We do not control McMoRan’s assets and operations and the value of our investment in
McMoRan’s common stock is subject to all of the risks and uncertainties inherent in McMoRan’s
business, which include, but are not limited to, the following:
• general economic and business conditions;
• variations in the market demand for, and prices of, oil and natural gas;
• drilling results;
• unanticipated fluctuations in flow rates of producing wells due to mechanical or operational
issues (including those experienced by wells operated by third parties where McMoRan is a
participant);
• oil and natural gas reserve expectations;
• the potential adoption of new governmental regulations;
• the failure of third party partners to fulfill their commitments;
• the ability to hold current or future lease acreage rights;
• the ability to satisfy future cash obligations and environmental costs;
• adverse conditions, such as high temperatures and pressure that could lead to mechanical
failures or increased costs;
• access to capital to fund drilling activities;
• other general exploration and development risks and hazards inherent in the production of oil
and natural gas;
• tropical storms, hurricanes and other adverse weather conditions, which are common in the
Gulf of Mexico during certain times of the year;
• the exercise of preferential rights by third parties; and
• other factors discussed in McMoRan’s Annual Report on Form 10-K and as are included from
time to time in McMoRan’s public announcements and other filings with the SEC.
For the reasons described above, we may not realize an adequate return on our investment and
we may incur losses on sales of our investment. We have elected to measure our equity investment in
McMoRan at fair value. As a result, unrealized gains and losses on the investment will be reported in
our consolidated statement of income, which could result in volatility in our earnings. If we are required
to write down the value of our investment, it could reduce our net income, result in losses and have a
significant impact on our working capital. The value of our investment in shares of McMoRan common
stock is subjective. Declines in the valuation of our investment may result in other than temporary
impairments of this asset, which would lead to accounting charges that could have a material adverse
effect on our net income and results of operations.
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