Reuters: Freeport-McMoRan to exit oil and gas sector

Offshore staff

NEW YORK and PHOENIX, Arizona - Freeport-McMoRan Inc. plans to auction off the majority of its oil and gas assets in the upcoming year, Reuters reports.

Reuters says the Freeport-McMoRan oil and gas unit could be worth more than $3 billion in a potential sale. It also noted that Freeport-McMoRan had incurred debt following its recent entrance into oil and gas due to the oil price crisis and resulting market conditions. Oil traded at $37 yesterday, falling to an 11-year low.

The company entered the oil and gas sector in 2013, when it acquired Plains Exploration & Production Co. and McMoRan Exploration Co. Its oil and gas portfolio includes holdings in the deepwater Gulf of Mexico, along with some onshore assets in California, Wyoming, and Louisiana.

Should Freeport-McMoRan exit the oil and gas sector, it would be left with its mining assets, which include gold, copper, and cobalt.

Capex reductions

Earlier this month, Freeport-McMoRan Oil & Gas (FM O&G) said it would defer investments in several long-term projects in response to current market conditions. It also announced further reductions in its capital expenditures for 2016 and 2017, cutting to from $2 billion per year in 2016 - 2017 to $1.8 billion in 2016 and $1.2 billion in 2017 (including idle rig costs). The company said these revised plans, together with initiatives to obtain third-party financing or other alternatives, will be pursued with the goal of achieving funding for oil and gas capital spending within its cash flows and resources.

The company also said its revised plans incorporate a reduction in rig utilization from three deepwater Gulf of Mexico drillships to one, while increasing production from its 3Q 2015 rates of 150 MMboe/d to an average of 159 MMboe/d in 2016 and 2017. At that time, FM O&G said it expected to bring eight wells on line in late 2015 and 2016 from its tieback drilling operations at the Holstein Deep, Horn Mountain, and King projects in the deepwater Gulf of Mexico. Under the revised plans, FM O&G said its cash flows would substantially fund its capital expenditures at $45/bbl of Brent crude oil in 2017.

An ongoing review of its oil and gas business was announced by Freeport-McMoRan in October, which aims to evaluate alternative courses of action designed to improve its financial position and achieve self-funding of its oil and gas business from its cash flows and resources.

Leadership change

Freeport-McMoRan announced today that James R. Moffett, chairman of the board and co-founder, will step down from its board of directors and as executive chairman. Moffett, who has been named Chairman Emeritus, has agreed to become a consultant to Freeport-McMoRan’s board, including providing advisory services.  

The board has elected Gerald J. Ford as non-executive chairman. Ford has served as Lead Independent Director since 2013.


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