximately $45 million, for FSC's facilities in the offshore Gulf of Mexico, which would result in an approximate $40 million gain to be reported in 2002. The agreement provides that FSC will share in the net profits associated with any future alternative uses of the facility. OSFI's reclamation activities are currently in progress.