McMoRan Exploration Shares Got Crushed: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of McMoRan Exploration (NYSE: MMR  ) plummeted 15% on Tuesday after the offshore energy company reported a malfunction at its Davy Jones prospect.

So what: Much of McMoRan's future hopes ride largely on the success of Davy Jones, so the news is triggering serious concerns over the company's prospects. According to management, the Davy Jones field has the potential to be one of the Gulf of Mexico's largest, but today's hiccup serves as yet another reminder of the huge risks associated with deepwater drilling.   

Now what: I'd look into this pullback as a possible buying opportunity. Stomach-churning, patience-trying technical difficulties are all part of the deepwater drilling game, but the long-term upside is often worth the stress. When you couple McMoRan's beaten-down stock price with Davy Jones' still-exciting potential, the risk/reward trade-off seems particularly attractive at this point.   

Interested in more info on McMoRan? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

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  • Report this Comment On March 27, 2012, at 11:57 AM, fitzglud wrote:

    Does anyone know the nature of the malfunction? Is it a matter of replacing some equipment or abandoning the project?

    A 25% drop in price in 2 days seems an over reaction. I picked up some shares today.

    Carl C

  • Report this Comment On March 27, 2012, at 9:52 PM, jdoig wrote:

    Brian P - Ahhhh, FYI, this is a DEEP well, but it is NOT a DEEPWATER well. It's is ~ 40' water depth off the near LA coast. somewhat less risky, but risky neverthless becasue of the extreme depth (~30,000 ft)

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