Freeport-McMoRan restructures board, reviews strategic alternatives for O&G business

Freeport-McMoRan Inc. (NYSE: FCX) has reduced the size of its board, and is undertaking a review of strategic alternatives for its oil and gas business, following discussions with many of its largest shareholders.

On Oct. 6, the company stated that its reconstituted FCX board comprised seven independent directors: Gerald J. Ford (lead independent director), Robert A. Day, Lydia H. Kennard, Jon C. Madonna, Dustan E. McCoy, Stephen H. Siegele, and Frances Fragos Townsend – and two executive directors: James R. Moffett, chairman; and Richard C. Adkerson, vice chairman, president, and CEO. In addition, the company will no longer have an Office of the Chairman management structure.

On Wednesday, Freeport-McMoRan said it had entered into an agreement with investor Carl C. Icahn and his affiliates. In connection with this agreement, Andrew Langham and Courtney Mather have been appointed to FCX’s board of directors. With these additions, the FCX board, formerly comprising 16 directors, now has 11 members – nine independent directors, and two executive directors.

Langham has been general counsel of Icahn Enterprises LP since January and was previously assistant general counsel since 2005. Mather has served as a managing director of Icahn Capital LP since April 2014. Icahn, together with his affiliates, beneficially owns approximately 100 million shares of FCX common stock, which represents 8.8% of FCX’s outstanding shares.

FCX also said this week that its board has undertaken a strategic review of its oil and gas business (FM O&G) to evaluate alternative courses of action designed to enhance value to FCX shareholders and achieve self-funding of the oil and gas business from its cash flows and resources. The previously announced potential public offering of a minority interest in FCX’s oil and gas business remains an alternative for future consideration, the timing of which is subject to market conditions.

Other alternatives currently under consideration include a spinoff of FCX’s oil and gas business to its shareholders, joint venture arrangements, and further spending reductions. The oil and gas strategic review is being undertaken with an objective of improving FCX’s financial position and enhancing long-term value for its shareholders.

In preparation of considering a separation of the oil and gas business, five directors have left the FCX board and have been appointed to the FM O&G board of directors. James C. Flores has been named FM O&G chairman and remains CEO of FM O&G. Joining Flores on the FM O&G board are Robert J. Allison Jr., Alan R. Buckwalter III, Thomas A. Fry III, and Charles C. Krulak. H. Devon Graham Jr. and Bobby Lee Lackey have retired from the FCX board.

FCX’s strategy will focus on its global position in the copper industry. Near term, this strategy will involve managing its production activities, spending on capital projects and operations, and the administration of its business to enhance cash flows and protect liquidity. While taking near-term steps responsive to the currently weak market conditions, FCX says it remains confident about the longer-term outlook for copper prices based on the global demand and supply fundamentals, and that a primary objective will be a reduction over time of FCX’s current debt level.

FCX's portfolio of oil and gas assets includes US oil and natural gas assets in the deepwater Gulf of Mexico, onshore and offshore California, and in the Haynesville natural gas shale, and a position in the Inboard Lower Tertiary/Cretaceous natural gas trend onshore in south Louisiana.

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