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# McMoRan Exploration Co. Message Board

• bcfbubba bcfbubba Jan 15, 2013 2:07 PM Flag

## Some Royalty Trust math :

Assumptions : MMR RT 230 million units & TISDZ 42.5 million units. MMR RT average interest in SUD wells 65 % & TISDZ 100 %. MMR RT royalty rate 5 % & TISDZ 1.25 %.

With MMR selling at \$ 16 ( ignoring deal risk ) implying a unit price for MMR RT of \$ 1.08 (\$1.25/1.15 units/MMR) or a market cap of \$ 249 million. This gives MMR RT exposure to 130 gross unrisked TCF @ 65 % or 84.5 TCF. TISDZ's market cap at \$ .80 is \$ 34 million & gives you an exposure to BBE,BBW, & Lafitte or 40 - 50 TCF ( average 45 TCF ).

So, with MMR RT, you pay \$ 249 million for 84.5 TCF pf gross unrisked exposure and only \$ 34 million for TISDZ's 40 -50 TCF of exposure.

The two main points are : you cannot like MMR RT without liking TISDZ & ,secondly, TISDZ has an unlimited life versus a capped return for MMR RT of \$ 11.50 + distributions.

Sentiment: Hold

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• Bubba: Now @ \$.66 or \$28 million Mkt. Cap., TISDZ looks even more appealing for a buyer
with patience. Thanks for your assumptions.

• BCF,
Please help me understand this senario- You are looking at a gross unrisked potential of 45TCF at BBW, BBE and Lafitte? Would that equal 45 new wells producing 100bcf a day? or would you have to take MMR % and devide by an avaerage of 50%, so the wells would have to produce 200BCF a day or have 90 new wells drilled? How many years would it take MMR to drill 45 or 90 new wells and produce them?? This is one of the reasons I had always hoped for CVX to buy MMR and not FCX.
This just seems like poppy #\$%\$ dream land. MMR is having a hard time producing just one well and the costs for one well is close to ~1Bln. Is the MMR RT net revenue or Gross revenue? I believe TISDZ is Gross revenue?

Thanks

Sentiment: Hold

• First time I've seen size on both sides.....25000 on bid @ \$.701 and 16700 on ask @ \$.71. From these levels this will get fun with any successful SUD completion on their lease or not.

• Thanks for that from the call sponge bob. I also thought they were gonna sit around and let Chevron complete first because of the line in the 1/18 press release:

"McMoRan plans to incorporate
potential core and log data from Lineham Creek in evaluating future plans at Davy Jones."

• I do think they will complete SS188. They ran casing to the bottom and I believe they said they were going to attempt to complete the laminated sand section at around 24,000'. If that does not work out, they will move up to the low resistivity sands. Then, they got the coffee grinds just under the cupola. They would take even marginal production if it will hold the lease for some time.

As to the LC comment - I think it pertains to applying to completing DJ2 and even future development well locations on the DJ structure. They need all the info they can get on this new frontier play. Remember, the early fracking wells were not that great and took quite a bit of time, experimenting, and data to improve the process to where it is today. I suspect the UD will be the same way.

• I think the fact that TISDZ is so thin eliminates it from being a trading vehicle. If good things happen, thin is good.....BMLC is a perfect example.

• bubba, when will it start to pay, and doesn't it have to pay off debt and administrative costs that are piled up. So, really two questions: is anything flowing and if it does, how long to get revenue distribution.? Estimates. Because even if MMR RT is more diluted, yet larger, isn't it likely to give a distribution sooner which would create another matrix and PV of money consideration. It might even generate enough revenue prior to TISDZ to actually purchase a stake in TISDZ, adding another strategy.

• Just wondering bubba because I think you are more aware than I as I perceive. TISDZ down from over 2 to .73 in 2 years, so SH must be getting tired of no action or return. I like the price now, but just don't want to be stagnant waiting for a payout. I get the long term notion, but what about 2 years. PV of a substantial investment in TISDZ instead of conservative dividend growth for two years seems to risk maybe 30% return from alternative investments making TISDZ cost even higher, Do you think this is why a major holder is selling.? Because of inactivity risk being too long.?

• Thanks for the math update - another reason why I'm happy I just bought 1,000 of TISDZ @ .78.

Sentiment: Strong Sell

• you did not factor in the royalty rate differential. But ,adjusting for that , your calculation of the relative value is spot on. TISDZ @ 1.25% . MMR RT @ 5 % x 65 % = 3.25 %. MMR RT's ORRI is 2.6x higher.