UPDATE 3-McMoRan sees Davy Jones wells test on target; shares up
* Sees 2011 average daily output at 187 mmcfe/d, up from 175
mmcfe/d earlier* Sees Q4 average daily production at 170 mmcfe/d* Shares up as much as 9 percentBy Sumit JhaOct 17 (Reuters) - McMoRan Exploration Co said it is
on schedule to conduct tests to extract hydrocarbon at its Davy
Jones wells in the Gulf of Mexico shelf, sending its shares up
as much as 9 percent.The company said on a conference call with analysts that it
expects to complete the flow test to extract hydrocarbon from
the Davy Jones No. 1 well by the end of this year and for Davy
Jones No. 2 well by the end of second half of 2012.”They made a lot of progress getting the equipment into the
field for the flow test. They have got the jacket
under-construction, the platform is heading out there and a rig
is heading out there. And they are saying everything is on
schedule. The company is very optimistic that it will work,”
analyst Leo Mariani of RBC Capital Markets told Reuters.The Davy Jones No. 1 well showed presence of oil and gas in
200 net feet of sand, while the Davy Jones No. 2 well confirmed
120 net feet of oil and gas bearing sands, the Gulf of
Mexico-focused mid-cap said.In February, McMoRan, which operates some of the deepest
wells in the world, had said it discovered a new
hydrocarbon-bearing sand at its ultra-deep Davy Jones prospect.The company’s high-profile, expensive operations like Davy
Jones, Blueberry Hill and Blackbeard East are expected to have
between 3-5 trillion cubic feet equivalent in reserves.The company also said its third ultra-deep exploration well,
Lafitte, has 115 net feet of hydrocarbon-bearing sands.McMoRan holds a 72 percent working interest and a 58.3
percent net revenue interest in Lafitte, which it started
drilling in October last year.The company also raised its 2011 capex outlook to $500-550
million, and said it will cut costs in deeper wells.NARROWER Q3 LOSSMcMoRan posted a narrower-than-expected third-quarter loss
helped by a rise in quarterly output, prompting the oil and
natural gas company to raise its full-year production forecast.The company now sees average daily production for the year
at about 187 million cubic feet of natural gas equivalents per
day (mmcfe/d), up from its prior forecast of 175 mmcfe/d.It expects fourth-quarter average daily output to be 170
mmcfe/d.McMoRan said production averaged 187 mmcfe/d in the third
quarter, compared with 146 mmcfe/d a year ago.Third-quarter loss was $9.4 million, or 6 cents per share,
compared with a net loss $25.3 million, or 26 cents per share, a
year ago.Quarterly revenue rose 46 percent to $138.1 million.Analysts on average had expected a loss of 16 cents a share,
on revenue of $124.8 million.Shares of the New Orleans, Louisiana-based company were up 3
percent at $11.66, after climbing to a high of $12.27 earlier.
PCCW telecoms spinoff paves way for Li to pursue media dreams
But whether Li can become Hong Kong’s Rupert Murdoch remains
unclear given the financial constraints of PCCW, stiff
competition in the media industry, and regulations in Hong Kong
and China that could tie his hands, industry executives say.Li, the younger son of Hong Kong’s best-known tycoon Li
Ka-shing, is expected to expand his television business in Hong
Kong and China in what’s left of PCCW Ltd, which consists of
pay-TV operator Now TV, a solutions business and some property
assets.He will be keen to delve into media-related business in
China and expand the company’s Hong Kong footprint after PCCW
obtains a free-to-air TV licence, which will help boost its TV
advertising revenue, industry executives say.”Richard Li has always been more interested in media than
the telecoms business,” said a banker in Hong Kong on condition
of anonymity. “In his mind, it’s a valuable business, but
whether the public will look at it the same way will depend on
how much cash he can generate for the business.”Although born with a silver spoon in his mouth, Li wants to
be a self-made man rather than rely on daddy’s pocket.Li’s life has been nothing short of conventional. He worked
shifts at McDonalds, according to some media reports, and has
fathered three children with his ex-girlfriend, former Hong Kong
movie star Isabella Leong.His career has had its share of ups and downs.He first ventured into the media business in the 1990s and
made a huge splash in one of his early deals.The crew-cut, bespectacled executive started the satellite
network Star TV in the mid-1980s which he sold to media mogul
Murdoch for $950 million in 1995, just before turning 30. He
used the money to set up a company that eventually became PCCW.In 2000, Li beat Singapore Telecommunications Ltd
in a deal to buy Cable & Wireless HKT for more than $30 billion,
aiming to create a telecoms powerhouse. However the deal proved
too big for Li to swallow with the telecoms unit bleeding money
for years.Hence Li’s decision to spin off and list the unit in the
form of HKT Trust.Last month, PCCW issued a prospectus on the spinoff plan,
aiming to raise HK$6.8 billion to HK$10 billion, assuming a
minimum market capitalisation of HK$28.6 billion ($3.68
billion). PCCW will retain control of the trust by keeping an
interest of 55-70 percent.Analysts say the high valuation and minimum market
capitalisation restriction could be a stumbling block in the
upcoming initial public offering of units in the trust.”I don’t think the vote (by shareholders) is a problem,”
said Macquarie analyst Lisa Soh. “What I think is a problem is
the market cap restriction, because the current share price of
PCCW alone would indicate that it’s not going to happen.”PCCW shares ended up nearly 4 percent on Tuesday, taking the
company’s market value to HK$21 billion, substantially lower
than the projected value of its telecoms asset. Daiwa Capital
Markets valued the remainder PCCW at about HK$23.5 billion if it
offers a 30 percent stake.Under current volatile market conditions, PCCW will likely
wait before setting a date for HKT Trust’s listing.If PCCW managed to raise more than HK$7.8 billion, it would
likely use the proceeds to expand its business, apart from
paying off the telecoms unit’s mountain of debt, the company
said.”Li’s focus will be on mainland China because he already has
invested in PPstream, so I think Li is looking at the Hong Kong
and China markets,” said Daiwa Capital Markets analyst Alan Kam.In Hong Kong, Li owns the Chinese-language Hong Kong
Economic Journal, although he will probably be unable to inject
the asset into PCCW due to local media regulations.Therefore TV will be Li’s focus.PCCW is among the few TV operators that have already applied
for a licence to provide free-to-air television services in Hong
Kong, which will challenge the dominance of Television
Broadcasts Ltd (TVB) .”Now TV is still very small and the free TV market is about
HK$4 billion in terms of advertising revenue, and it’s dominated
by TVB,” said Standard Chartered analyst Steven Liu. “If three
more operators get licences, competition will be fierce.”There could be more acquisitions in store, although Li will
have to make a good sales pitch to convince PCCW shareholders,
such as China Unicom (Hong Kong) Ltd . In 2006 China
Netcom, now owned by China Unicom, objected to Li’s plan to sell
PCCW’s core assets to U.S. buyout firm TPG and Australia’s
Macquarie Group Ltd. .
($1 = 7.782 Hong Kong dollars)
