Freeport-McMoRan Inc. (NYSE: FCX):
- Net income attributable to
common stock totaled $482 million, $0.46 per share, for
second-quarter 2014, compared with net income of $482 million,
$0.49 per share, for second-quarter 2013. Net income attributable
to common stock for the first six months of 2014 totaled $992
million, $0.95 per share, compared with $1.1 billion, $1.17 per
share, for the first six months of 2013.
- Consolidated sales for
second-quarter 2014 totaled 968 million pounds of copper, 159
thousand ounces of gold, 25 million pounds of molybdenum and 16.0
million barrels of oil equivalents (MMBOE), compared with
second-quarter 2013 sales of 951 million pounds of copper, 173
thousand ounces of gold, 23 million pounds of molybdenum and 5.0
MMBOE (reflecting oil and gas results beginning June 1, 2013).
- Consolidated sales for the year
2014 are expected to approximate 4.1 billion pounds of copper, 1.3
million ounces of gold, 98 million pounds of molybdenum and 58.4
MMBOE, including 1.1 billion pounds of copper, 445 thousand ounces
of gold, 23 million pounds of molybdenum and 12.2 MMBOE for
third-quarter 2014.
- Average realized prices for
second-quarter 2014 were $3.16 per pound for copper (compared with
$3.17 per pound for second-quarter 2013), $1,296 per ounce for gold
(compared with $1,322 per ounce for second-quarter 2013) and $95.50
per barrel for oil (net of $4.96 per barrel associated with
payments on derivative contracts).
- Consolidated unit net cash costs
for second-quarter 2014 averaged $1.72 per pound of copper for
mining operations (compared with $1.85 per pound of copper for
second-quarter 2013) and $19.57 per barrel of oil equivalents (BOE)
for oil and gas operations (compared with $16.58 per BOE for June
2013).
- Operating cash flows totaled
$1.4 billion (net of $364 million in working capital uses and
changes in other tax payments) for second-quarter 2014, and $2.6
billion (net of $777 million in working capital uses and changes in
other tax payments) for the first six months of 2014. Based on
current sales volume and cost estimates and assuming average prices
of $3.25 per pound for copper, $1,300 per ounce for gold, $12 per
pound for molybdenum and $110 per barrel for Brent crude oil for
the second half of 2014, operating cash flows are expected to
approximate $6.8 billion (net of $0.6 billion of working capital
uses and changes in other tax payments) for the year 2014.
- Capital expenditures totaled
$2.0 billion for second-quarter 2014 and $3.6 billion for the first
six months of 2014, including $1.4 billion for major projects at
mining operations and $1.5 billion for oil and gas operations.
Capital expenditures are expected to approximate $7.6 billion for
the year 2014, including $3.2 billion for major projects at mining
operations and $3.4 billion for oil and gas operations.
- In June 2014, FCX completed the
sale of its Eagle Ford shale assets for $3.1 billion (before
closing adjustments) and acquired additional interests in
the Deepwater Gulf of Mexico (GOM) for $0.9 billion.
- At June 30, 2014, consolidated
cash totaled $1.5 billion and consolidated debt totaled
$20.3 billion. On July 23, 2014, FCX redeemed $1.7 billion
of the aggregate face amount of senior notes.
- The corporate name changed to
Freeport-McMoRan Inc. effective July 14, 2014. The change
simplifies the corporate name and better reflects FCX's expanded
portfolio of assets.
Freeport-McMoRan Inc. (NYSE: FCX) reported net income
attributable to common stock of $482 million, $0.46 per share, for
second-quarter 2014, compared with $482 million, $0.49 per share,
for second-quarter 2013 and $992 million, $0.95 per share, for the
first six months of 2014, compared with $1.1 billion, $1.17 per
share, for the first six months of 2013. FCX’s net income
attributable to common stock for second-quarter 2014 included
charges of $130 million ($0.12 per share) comprised of $68 million
for environmental obligations and related litigation charges, $58
million for deferred taxes recorded in connection with the
allocation of goodwill to the sale of Eagle Ford and $4 million for
net noncash mark-to-market losses on oil and gas derivative
contracts. Second-quarter 2013 net income attributable to common
stock included net gains of $242 million ($0.25 per share) related
to the oil and gas acquisitions, partly offset by net noncash
mark-to-market losses on oil and gas derivative contracts.
James R. Moffett, Chairman of the Board; Richard C. Adkerson,
Vice Chairman, and FCX President and Chief Executive Officer; and
James C. Flores, Vice Chairman, and FM O&G President and Chief
Executive Officer, said, "Our second-quarter results reflect
continued strong operating performance in our North America, South
America and Africa mining operations and from our oil and gas
operations, partly offset by the effects of reduced output from
Indonesia. We are encouraged by our discussions with the Indonesian
government toward reaching a near-term agreement to enable
resumption of PT Freeport Indonesia’s copper concentrate exports.
During the quarter, we completed a $3.1 billion sale of our Eagle
Ford shale assets and acquired additional interests in our
Deepwater Gulf of Mexico focus area. We also commenced copper
production from our expanded Morenci operation and achieved
important progress in our mining and oil and gas development
projects to provide future growth in production, cash flows and
attractive investment returns. We remain focused on our
opportunities to increase value for shareholders through the
development of our large resource base, effective management of our
operations, prudent capital and balance sheet management, and
providing attractive cash returns to shareholders."
SUMMARY FINANCIAL DATA
Three Months Ended Six Months Ended June
30, June 30, 2014
2013a 2014
2013a (in millions, except per share
amounts) Revenuesb $ 5,522
c,d
$ 4,288 c,d $ 10,507 c,d $ 8,871
c,d Operating incomeb $ 1,153 e,f $ 639 f,g $ 2,264 e,f $ 1,994 f,g
Net income attributable to common stockh $ 482 c,d,e,f,i,j $ 482
c,d,f,g,k $ 992 c,d,e,f,i,j $ 1,130 c,d,f,g,j,k Diluted net income
per share of common stock $ 0.46 c,d,e,f,i,j $ 0.49 c,d,f,g,k $
0.95 c,d,e,f,i,j $ 1.17 c,d,f,g,j,k Diluted weighted-average common
shares outstanding 1,045 984 1,045 968 Operating cash flowsl $
1,386 $ 1,034 $ 2,587 $ 1,865 Capital expendituresb $ 1,950 $ 1,173
$ 3,562 $ 1,978 At June 30: Cash and cash equivalents $ 1,458 $
3,294 $ 1,458 $ 3,294 Total debt, including current portion $
20,296 $ 21,215 $ 20,296 $ 21,215
a. The 2013 periods reflect the results of
FCX Oil & Gas Inc. (FM O&G) beginning June 1, 2013.
b. For segment financial results, refer to
the supplemental schedule, "Business Segments," beginning on page
XI, which is available on FCX's website, "www.fcx.com."
c. Includes favorable (unfavorable)
adjustments to provisionally priced concentrate and cathode copper
sales recognized in prior periods totaling $35 million ($16 million
to net income attributable to common stock or $0.01 per share) for
second-quarter 2014, $(117) million ($(55) million to net income
attributable to common stock or $(0.06) per share) for
second-quarter 2013, $(118) million ($(65) million to net income
attributable to common stock or $(0.06) per share) for the first
six months of 2014 and $(26) million ($(12) million to net income
attributable to common stock or $(0.01) per share) for the first
six months of 2013. For further discussion, refer to the
supplemental schedule, "Derivative Instruments," on page X, which
is available on FCX's website, "www.fcx.com."
d. Includes net noncash mark-to-market
(losses) gains associated with crude oil and natural gas derivative
contracts totaling $(7) million ($(4) million to net income
attributable to common stock or less than $(0.01) per share) for
second-quarter 2014, $8 million ($5 million to net income
attributable to common stock or less than $0.01 per share) for the
first six months of 2014 and $(36) million ($(23) million to net
income attributable to common stock or $(0.02) per share) for June
2013. For further discussion, refer to the supplemental schedule,
"Derivative Instruments," on page X, which is available on FCX's
website, "www.fcx.com."
e. Includes fixed costs charged directly
to cost of sales as a result of the impact of export restrictions
on PT Freeport Indonesia's (PT-FI) operating rates totaling $56
million ($30 million to net income attributable to common stock or
$0.03 per share) for second-quarter 2014 and $109 million ($58
million to net income attributable to common stock or $0.06 per
share) for the first six months of 2014.
f. Includes net charges for adjustments to
environmental obligations and related litigation reserves of $69
million ($68 million to net income attributable to common stock or
$0.06 per share) for the second quarter and first six months of
2014, $3 million ($2 million to net income attributable to common
stock or less than $0.01 per share) for second-quarter 2013 and $7
million ($7 million to net income attributable to common stock or
$0.01 per share) for the first six months of 2013.
g. Includes charges of $61 million ($46
million to net income attributable to common stock or $0.05 per
share) for second-quarter 2013 and $75 million ($57 million to net
income attributable to common stock or $0.06 per share) for the
first six months of 2013 for transaction and related costs
principally associated with FCX's second-quarter 2013 oil and gas
acquisitions.
h. FCX defers recognizing profits on
intercompany sales until final sales to third parties occur. For a
summary of net impacts from changes in these deferrals, refer to
the supplemental schedule, "Deferred Profits," on page XI, which is
available on FCX's website.
i. The second quarter and first six months
of 2014 includes a charge of $58 million to net income attributable
to common stock, or $0.06 per share, associated with deferred taxes
recorded in connection with the allocation of goodwill to the sale
of Eagle Ford.
j. Includes net gains (losses) on early
extinguishment of debt totaling $5 million ($4 million to net
income attributable to common stock or less than $0.01 per share)
in the second quarter and first six months of 2014 primarily
related to the redemption of senior notes and $(45) million ($(39)
million to net income attributable to common stock or $(0.04) per
share) for the first six months of 2013 related to the termination
of the acquisition bridge loan facilities.
k. The second quarter and first six months
of 2013 include gains associated with the oil and gas acquisitions,
including $128 million to net income attributable to common stock
or $0.13 per share, primarily related to FCX's preferred stock
investment in and the subsequent acquisition of McMoRan Exploration
Co., and $183 million to net income attributable to common stock or
$0.19 per share, associated with net reductions in FCX's deferred
tax liabilities and deferred tax asset valuation allowances.
l. Includes net working capital (uses)
sources and changes in other tax payments of $(364) million for
second-quarter 2014, $235 million for second-quarter 2013, $(777)
million for the first six months of 2014 and $(195) million for the
first six months of 2013.
SUMMARY OPERATING DATA
Three Months Ended Six Months Ended June 30,
June 30, 2014
2013a 2014
2013a Copper (millions of recoverable pounds)
Production 931 909 1,879 1,889 Sales, excluding
purchases 968 951 1,839 1,905 Average realized price per pound $
3.16 $ 3.17 $ 3.17 $ 3.29 Site production and delivery costs per
poundb $ 1.99 $ 2.11 $ 1.94 $ 2.02 Unit net cash costs per poundb $
1.72 $ 1.85 $ 1.64 $ 1.71
Gold (thousands of recoverable
ounces) Production 166 151 397 386 Sales, excluding purchases 159
173 346 387 Average realized price per ounce $ 1,296 $ 1,322 $
1,299 $ 1,434
Molybdenum (millions of recoverable pounds)
Production 25 24 49 46 Sales, excluding purchases 25 23 52 48
Average realized price per pound $ 13.43 $ 12.35 $ 12.27 $ 12.56
Oil Equivalents Sales volumes: MMBOE 16.0 5.0 32.2 5.0
Thousand BOE (MBOE) per day 176 169 178 169 Cash operating margin
per BOE:c Realized revenues $ 77.53 $ 74.37 $ 77.37 $ 74.37 Cash
production costs 19.57 16.58 19.03 16.58 Cash
operating margin $ 57.96 $ 57.79 $ 58.34 $
57.79
a. The 2013 periods reflect the results of
FM O&G beginning June 1, 2013.
b. Reflects per pound weighted-average
production and delivery costs and unit net cash costs (net of by-
product credits) for all copper mines, excluding net noncash and
other costs. Site production and delivery and unit net cash costs
exclude $0.06 per pound of copper for the second quarter and first
six months of 2014 for fixed costs charged directly to cost of
sales as a result of the impact of export restrictions on PT-FI's
operating rates. For reconciliations of per pound unit costs by
operating division to production and delivery costs applicable to
sales reported in FCX's consolidated financial statements, refer to
the supplemental schedule, "Product Revenues and Production Costs,"
beginning on page XIV, which is available on FCX's website,
"www.fcx.com."
c. Cash operating margin for oil and gas
operations reflects realized revenues less cash production costs.
Realized revenues exclude noncash mark-to-market adjustments on
derivative contracts, and cash production costs exclude accretion
and other costs. For reconciliations of realized revenues and cash
production costs per BOE to revenues and production and delivery
costs reported in FCX's consolidated financial statements, refer to
the supplemental schedule, “Product Revenues and Production Costs,”
beginning on page XIV, which is available on FCX's website,
“www.fcx.com.”
Consolidated Sales Volumes
Second-quarter 2014 consolidated copper sales of 968
million pounds were higher than second-quarter 2013 sales of 951
million pounds, but lower than the April 2014 estimate of 1.1
billion pounds (which assumed resuming PT-FI exports in May).
Second-quarter 2014 consolidated gold sales of 159 thousand
ounces were lower than second-quarter 2013 sales of 173 thousand
ounces and the April 2014 estimate of 320 thousand ounces (which
assumed resuming PT-FI exports in May). Lower copper and gold sales
volumes, compared to the April 2014 estimates, primarily reflected
continued restrictions on concentrate exports from Indonesia. These
restrictions resulted in a deferral of approximately 150 million
pounds of copper and 240 thousand ounces of gold in second-quarter
2014 and 275 million pounds of copper and 380 thousand ounces of
gold for the first six months of 2014.
Second-quarter 2014 consolidated molybdenum sales of 25
million pounds were higher than second-quarter 2013 sales of 23
million pounds and the April 2014 estimate of 24 million
pounds.
Second-quarter 2014 sales from oil and gas operations of 16.0
MMBOE, including 11.7 million barrels (MMBbls) of crude oil,
20.3 billion cubic feet (Bcf) of natural gas and 1.0 MMBbls
of natural gas liquids (NGLs), were higher than the April
2014 estimate of 15.2 MMBOE primarily reflecting higher production
volumes from Eagle Ford and the Deepwater GOM. Second-quarter 2014
volumes included 4.0 MMBOE of sales from the Eagle Ford field
through June 19, 2014.
In January 2014, the Indonesian government published regulations
regarding exports of minerals, including copper concentrates. The
regulations provide that holders of contracts of work with existing
processing facilities in Indonesia could continue to export product
through January 12, 2017, but established new requirements for the
continued export of copper concentrates, including the development
of domestic smelter and refining facilities and the imposition of a
progressive export duty on copper concentrates. To date, PT-FI has
not received authorization from the Indonesian government to export
copper concentrate.
The Indonesian government is also seeking to amend PT-FI’s
Contract of Work (COW) to incorporate changes pursuant to
Indonesia’s 2009 mining law and subsequent regulations. PT-FI and
the Indonesian government have developed a Memorandum of
Understanding (MOU), expected to be signed imminently, that
addresses provisions in PT-FI’s COW related to the size of PT-FI’s
concession area, royalties and taxes, domestic processing and
refining, divestment, local content, and continuation of operations
post-2021. The MOU would enable the immediate resumption of
exports. Refer to page 8 for further discussion of these regulatory
matters.
Consolidated sales for the year 2014 are expected to approximate
4.1 billion pounds of copper, 1.3 million ounces of gold, 98
million pounds of molybdenum and 58.4 MMBOE, including 1.1 billion
pounds of copper, 445 thousand ounces of gold, 23 million pounds of
molybdenum and 12.2 MMBOE for third-quarter 2014. These estimates
assume resumption of exports from PT-FI beginning in August 2014.
To the extent PT-FI is unable to resume exports in August 2014,
this would result in a deferral of approximately 50 million pounds
of copper and 80 thousand ounces of gold per month.
Consolidated Unit Costs
Mining Unit Net Cash Costs. Consolidated average unit net cash
costs (net of by-product credits) for FCX's copper mines of $1.72
per pound of copper in second-quarter 2014 were lower than unit net
cash costs of $1.85 per pound in second-quarter 2013 primarily
reflecting higher North America sales volumes, but were higher than
the April 2014 estimate of $1.58 per pound because of lower sales
volumes from Indonesia. Second-quarter 2014 consolidated average
unit net cash costs excluded $0.06 per pound of copper for fixed
costs charged directly to cost of sales as a result of the impact
of export restrictions on PT-FI's operating rates.
Assuming average prices of $1,300 per ounce of gold and $12 per
pound of molybdenum for the second half of 2014 and achievement of
current sales volume and cost estimates, which assumes the
resumption of exports from PT-FI beginning in August 2014,
consolidated unit net cash costs (net of by-product credits) for
copper mines are expected to average $1.44 per pound of copper in
third-quarter 2014 and $1.50 per pound for the year 2014. Quarterly
unit net cash costs vary with fluctuations in sales volumes and
average realized prices (primarily gold and molybdenum prices). The
impact of price changes for the second half of 2014 on consolidated
unit net cash costs would approximate $0.013 per pound for each $50
per ounce change in the average price of gold and $0.01 per pound
for each $2 per pound change in the average price of
molybdenum.
Oil and Gas Cash Production Costs per BOE. Cash production costs
for oil and gas operations of $19.57 per BOE in second-quarter 2014
were higher than cash production costs of $16.58 per BOE in June
2013 primarily because of higher operating costs in California.
Based on current sales volume and cost estimates for the second
half of 2014, cash production costs are expected to approximate $22
per BOE for the second half of 2014 and $20 per BOE for the year
2014.
MINING OPERATIONS
North America Copper Mines. FCX operates seven open-pit
copper mines in North America - Morenci, Bagdad, Safford, Sierrita
and Miami in Arizona, and Chino and Tyrone in New Mexico. All of
the North America mining operations are wholly owned, except for
Morenci. FCX records its 85 percent joint venture interest in
Morenci using the proportionate consolidation method. In addition
to copper, molybdenum concentrates are also produced by certain of
FCX's North America copper mines.
Operating and Development Activities. FCX has increased
production from its North America copper mines in recent years and
continues to evaluate a number of opportunities to invest in
additional production capacity following positive exploration
results. Future investments will be undertaken based on the results
of economic and technical feasibility studies and market
conditions.
At Morenci, start-up activities from the expanded mill project
began in second-quarter 2014. Commissioning activities commenced in
May 2014, with a ramp up to full rates expected to be achieved by
year-end 2014. The project targets average incremental annual
production of approximately 225 million pounds of copper (an
approximate 40 percent increase from 2013) through an increase in
milling rates from 50,000 metric tons of ore per day to
approximately 115,000 metric tons of ore per day. At full rates,
Morenci's copper production is expected to approach 1 billion
pounds in 2015, compared with 564 million pounds in 2013.
Construction of the new mill is substantially complete.
Remaining items include completion of the molybdenum circuit, which
would add capacity of approximately 9 million pounds of molybdenum
per year, and the construction of an expanded tailings storage
facility, which is expected to be completed in 2015.
Operating Data. Following is summary consolidated operating data
for the North America copper mines for the second quarters and
first six months of 2014 and 2013:
Three Months Ended Six Months
Ended June 30, June 30, 2014
2013 2014 2013
Copper (millions of recoverable pounds) Production
395 349 780 692 Sales 423 372 794 725 Average realized price per
pound $ 3.16 $ 3.25 $ 3.21 $ 3.41
Molybdenum
(millions of recoverable pounds) Productiona 9 9 17 17
Unit net cash costs per pound of copperb Site
production and delivery, excluding adjustments $ 1.87 $ 2.09 $ 1.87
$ 2.04 By-product credits (0.28 ) (0.25 ) (0.25 ) (0.26 ) Treatment
charges 0.11 0.08 0.12 0.11 Unit net
cash costs $ 1.70 $ 1.92 $ 1.74 $ 1.89
a. Refer to summary operating data on page
4 for FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at the North America copper mines.
b. For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX's consolidated financial statements, refer to
the supplemental schedule, "Product Revenues and Production Costs,"
beginning on page XIV, which is available on FCX's website,
"www.fcx.com."
North America's consolidated copper sales volumes of 423 million
pounds in second-quarter 2014 were higher than second-quarter 2013
sales of 372 million pounds, primarily reflecting higher milling
rates and ore grades at several operating sites. North America's
copper production is expected to continue to increase during the
second half of 2014 with the ramp up of the Morenci mill expansion
project. Copper sales from the North America copper mines are
expected to approximate 1.7 billion pounds for the year 2014,
compared with 1.4 billion pounds in 2013.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.70 per pound of copper in
second-quarter 2014 were lower than unit net cash costs of $1.92
per pound in second-quarter 2013, primarily reflecting higher
copper sales volumes. Average unit net cash costs (net of
by-product credits) for the North America copper mines are expected
to approximate $1.74 per pound of copper for the year 2014, based
on current sales volume and cost estimates and assuming an average
molybdenum price of $12 per pound for the second half of 2014.
North America's average unit net cash costs for the second half of
2014 would change by approximately $0.015 per pound for each $2 per
pound change in the average price of molybdenum.
South America Mining. FCX operates four copper mines in
South America - Cerro Verde in Peru and El Abra, Candelaria and
Ojos del Salado in Chile. FCX owns a 53.56 percent interest in
Cerro Verde, a 51 percent interest in El Abra, and an 80 percent
interest in the Candelaria and Ojos del Salado mining complex. All
operations in South America are consolidated in FCX's financial
statements. In addition to copper, the Candelaria and Ojos del
Salado mines produce gold and silver, and the Cerro Verde mine
produces molybdenum concentrates.
Development Activities. Construction activities associated with
a large-scale expansion at Cerro Verde are in progress. Detailed
project engineering and procurement are substantially complete and
construction is advancing on schedule. The project will expand the
concentrator facilities from 120,000 metric tons of ore per day to
360,000 metric tons of ore per day and provide incremental annual
production of approximately 600 million pounds of copper and 15
million pounds of molybdenum beginning in 2016. As of June 30,
2014, $2.3 billion had been incurred for this project, with
approximately $2.3 billion remaining to be incurred.
FCX continues to evaluate a potential large-scale milling
operation at El Abra to process additional sulfide material and to
achieve higher recoveries. Exploration results in recent years at
El Abra indicate a significant sulfide resource, which could
potentially support a major mill project. Future investments will
be dependent on technical studies, economic factors and global
copper market conditions.
Operating Data. Following is summary consolidated operating data
for the South America mining operations for the second quarters and
first six months of 2014 and 2013:
Three Months Ended Six
Months Ended June 30, June 30, 2014
2013 2014
2013 Copper (millions of recoverable
pounds) Production 300 299 614 597 Sales 310 315 617 600 Average
realized price per pound $ 3.17 $ 3.13 $ 3.16 $ 3.22
Gold (thousands of recoverable ounces) Production 21 19 42
40 Sales 20 21 43 42 Average realized price per ounce $ 1,302 $
1,317 $ 1,302 $ 1,449
Molybdenum (millions of
recoverable pounds) Productiona 2 2 5 4
Unit net cash
costs per pound of copperb Site production and delivery,
excluding adjustments $ 1.64 $ 1.62 $ 1.57 $ 1.62 By-product
credits (0.23 ) (0.24 ) (0.24 ) (0.26 ) Treatment charges 0.18 0.16
0.18 0.17 Royalty on metals 0.01 — — —
Unit net cash costs $ 1.60 $ 1.54 $ 1.51 $
1.53
a. Refer to summary operating data on page
4 for FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at Cerro Verde.
b. For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX's consolidated financial statements, refer to
the supplemental schedule, "Product Revenues and Production Costs,"
beginning on page XIV, which is available on FCX's website,
"www.fcx.com."
South America's consolidated copper sales volumes of 310 million
pounds in second-quarter 2014 were slightly lower than
second-quarter 2013 sales of 315 million pounds, reflecting timing
of shipments. Sales from South America mining are expected to
approximate 1.2 billion pounds of copper for the year 2014, which
are lower than 2013 volumes of 1.3 billion pounds, primarily
reflecting lower ore grades at Candelaria and Cerro Verde.
Unit net cash costs (net of by-product credits) for South
America mining averaged $1.60 per pound of copper in second-quarter
2014 and $1.54 per pound in second-quarter 2013. Average unit net
cash costs (net of by-product credits) for South America mining are
expected to approximate $1.59 per pound of copper for the year
2014, based on current sales volume and cost estimates and assuming
average prices of $1,300 per ounce of gold and $12 per pound of
molybdenum for the second half of 2014.
Indonesia Mining. Through its 90.64 percent owned and
consolidated subsidiary PT-FI, FCX's assets include one of the
world's largest copper and gold deposits at the Grasberg minerals
district in Papua, Indonesia. PT-FI operates a proportionately
consolidated joint venture, which produces copper concentrates that
contain significant quantities of gold and silver.
Development Activities. PT-FI has several projects in progress
in the Grasberg minerals district related to the development of
large-scale, long-lived, high-grade underground ore bodies. In
aggregate, these underground ore bodies are expected to ramp up
over several years to process approximately 240,000 metric tons of
ore per day following the transition from the Grasberg open pit,
currently anticipated to occur in 2017. Development of the Grasberg
Block Cave and Deep Mill Level Zone (DMLZ) underground mines is
advancing to enable DMLZ to commence production in 2015 and the
Grasberg Block Cave mine to commence production in 2017. Over the
next five years, estimated aggregate capital spending on these
projects is currently expected to average $0.9 billion per year
($0.7 billion per year net to PT-FI). As a result of changes in
Indonesian regulatory policy, PT-FI is engaged in discussions with
the Indonesia government regarding the need for legal and fiscal
assurance to support its long-term development plans. PT-FI may
reduce or defer these activities pending resolution of export
restrictions and other Indonesia regulatory matters.
Regulatory Matters. In January 2014, the Indonesian government
published regulations providing that holders of contracts of work
with existing processing facilities in Indonesia could continue to
export product through January 12, 2017, but established new
requirements for the continued export of copper concentrates,
including the development of domestic smelter and refining
facilities and the imposition of a progressive export duty on
copper concentrates in the amount of 25 percent in 2014, rising to
60 percent by mid-2016. To date, PT-FI has not received
authorization from the Indonesian government to export copper
concentrate.
The Indonesian government is also seeking to amend PT-FI’s COW
to incorporate changes pursuant to Indonesia’s 2009 mining law and
subsequent regulations. PT-FI and the Indonesian government have
developed a MOU, expected to be signed imminently, that addresses
provisions in PT-FI’s COW related to the size of PT-FI’s concession
area, royalties and taxes, domestic processing and refining,
divestment, local content, and continuation of operations
post-2021. The MOU would enable the immediate resumption of
exports.
Under the MOU, PT-FI would agree to provide a $115 million
assurance bond to support its commitment for smelter development,
pay reduced export duties that would decline as smelter development
progresses and pay increased royalties of 4 percent for copper and
3.75 percent for gold from the current rates of 3.5 percent for
copper and 1 percent for gold. The MOU provides that PT-FI and
the Indonesian government would commence immediate negotiations for
an amended COW. These negotiations will take into consideration the
need for assurance of legal and fiscal terms for PT-FI to continue
with its large-scale investment program for the development of its
reserves.
As a result of the delay in obtaining approvals for 2014
exports, PT-FI has implemented changes to its operations to align
its concentrate production with PT Smelting’s operating plans.
PT-FI’s milling rate averaged 102,900 metric tons of ore per day in
second-quarter 2014 and 110,400 metric tons of ore per day for the
first six months of 2014, which is approximately half of normal
rates, and resulted in the deferral of approximately 150 million
pounds of copper and 240 thousand ounces of gold in second-quarter
2014 and 275 million pounds of copper and 380 thousand ounces of
gold for the first six months of 2014.
PT-FI's 2014 production estimates assume resumption of exports
beginning in August 2014. In the event that PT-FI is unable to
resume normal operations for an extended period, PT-FI intends to
implement plans to reduce operating costs, defer capital
expenditures and implement workforce reductions.
Operating Data. Following is summary consolidated operating data
for the Indonesia mining operations for the second quarters and
first six months of 2014 and 2013:
Three Months Ended Six Months
Ended June 30, June 30, 2014
2013 2014 2013
Copper (millions of recoverable pounds) Production
122 139 262 358 Sales 117 158 226 356 Average realized price per
pound $ 3.19 $ 3.08 $ 3.15 $ 3.20
Gold (thousands of
recoverable ounces) Production 142 131 350 343 Sales 135 151 297
342 Average realized price per ounce $ 1,294 $ 1,321 $ 1,299 $
1,431
Unit net cash costs per pound of coppera
Site production and delivery, excluding adjustmentsa $ 3.86 $ 3.55
$ 3.60 $ 3.03 Gold and silver credits (1.57 ) (1.20 ) (1.85 ) (1.44
) Treatment charges 0.26 0.23 0.25 0.23 Royalty on metals 0.11
0.13 0.12 0.13 Unit net cash costs $
2.66 $ 2.71 $ 2.12 $ 1.95
a. Site production and delivery and unit
net cash costs exclude fixed costs charged directly to cost of
sales as a result of the impact of export restrictions on PT-FI's
operating rates totaling $0.48 per pound of copper for the second
quarter and first six months of 2014. For a reconciliation of unit
net cash costs per pound to production and delivery costs
applicable to sales reported in FCX's consolidated financial
statements, refer to the supplemental schedule, "Product Revenues
and Production Costs," beginning on page XIV, which is available on
FCX's website, "www.fcx.com."
Indonesia's second-quarter 2014 sales of 117 million pounds of
copper and 135 thousand ounces of gold were lower than
second-quarter 2013 sales of 158 million pounds of copper and 151
thousand ounces of gold, because of lower milling rates as a result
of the continued restrictions on concentrate exports from
Indonesia, which resulted in the deferral of approximately 150
million pounds of copper and 240 thousand ounces of gold in
second-quarter 2014 and 275 million pounds of copper and 380
thousand ounces of gold for the first six months of 2014.
At the Grasberg mine, the sequencing of mining areas with
varying ore grades causes fluctuations in quarterly and annual
production of copper and gold. Sales from Indonesia mining are
expected to approximate 0.7 billion pounds of copper and 1.25
million ounces of gold for the year 2014, compared with 0.9 billion
pounds of copper and 1.1 million ounces of gold for the year 2013.
These estimates assume resumption of exports from PT-FI beginning
in August 2014. To the extent PT-FI is unable to resume exports in
August 2014, this will result in a deferral of approximately 50
million pounds of copper and 80 thousand ounces of gold per month.
Upon a favorable resolution of the restrictions on exports matter,
sales from Indonesia mining are expected to increase through 2016
as PT-FI gains access to higher grade ore.
A significant portion of PT-FI's costs are fixed and unit costs
vary depending on production volumes. During the second quarter and
first six months of 2014, PT-FI operated at approximately half of
normal rates. Indonesia's unit net cash costs (including gold and
silver credits) of $2.66 per pound of copper in second-quarter 2014
were lower than unit net cash costs of $2.71 per pound in
second-quarter 2013, which was impacted by a temporary production
suspension. Indonesia's second-quarter 2014 unit net cash costs
excluded $0.48 per pound of copper for fixed costs charged directly
to cost of sales as a result of the impact of export restrictions
on PT-FI's operating rates.
Unit net cash costs (net of gold and silver credits) for
Indonesia mining are expected to approximate $0.96 per pound of
copper for the year 2014, based on current sales volume and cost
estimates, which assumes the resumption of exports from PT-FI
beginning in August 2014, and assuming an average gold price of
$1,300 per ounce for the second half of 2014. Indonesia mining's
projected unit net cash costs would change by approximately $0.07
per pound for each $50 per ounce change in the average price of
gold for the second half of 2014. Because of the fixed nature of a
large portion of Indonesia's costs, unit costs vary from quarter to
quarter depending on copper and gold volumes.
Africa Mining. Through its 56 percent owned and
consolidated subsidiary Tenke Fungurume Mining S.A.R.L. (TFM), FCX
operates the Tenke Fungurume (Tenke) minerals district in the
Katanga province of the Democratic Republic of Congo (DRC). In
addition to copper, the Tenke mine produces cobalt hydroxide.
Operating and Development Activities. TFM completed its second
phase expansion project in early 2013, which included increasing
mine, mill and processing capacity. The expanded mill's throughput
rates averaged 15,200 metric tons per day for second-quarter 2014,
compared with the project's design capacity of 14,000 metric tons
of ore per day. FCX continues to engage in exploration activities
and metallurgical testing to evaluate the potential of the highly
prospective minerals district at Tenke. These analyses are being
incorporated in future plans for potential expansions of production
capacity. Future expansions are subject to a number of factors,
including economic and market conditions, and the business and
investment climate in the DRC.
Operating Data. Following is summary consolidated operating data
for the Africa mining operations for the second quarters and first
six months of 2014 and 2013:
Three Months Ended Six Months
Ended June 30, June 30, 2014
2013 2014 2013
Copper (millions of recoverable pounds) Production
114 122 223 242 Sales 118 106 202 224 Average realized price per
pounda $ 3.08 $ 3.10 $ 3.08 $ 3.22
Cobalt (millions
of contained pounds) Production 7 5 14 11 Sales 7 5 15 11 Average
realized price per pound $ 9.58 $ 8.48 $ 9.29 $ 7.99
Unit
net cash costs per pound of copperb Site production and
delivery, excluding adjustments $ 1.46 $ 1.47 $ 1.47 $ 1.43 Cobalt
creditsc (0.34 ) (0.30 ) (0.48 ) (0.26 ) Royalty on metals 0.06
0.06 0.07 0.06 Unit net cash costs $
1.18 $ 1.23 $ 1.06 $ 1.23
a. Includes point-of-sale transportation
costs as negotiated in customer contracts.
b. For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX's consolidated financial statements, refer to
the supplemental schedule, "Product Revenues and Production Costs,"
beginning on page XIV, which is available on FCX's website,
"www.fcx.com."
c. Net of cobalt downstream processing and
freight costs.
TFM's copper sales of 118 million pounds in second-quarter 2014
were higher than second-quarter 2013 copper sales of 106 million
pounds, primarily reflecting timing of shipments. TFM's sales are
expected to approximate 440 million pounds of copper and 30 million
pounds of cobalt for the year 2014, compared with 454 million
pounds of copper and 25 million pounds of cobalt for the year
2013.
Africa mining's unit net cash costs (net of cobalt credits) of
$1.18 per pound of copper in second-quarter 2014 were lower than
unit net cash costs of $1.23 per pound of copper in second-quarter
2013, primarily reflecting higher cobalt credits. Unit net cash
costs (net of cobalt credits) for Africa mining are expected to
approximate $1.21 per pound of copper for the year 2014, based on
current sales volume and cost estimates and assuming an average
cobalt price of $13 per pound for the second half of 2014. Africa
mining's projected unit net cash costs would change by
approximately $0.045 per pound for each $2 per pound change in the
average price of cobalt for the second half of 2014.
Molybdenum Mines. FCX has two wholly owned molybdenum
mines in North America - the Henderson underground mine and the
Climax open-pit mine, both in Colorado. The Henderson and Climax
mines produce high-purity, chemical-grade molybdenum concentrates,
which are typically further processed into value-added molybdenum
chemical products. The majority of molybdenum concentrates produced
at the Henderson and Climax mines, as well as from North and South
America copper mines, are processed at FCX's conversion
facility.
Operating Data. Following is summary consolidated operating data
for the Molybdenum mines for the second quarters and first six
months of 2014 and 2013:
Three Months Ended Six Months
Ended June 30, June 30, 2014
2013 2014 2013
Molybdenum production (millions of recoverable pounds)a 14
13 27 25 Unit net cash cost per pound of molybdenumb $ 6.47
$ 6.79 $ 6.58 $ 7.05
a. Refer to summary operating data on page
4 for FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at the molybdenum mines, and from the North and
South America copper mines.
b. For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX's consolidated financial statements, refer to
the supplemental schedule, "Product Revenues and Production Costs,"
beginning on page XIV, which is available on FCX's website,
"www.fcx.com."
Molybdenum prices have improved during the first six months of
2014, resulting from improved demand in the metallurgical sector.
FCX continues to monitor market conditions and may make adjustments
to its primary molybdenum production as market conditions
warrant.
Average unit net cash costs for the Molybdenum mines of $6.47
per pound of molybdenum in second-quarter 2014 were lower than
average unit net cash costs of $6.79 per pound in second-quarter
2013, primarily reflecting higher production volumes. Based on
current sales volume and cost estimates, unit net cash costs for
the Molybdenum mines are expected to average approximately $7.00
per pound of molybdenum for the year 2014.
Mining Exploration Activities. FCX is actively conducting
exploration activities near its existing mines with a focus on
opportunities to expand reserves and resources to support
development of additional future production capacity in the large
minerals districts where it currently operates. Exploration results
indicate opportunities for significant future reserve additions in
North and South America and in the Tenke minerals district. The
drilling data in North America continue to indicate the potential
for significantly expanded sulfide production.
Exploration spending associated with mining operations is
expected to approximate $100 million for the year 2014, compared to
$182 million in 2013.
OIL & GAS OPERATIONS
In second-quarter 2013, FCX acquired oil and gas operations by
completing the acquisitions of Plains Exploration & Production
Company (PXP) and McMoRan Exploration Co. (MMR), collectively FM
O&G. FCX's oil and gas operations provide exposure to energy
markets with positive fundamentals, strong margins and cash flows,
and a large resource base with financially attractive exploration
and development investment opportunities. The portfolio of assets
includes significant oil production facilities and growth potential
in the Deepwater GOM, established oil production facilities onshore
and offshore California, large onshore natural gas resources in the
Haynesville shale play in Louisiana, natural gas production from
the Madden area in central Wyoming, and an industry-leading
position in the emerging Inboard Lower Tertiary/Cretaceous natural
gas trend located in the shallow waters of the GOM and onshore in
South Louisiana. More than 90 percent of FCX's oil and gas revenues
are from oil and NGLs.
FM O&G follows the full cost method of accounting whereby
all costs associated with oil and gas property acquisition,
exploration and development activities are capitalized into cost
centers on a country-by-country basis. Capitalized costs, along
with estimated future costs to develop proved reserves, are
amortized to expense under the unit-of-production method using
estimates of proved oil and natural gas reserves. The costs of
unproved oil and gas properties are excluded from amortization
until the properties are evaluated, at which time the related costs
are subject to amortization. Under the full cost accounting rules,
a "ceiling test" is conducted each quarter to review the carrying
value of the oil and gas properties for impairment.
Sale and Purchase Transactions. On June 20, 2014, FM O&G
completed the sale of the Eagle Ford shale assets for cash
consideration of $3.1 billion, before closing adjustments from the
effective date of April 1, 2014, through the closing date. Under
full cost accounting rules, the proceeds from this transaction were
accounted for as an adjustment to capitalized costs, with no gain
or loss recognition, except for $58 million of deferred taxes
recorded in connection with the allocation of goodwill to the sale
of Eagle Ford. FM O&G's Eagle Ford interests included
approximately 45,500 net acres with estimated net proved reserves
of 59 MMBOE and estimated net proved and probable reserves of 69
MMBOE at year-end 2013. FM O&G's second-quarter 2014 results
included 4.0 MMBOE of sales volumes from the Eagle Ford field
through June 19, 2014.
On June 30, 2014, FM O&G completed the acquisition of
interests in the Deepwater GOM, including interests in the Lucius
and Heidelberg oil production development projects and several
exploration leases, for $0.9 billion. See below for further
discussion of these and FM O&G's other Deepwater GOM
interests.
The Deepwater GOM acquisition was funded with proceeds from the
sale of the Eagle Ford shale assets. The estimated combined
after-tax net proceeds from these transactions approximated $1.8
billion, before purchase price adjustments.
Financial and Operating Data. Following is summary financial and
operating data for the oil and gas operations for the second
quarters and first six months of 2014 and 2013:
Three Months Ended Six Months
Ended June 30, June 30, 2014a 2013b 2014a
2013b
Financial Summary (in millions) Realized
revenuesc $ 1,243 $ 372 $ 2,488 $ 372 Less: cash production costsc
314 83 612 83 Cash operating margin $ 929 $
289 $ 1,876 $ 289 Capital expenditures $ 903 $ 190 $ 1,484 $ 190
Sales Volumes Oil (MMBbls) 11.7 3.4 23.5 3.4 Natural gas
(Bcf) 20.3 7.7 39.8 7.7 NGLs (MMBbls) 1.0 0.3 2.1 0.3 MMBOE 16.0
5.0 32.2 5.0
Average Realizationsc Oil (per barrel) $
95.50 $ 97.42 $ 94.63 $ 97.42 Natural gas (per million British
thermal units, or MMBtu) $ 4.44 $ 3.86 $ 4.55 $ 3.86 NGLs (per
barrel) $ 38.79 $ 35.18 $ 42.35 $ 35.18
Cash Operating Margin
per BOEc Realized revenues $ 77.53 $ 74.37 $ 77.37 $
74.37 Less: cash production costs 19.57 16.58 19.03
16.58 Cash operating margin $ 57.96 $ 57.79 $
58.34 $ 57.79
a. The 2014 periods include results from
the Eagle Ford field through June 19, 2014.
b. The 2013 periods include the results of
FM O&G beginning June 1, 2013.
c. Cash operating margin for oil and gas
operations reflects realized revenues less cash production costs.
Realized revenues exclude noncash mark-to-market adjustments on
derivative contracts, and cash production costs exclude accretion
and other costs. For reconciliations of realized revenues
(including average realizations for oil, natural gas and NGLs) and
cash production costs to revenues and production and delivery costs
reported in FCX's consolidated financial statements, refer to the
supplemental schedule, “Product Revenues and Production Costs,”
beginning on page XIV, which is available on FCX's website,
“www.fcx.com.”
FM O&G's realized revenues totaled $1.2 billion ($77.53 per
BOE) and cash production costs totaled $314 million ($19.57 per
BOE) in second-quarter 2014.
In second-quarter 2014, FM O&G's average realized price for
crude oil was $95.50 per barrel, net of $4.96 per barrel associated
with payments on derivative contracts. Excluding the impact of
derivative contracts, the second-quarter 2014 average realized
price for crude oil was $100.46 per barrel (92 percent of the
average Brent crude oil price of $109.73 per barrel).
In second-quarter 2014, FM O&G's average realized price for
natural gas was $4.44 per MMBtu. Excluding the impact of derivative
contracts, the average realized price for natural gas was $4.70 per
MMBtu in second-quarter 2014, compared to the New York Mercantile
Exchange (NYMEX) natural gas price average of $4.67 per MMBtu for
the April through June 2014 contracts.
Following is a summary of average oil and gas sales volumes per
day by region for the second quarters and first six months of 2014
and 2013:
Three Months Ended Six Months
Ended June 30, June 30, Sales Volumes (MBOE
per day): 2014 2013a 2014 2013a
GOMb 75 64 73 64 Eagle Ford 44 c 43 48 c 43
California 39 37 39 37 Haynesville/Madden/Other 18 25
18 25 Total oil and gas operations 176 169 178 169
a. Reflects the results of FM O&G
beginning June 1, 2013.
b. Includes sales from properties on the
GOM Shelf and in the Deepwater GOM. Production from the GOM Shelf
totaled 12 MBOE per day in the second quarter and first six months
of 2014 (15 percent of the GOM total in second-quarter 2014 and 16
percent for the first six months of 2014) and 15 MBOE per day (22
percent of the GOM total in June 2013).
c. Includes results of the Eagle Ford
field through June 19, 2014.
Daily sales volumes averaged 176 MBOE for second-quarter 2014,
including 128 MBbls of crude oil, 223 MMcf of natural gas and 11
MBbls of NGLs. Oil and gas sales volumes are expected to average
142 MBOE per day for the second half of 2014, comprised of 69
percent oil, 27 percent natural gas and 4 percent NGLs. Based on
current sales volume and cost estimates for the second half of
2014, cash production costs are expected to approximate $22 per BOE
for the second half of 2014, which is higher than the April 2014
estimate primarily reflecting lower estimated volumes because of
the sale of the Eagle Ford shale assets.
Operating, Development and Exploration Activities. FCX's
oil and gas business has significant proved, probable and possible
reserves and a broad range of development opportunities and
high-potential exploration prospects. The business is being managed
to reinvest its cash flows in projects with attractive rates of
returns and risk profiles.
FM O&G has a large, strategic position in the Deepwater GOM
with significant current oil production, strong cash margins and
existing infrastructure and facilities with excess capacity. These
assets, combined with FM O&G’s large leasehold interests in an
established geologic basin, provide financially attractive
investment opportunities for high-impact growth in oil production
and cash margins. Following the sale of the Eagle Ford shale assets
on June 20, 2014, FM O&G’s capital allocation strategy is
principally focused on exploitation drilling and development
opportunities that can be tied back to existing facilities in the
Deepwater GOM. Additional oil and gas asset sales may be considered
to provide additional funding to accelerate FM O&G’s growth
plans in the Deepwater GOM.
Capital expenditures for oil and gas operations approximated
$0.9 billion for second-quarter 2014 and $1.5 billion for the first
six months of 2014, including $0.8 billion incurred for the
Deepwater GOM and $0.3 billion for the Inboard Lower
Tertiary/Cretaceous natural gas trend. Capital expenditures for oil
and gas operations, which are expected to be funded by FM O&G's
operating cash flows and oil and gas asset sales, are projected to
approximate $3.4 billion for the year 2014, including $1.8 billion
for the Deepwater GOM and $0.7 billion for the Inboard Lower
Tertiary/Cretaceous natural gas trend. FM O&G future capital
spending estimates may be adjusted to incorporate results from its
ongoing drilling activities and follow-on development
activities.
Deepwater Gulf of Mexico. Multiple development and exploration
opportunities have been identified in the Deepwater GOM that are
expected to benefit from tie-back opportunities to available
production capacity at the FM O&G operated large-scale
Holstein, Marlin and Horn Mountain deepwater production platforms.
Operations to pursue these opportunities have commenced and
activities are expected to accelerate following the delivery of
contracted drill ships over the next 12 months.
The Bureau of Ocean Energy Management (BOEM) has awarded FM
O&G all 20 leases from the March 2014 Central Gulf of Mexico
Lease Sale 231. The blocks, which range in water depths up to 6,000
feet and cover approximately 106,000 gross acres, are primarily
focused on high-impact, drillable targets in the Mississippi
Canyon, Atwater Valley and Green Canyon areas, and complement FM
O&G’s existing infrastructure and production facilities, as
well as add several new exploration plays.
Holstein, in which FM O&G has a 100 percent working
interest, is located in Green Canyon and has production facilities
capable of producing in excess of 100 MBOE per day. Drilling from
the Holstein platform rig commenced in first-quarter 2014. In June
2014, the first sidetrack well commenced production at a rate of
approximately 3,600 BOE per day and drilling of the second
sidetrack well is under way. Over the 2014 to 2016 period, FM
O&G expects to drill five additional sidetrack wells from the
Holstein platform following the current sidetrack well. During this
period, FM O&G also plans to drill five subsea tie-back wells
from contracted drill ships to enhance production volumes from the
spar. Near-term tie-back prospects in the Holstein area include
Holstein Deep and Copper.
The Holstein Deep development, in which FM O&G has a 100
percent working interest, is located four miles west of the
Holstein platform. FM O&G acquired the acreage associated with
this development in the 2013 lease sale held by the BOEM. Two
successful wells had previously been drilled in recent years and
encountered approximately 500 net feet of oil pay. Delineation
drilling on this prospect is expected to commence in third-quarter
2014.
The Copper exploration prospect commenced drilling in July 2014
and is currently drilling below 6,800 feet towards a proposed total
depth of 14,500 feet. Copper is located southeast of the
Holstein field in 4,400 feet of water and is a subsea tie-back
opportunity to the Holstein facility. The prospect is a Holstein
analog play with Pliocene objectives and FM O&G has a 100
percent working interest.
Development of the Lucius field in Keathley Canyon is on track
with first oil production anticipated in the second half of 2014.
The geologic results from the six wells drilled since 2009 confirm
a significant oil resource. The sanctioned development of Lucius is
a subsea development consisting of a truss spar hull located in
7,200 feet of water with a topside daily capacity of 80 MBbls of
oil and 450 MMcf of gas. FM O&G has a 25.1 percent working
interest in Lucius.
Development of the Heidelberg field in Green Canyon is in
progress and production is expected to commence in mid-2016.
Heidelberg is a large, high-quality oil development project located
in 5,300 feet of water. The hull fabrication for the 80 MBbls of
oil per day Lucius-look-alike facility is more than 85 percent
complete and the spar is expected to be towed to the GOM later this
year. Topsides fabrication is currently more than 25 percent
complete. Development drilling is expected to commence in
third-quarter 2014 as the first of six development wells are to be
drilled through 2016. FM O&G has a 12.5 percent working
interest in Heidelberg.
In second-quarter 2014, FM O&G drilled the Tara exploratory
prospect, located in Keathley Canyon in 8,700 feet of water, to
approximately 20,800 feet. In July 2014, the well was evaluated and
determined not to contain commercial quantities of
hydrocarbons.
California. FM O&G's California assets benefit from an
established oil production base with a stable production profile
and access to favorably priced crude markets. Development plans are
principally focused on maintaining stable production levels through
continued drilling in the long-established producing fields onshore
in California. FM O&G’s position in California is located
onshore in the San Joaquin Valley and Los Angeles Basin and
offshore in the Point Arguello and Point Pedernales fields.
Haynesville. FM O&G has rights to a substantial natural gas
resource, located in the Haynesville shale play in North Louisiana.
Drilling activities in recent years have been reduced to maximize
cash flows in a low natural gas price environment and to benefit
from potentially higher future natural gas prices.
Inboard Lower Tertiary/Cretaceous. FM O&G has an
industry-leading position in the emerging Inboard Lower
Tertiary/Cretaceous natural gas trend, located on the Shelf of the
GOM and onshore in South Louisiana. FM O&G has a large onshore
and offshore lease acreage position with high-quality prospects and
the potential to develop a significant long-term, low-cost source
of natural gas. Data from eight wells drilled to date indicate
the presence of geologic formations that are analogous to
productive formations in the Deepwater GOM and onshore in the Gulf
Coast region. The near-term focus is on defining the trend
onshore with plans to spud three prospects by year-end
2014. FM O&G is currently completing the Highlander and
Blackbeard West No. 2 Inboard Lower Tertiary/Cretaceous exploration
prospects and plans to perform production tests on these two wells
in 2014.
The Highlander onshore exploratory well, in which FM O&G is
the operator and has a 72 percent working interest, located in St.
Martin Parish, Louisiana, encountered gas pay in several Wilcox and
Cretaceous/Tuscaloosa sands between 24,000 feet and 29,000 feet. As
previously reported, the wireline log and core data obtained from
the Wilcox and Cretaceous sand packages indicated favorable
reservoir characteristics with approximately 150 feet of net pay.
The Highlander discovery well is currently in completion operations
to test Cretaceous/Tuscaloosa objectives found below the salt weld.
Flow testing is anticipated in the second half of 2014. FM O&G
has identified multiple exploratory prospects in the Highlander
area where it controls rights to approximately 57,000 gross
acres.
Completion operations at the Blackbeard West No. 2 well, in
which FM O&G has a 69.4 percent working interest, located on
Ship Shoal Block 188 are in progress. Other near-term drilling
includes the Farthest Gate West exploratory prospect located
onshore in Cameron Parish, Louisiana. Farthest Gate West is a
Lineham Creek analog prospect with Paleogene objectives and has a
proposed total depth of 25,000 feet.
During second-quarter 2014, a flow test was performed on the
deepest sand section (Cretaceous/Tuscaloosa) in Davy Jones No. 2,
in which FM O&G has a 75 percent working interest. The test of
this section, one of two potentially productive intervals in the
well, did not result in hydrocarbon production in commercial
quantities, and the well was temporarily abandoned. Testing of the
remaining sand sections (Wilcox) was deferred until later in 2014
in order to use the completion equipment to accelerate the
completion and testing of the Highlander well. The Davy Jones No. 2
flow test provided valuable data, including confirmation of
permeability of the sands, which is encouraging in relation to the
Tuscaloosa discovery at Highlander and other Inboard Lower
Tertiary/Cretaceous prospects.
CASH FLOWS, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of $1.4
billion (net of $364 million in working capital uses and changes in
other tax payments) for second-quarter 2014 and $2.6 billion (net
of $777 million in working capital uses and changes in other tax
payments) for the first six months of 2014.
Based on current sales volume and cost estimates and assuming
average prices of $3.25 per pound of copper, $1,300 per ounce of
gold, $12 per pound of molybdenum and $110 per barrel of Brent
crude oil for the second half of 2014, FCX's consolidated operating
cash flows are estimated to approximate $6.8 billion (net of $0.6
billion of working capital uses and changes in other tax payments)
for the year 2014. The impact of price changes for the second half
of 2014 on operating cash flows would approximate $200 million for
each $0.10 per pound change in the average price of copper, $40
million for each $50 per ounce change in the average price of gold,
$55 million for each $2 per pound change in the average price of
molybdenum and $60 million for each $5 per barrel change in the
average price of Brent crude oil above $100 per barrel.
Capital Expenditures. Capital expenditures totaled $2.0 billion
for second-quarter 2014, including $0.7 billion for major projects
at mining operations and $0.9 billion for oil and gas operations,
and $3.6 billion for the first six months of 2014, including $1.4
billion for major projects at mining operations and $1.5 billion
for oil and gas operations. Capital expenditures are currently
expected to approximate $7.6 billion for the year 2014, including
$3.2 billion for major projects at mining operations and $3.4
billion for oil and gas operations. Major projects at mining
operations for the year 2014 primarily include the expansions at
Cerro Verde and Morenci, and underground development activities at
Grasberg.
Cash. Following is a summary of cash available to the parent
company, net of noncontrolling interests' share, taxes and other
costs at June 30, 2014 (in millions):
Cash at domestic companies $ 700 Cash at
international operations 758 Total consolidated cash and
cash equivalents 1,458 Less: noncontrolling interests' share (333 )
Cash, net of noncontrolling interests' share 1,125 Less:
withholding taxes and other (42 )
Net cash available
$ 1,083
Debt. FCX continues to target significant reductions in debt by
the end of 2016 using cash flows generated above capital
expenditures and other cash requirements. FCX has taken steps to
accelerate its deleveraging plans through asset sales and will
continue to evaluate its portfolio for potential future
monetizations. FCX may also take additional steps to reduce or
defer capital spending and other costs in response to market
conditions. Following is a summary of total debt and related
weighted-average interest rates at June 30, 2014 (in billions,
except percentages):
Weighted- Average
Interest
Rate
Acquisition-related debt $ 10.4 3.1% Assumed debt of PXP 6.4 a 6.8%
a Other FCX debt 3.5 3.4% $ 20.3 4.2%
a. On July 23, 2014, FCX
redeemed $1.8 billion of senior notes with a weighted-average
interest rate of 6.6 percent under the equity clawback provisions
of the instruments. Holders received the principal amount together
with the redemption premium and accrued and unpaid interest to the
redemption date. FCX expects to record a pre-tax gain in
third-quarter 2014 on early extinguishment of debt of $58 million
associated with these redemptions.
On May 30, 2014, FCX amended its revolving credit facility,
extending the maturity date by one year, to May 31, 2019, and
increased the aggregate principal amount available from $3.0
billion to $4.0 billion. At June 30, 2014, FCX had no
borrowings outstanding and $46 million of letters of credit issued
under its revolving credit facility.
FINANCIAL POLICY
FCX has a long-standing tradition of seeking to build
shareholder value through investing in projects with attractive
rates of return and returning cash to shareholders through common
stock dividends and share purchases. FCX paid common stock
dividends of $653 million in the first six months of 2014.
FCX's current annual dividend rate for its common stock is $1.25
per share. On June 25, 2014, FCX's Board of Directors (the Board)
declared a regular quarterly dividend of $0.3125 per share, which
will be paid on August 1, 2014. The declaration of dividends is at
the discretion of the Board and will depend upon FCX's financial
results, cash requirements, future prospects and other factors
deemed relevant by the Board.
FCX intends to continue to maintain a strong financial position,
with a focus on reducing debt while continuing to invest in
attractive growth projects and providing cash returns to
shareholders. The Board will continue to review FCX's financial
policy on an ongoing basis.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX's
second-quarter 2014 results is scheduled for today at 10:00 a.m.
Eastern Time. The conference call will be broadcast on the Internet
along with slides. Interested parties may listen to the conference
call live and view the slides by accessing "www.fcx.com." A replay
of the webcast will be available through Friday, August 22,
2014.
-----------------------------------------------------------------------------------------------------------
FCX is a premier U.S.-based natural resources company with an
industry-leading global portfolio of mineral assets, significant
oil and gas resources and a growing production profile. FCX is the
world's largest publicly traded copper producer.
FCX's portfolio of assets includes the Grasberg minerals
district in Indonesia, one of the world's largest copper and gold
deposits; significant mining operations in the Americas, including
the large-scale Morenci minerals district in North America and the
Cerro Verde operation in South America; the Tenke Fungurume
minerals district in the DRC; and significant oil and natural gas
assets in North America, including reserves in the Deepwater GOM,
onshore and offshore California and in the Haynesville shale play,
and an industry-leading position in the emerging shallow water
Inboard Lower Tertiary/Cretaceous natural gas trend on the Shelf of
the GOM and onshore in South Louisiana. Additional information
about FCX is available on FCX's website at "www.fcx.com."
Cautionary Statement and Regulation G Disclosure: This
press release contains forward-looking statements in which FCX
discusses its potential future performance. Forward-looking
statements are all statements other than statements of historical
facts, such as projections or expectations relating to ore grades
and milling rates, production and sales volumes, unit net cash
costs, cash production costs per BOE, operating cash flows, capital
expenditures, exploration efforts and results, development and
production activities and costs, liquidity, tax rates, the impact
of copper, gold, molybdenum, cobalt, crude oil and natural gas
price changes, the impact of derivative positions, the impact of
deferred intercompany profits on earnings, reserve estimates,
future dividend payments, debt reduction and share purchases. The
words “anticipates,” “may,” “can,” “plans,” “believes,”
“estimates,” “expects,” “projects,” "targets," “intends,” “likely,”
“will,” “should,” “to be,” ”potential" and any similar expressions
are intended to identify those assertions as forward-looking
statements. The declaration of dividends is at the discretion of
FCX's Board and will depend on FCX's financial results, cash
requirements, future prospects, and other factors deemed relevant
by the Board.
FCX cautions readers that forward-looking statements are not
guarantees of future performance and its actual results may differ
materially from those anticipated, projected or assumed in the
forward-looking statements. Important factors that can cause FCX's
actual results to differ materially from those anticipated in the
forward-looking statements include supply of and demand for, and
prices of, copper, gold, molybdenum, cobalt, oil and gas, mine
sequencing, production rates, industry risks, regulatory changes,
political risks, drilling results, the outcome of ongoing
discussions with the Indonesian government regarding PT-FI's
Contract of Work and the impact of the January 2014 regulations on
PT-FI's exports and export duties, the potential effects of
violence in Indonesia, the resolution of administrative disputes in
the DRC, labor relations, currency translation risks, weather- and
climate-related risks, environmental risks, litigation results and
other factors described in more detail under the heading “Risk
Factors” in FCX's Annual Report on Form 10-K for the year ended
December 31, 2013, filed with the U.S. Securities and Exchange
Commission (SEC) as updated by FCX's subsequent filings with the
SEC.
Investors are cautioned that many of the assumptions on which
FCX's forward-looking statements are based are likely to change
after its forward-looking statements are made, including for
example commodity prices, which FCX cannot control, and production
volumes and costs, some aspects of which FCX may or may not be able
to control. Further, FCX may make changes to its business plans
that could or will affect its results. FCX cautions investors that
it does not intend to update forward-looking statements more
frequently than quarterly notwithstanding any changes in FCX's
assumptions, changes in business plans, actual experience or other
changes, and FCX undertakes no obligation to update any
forward-looking statements.
This press release also contains certain financial measures such
as unit net cash costs per pound of copper and per pound of
molybdenum, oil and gas realized revenues, cash production costs
and cash operating margin, which are not recognized under generally
accepted accounting principles in the U.S. As required by SEC
Regulation G, reconciliations of these measures to amounts reported
in FCX's consolidated financial statements are in the supplemental
schedules of this press release, which are also available on FCX's
website, "www.fcx.com."
FREEPORT-McMoRan INC. SELECTED MINING OPERATING DATA
Three Months Ended
June 30, Production Sales
COPPER
(millions of recoverable pounds)
2014 2013 2014 2013 (FCX's net interest in %)
North
America
Morenci (85%)a 153 136 164 147 Bagdad (100%) 59 52 64 54 Safford
(100%) 34 42 38 43 Sierrita (100%) 51 39 54 42 Miami (100%) 15 14
16 15 Chino (100%) 57 40 60 44 Tyrone (100%) 24 24 25 25 Other
(100%) 2 2 2 2 Total North America 395
349 423 372
South
America
Cerro Verde (53.56%) 125 136 138 139 El Abra (51%) 93 84 92 93
Candelaria (80%) 69 67 67 72 Ojos del Salado (80%) 13 12
13 11 Total South America 300 299 310
315
Indonesia
Grasberg (90.64%)b 122 139 117 158
Africa
Tenke Fungurume (56%) 114 122 118 106
Consolidated 931 909 968
951 Less noncontrolling interests 182 187
188 188
Net 749 722
780 763 Consolidated sales from
mines 968 951 Purchased copper 34 54 Total copper sales,
including purchases 1,002 1,005 Average realized
price per pound $ 3.16 $ 3.17
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 3 1 4 1 South
America (80%) 21 19 20 21 Indonesia (90.64%)b 142 131
135 151
Consolidated 166 151
159 173 Less noncontrolling interests
17 16 16 18
Net 149
135 143 155 Average
realized price per ounce $ 1,296 $ 1,322
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 8 8 N/A N/A Climax
(100%) 6 5 N/A N/A North America copper mines (100%)a 9 9 N/A N/A
Cerro Verde (53.56%) 2 2 N/A N/A
Consolidated 25 24 25
23 Less noncontrolling interests 1 1 1
1
Net 24 23 24
22 Average realized price per pound $ 13.43 $
12.35
COBALT (millions of
contained pounds)
(FCX's net interest in %)
Consolidated - Tenke Fungurume
(56%)
7 5 7 5 Less
noncontrolling interests 3 2 3 2
Net
4 3 4 3
Average realized price per pound $ 9.58 $ 8.48
a. Amounts are net of Morenci's 15 percent
joint venture partner's interest.
b. Amounts are net of Grasberg's joint
venture partner's interest, which varies in accordance with the
terms of the joint venture agreement.
FREEPORT-McMoRan INC. SELECTED MINING OPERATING DATA
(continued) Six Months Ended June 30, Production Sales
COPPER
(millions of recoverable pounds)
2014 2013 2014 2013 (FCX's net interest in %)
North
America
Morenci (85%)a 301 274 308 288 Bagdad (100%) 117 101 120 105
Safford (100%) 71 73 74 80 Sierrita (100%) 101 83 100 85 Miami
(100%) 29 28 31 29 Chino (100%) 110 83 109 87 Tyrone (100%) 47 47
48 48 Other (100%) 4 3 4 3 Total North America
780 692 794 725
South
America
Cerro Verde (53.56%) 260 258 261 258 El Abra (51%) 185 174 182 172
Candelaria (80%) 143 140 148 146 Ojos del Salado (80%) 26 25
26 24 Total South America 614 597 617
600
Indonesia
Grasberg (90.64%)b 262 358 226 356
Africa
Tenke Fungurume (56%) 223 242 202 224
Consolidated 1,879 1,889
1,839 1,905 Less noncontrolling interests 368
378 355 370
Net 1,511
1,511 1,484 1,535
Consolidated sales from mines 1,839 1,905 Purchased copper 66
103 Total copper sales, including purchases 1,905
2,008 Average realized price per pound $ 3.17 $ 3.29
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 5 3 6 3 South
America (80%) 42 40 43 42 Indonesia (90.64%)b 350 343
297 342
Consolidated
397 386 346 387
Less noncontrolling interests 41 40 36 40
Net 356 346 310
347 Average realized price per ounce $ 1,299 $ 1,434
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 16 15 N/A N/A Climax
(100%) 11 10 N/A N/A North America copper mines (100%)a 17 17 N/A
N/A Cerro Verde (53.56%) 5 4 N/A N/A
Consolidated 49 46 52
48 Less noncontrolling interests 3 2 3
2
Net 46 44 49
46 Average realized price per pound $ 12.27 $
12.56
COBALT
(millions of contained pounds)
(FCX's net interest in %)
Consolidated - Tenke Fungurume
(56%)
14 11 15 11
Less noncontrolling interests 6 5 7 5
Net 8 6 8 6
Average realized price per pound $ 9.29 $ 7.99
a. Amounts are net of Morenci's 15 percent
joint venture partner's interest.
b. Amounts are net of Grasberg's joint
venture partner's interest, which varies in accordance with the
terms of the joint venture agreement.
FREEPORT-McMoRan INC. SELECTED MINING OPERATING
DATA (continued)
Three Months Ended Six Months Ended June 30,
June 30, 2014 2013 2014 2013
100% North
America Copper Mines
Solution
Extraction/Electrowinning (SX/EW) Operations
Leach ore placed in stockpiles (metric tons per day) 1,044,500
1,053,000 1,014,000 1,026,700 Average copper ore grade (percent)
0.25 0.22 0.25 0.22 Copper production (millions of recoverable
pounds) 234 226 463 435
Mill
Operations
Ore milled (metric tons per day) 260,100 240,900 257,700 245,700
Average ore grades (percent): Copper 0.44 0.38 0.43 0.39 Molybdenum
0.03 0.03 0.03 0.03 Copper recovery rate (percent) 82.8 82.4 84.4
83.4 Production (millions of recoverable pounds): Copper 188 148
370 306 Molybdenum 9 9 17 17
100% South America
Mining
SX/EW
Operations
Leach ore placed in stockpiles (metric tons per day) 281,700
279,100 284,200 271,000 Average copper ore grade (percent) 0.52
0.50 0.51 0.50 Copper production (millions of recoverable pounds)
125 110 248 219
Mill
Operations
Ore milled (metric tons per day) 182,200 194,600 185,500 191,600
Average ore grades: Copper (percent) 0.56 0.56 0.58 0.57 Gold
(grams per metric ton) 0.11 0.09 0.11 0.10 Molybdenum (percent)
0.02 0.02 0.02 0.02 Copper recovery rate (percent) 88.7 89.8 89.4
90.3 Production (recoverable): Copper (millions of pounds) 175 189
366 378 Gold (thousands of ounces) 21 19 42 40 Molybdenum (millions
of pounds) 2 2 5 4
100% Indonesia Mining Ore milled
(metric tons per day)a Grasberg open pit 50,700 81,800 58,200
109,500 DOZ underground mine 50,500 31,100 50,400 44,900 Big Gossan
underground mine 1,700 1,400 1,800 2,200 Total
102,900 114,300 110,400 156,600 Average ore
grades: Copper (percent) 0.73 0.73 0.72 0.69 Gold (grams per metric
ton) 0.65 0.53 0.72 0.53 Recovery rates (percent): Copper 89.0 89.0
88.7 88.7 Gold 76.3 75.4 78.1 73.1 Production (recoverable): Copper
(millions of pounds) 125 139 269 358 Gold (thousands of ounces) 142
131 351 343
100% Africa Mining Ore milled (metric
tons per day) 15,200 15,000 14,800 14,800 Average ore grades
(percent): Copper 4.08 4.59 4.07 4.52 Cobalt 0.34 0.31 0.33 0.32
Copper recovery rate (percent) 92.7 89.9 93.7 91.7 Production
(millions of pounds): Copper (recoverable) 114 122 223 242 Cobalt
(contained) 7 5 14 11
100% Molybdenum Mines Ore
milled (metric tons per day) 44,800 39,000 42,200 37,400 Average
molybdenum ore grade (percent) 0.18 0.19 0.18 0.19 Molybdenum
production (millions of recoverable pounds) 14 13 27 25
a. Amounts represent the
approximate average daily throughput processed at PT-FI's mill
facilities from each producing mine.
FREEPORT-McMoRan INC. SELECTED OIL AND GAS
OPERATING DATA Three Months Ended June 30,
Sales Volumes Sales per Day 2014a 2013b 2014a 2013b
GULF OF
MEXICO (GOM)c Oil (thousand barrels or MBbls) 5,262
1,377 58 46 Natural gas (million cubic feet or MMcf) 6,669 2,406 73
86 Natural gas liquids (NGLs, in MBbls) 489 127 5 4 Thousand
barrels of oil equivalents (MBOE) 6,862 1,905 75 64 Average
realized price per BOEd $ 87.49 $ 78.07 Cash production costs per
BOEd $ 14.80 $ 14.07 Capital expenditures (in millions) $ 728 e $
94 e
EAGLE FORD Oil (MBbls) 2,950 927 33 31 Natural
gas (MMcf) 3,452 1,114 38 37 NGLs (MBbls) 433 169 5 6 MBOE 3,959
1,282 44 43 Average realized price per BOEd $ 81.52 $ 76.94 Cash
production costs per BOEd $ 13.23 $ 12.79 Capital expenditures (in
millions) $ 105 $ 78
CALIFORNIA Oil (MBbls) 3,436
1,085 37 36 Natural gas (MMcf) 597 191 7 6 NGLs (MBbls) 42 14 1 — f
MBOE 3,578 1,131 39 37 Average realized price per BOEd $ 94.37 $
94.48 Cash production costs per BOEd $ 37.70 $ 30.98 Capital
expenditures (in millions) $ 68 $ 29
HAYNESVILLE/MADDEN/OTHER Oil (MBbls) 26 11 — f 1 Natural gas
(MMcf) 9,585 4,026 105 134 NGLs (MBbls) 5 5 — f 1 MBOE 1,629 687 18
25 Average realized price per BOEd $ 27.59 $ 23.77 Cash production
costs per BOEd $ 15.35 $ 6.91 Capital expenditures (in millions) $
40 $ 7
TOTAL OIL AND GAS OPERATIONS Oil (MBbls)
11,674 3,400 128 114 Natural gas (MMcf) 20,303 7,737 223 263 NGLs
(MBbls) 969 315 11 11 MBOE 16,028 5,005 176 169 Cash operating
margin per BOE:d Realized revenue $ 77.53 $ 74.37 Cash production
costs 19.57 16.58 Cash operating margin $ 57.96 $
57.79 Depreciation, depletion and amortization per BOE $ 38.39 $
33.82 Capital expenditures (in millions) $ 903 g $ 190 g
a. Includes the results of the Eagle Ford
field through June 19, 2014.
b. Includes the results of FM O&G
beginning June 1, 2013.
c. Reflects properties in the Deepwater
GOM and on the Shelf, including the Inboard Lower
Tertiary/Cretaceous natural gas trend.
d. Cash operating margin for oil and gas
operations reflects realized revenues less cash production costs.
Realized revenues exclude noncash mark-to-market adjustments on
derivative contracts, and cash production costs exclude accretion
and other costs. In addition, the derivative contracts for oil and
gas operations are managed on a consolidated basis; accordingly,
the average realized price per BOE by region does not reflect
adjustments for derivative contracts. For reconciliations of
average realized price and cash production costs per BOE to
revenues and production and delivery costs reported in FCX's
consolidated financial statements, refer to the supplemental
schedule, “Product Revenues and Production Costs,” beginning on
page XIV, which is available on FCX's website, “www.fcx.com.”
e. Includes $174 million in second-quarter
2014 and $18 million in June 2013 for the Inboard Lower
Tertiary/Cretaceous natural gas trend.
f. Rounds to less than 1 MBbl per day.
g. Consolidated capital expenditures for
oil and gas operations reflect total spending, which is net of
accrual and other adjustments totaling $(38) million for
second-quarter 2014 and $(18) million for second-quarter 2013 that
are not specifically allocated to the regions.
FREEPORT-McMoRan INC. SELECTED OIL AND GAS
OPERATING DATA (continued) Six Months Ended June
30, Sales Volumes Sales per Day 2014a 2013b 2014a 2013b
GOMc Oil (MBbls) 10,063 1,377 56 46 Natural gas
(MMcf) 12,576 2,406 70 86 NGLs (MBbls) 1,004 127 6 4 MBOE 13,163
1,905 73 64 Average realized price per BOEd $ 87.42 $ 78.07 Cash
production costs per BOEd $ 14.62 $ 14.07 Capital expenditures (in
millions) $ 1,131
e
$ 94
e
EAGLE FORD Oil (MBbls) 6,481 927 36 31 Natural gas
(MMcf) 7,410 1,114 41 37 NGLs (MBbls) 978 169 5 6 MBOE 8,694 1,282
48 43 Average realized price per BOEd $ 81.66 $ 76.94 Cash
production costs per BOEd $ 12.97 $ 12.79 Capital expenditures (in
millions) $ 232
$ 78
CALIFORNIA Oil (MBbls) 6,855 1,085 38 36 Natural gas
(MMcf) 1,145 191 6 6 NGLs (MBbls) 83 14 — f — f MBOE 7,129 1,131 39
37 Average realized price per BOEd $ 93.07 $ 94.48 Cash production
costs per BOEd $ 37.12 $ 30.98 Capital expenditures (in millions) $
121 $ 29
HAYNESVILLE/MADDEN/OTHER Oil (MBbls) 54 11 —
f 1 Natural gas (MMcf) 18,651 4,026 103 134 NGLs (MBbls) 11 5 — f 1
MBOE 3,174 687 18 25 Average realized price per BOEd $ 28.93 $
23.77 Cash production costs per BOEd $ 13.40 $ 6.91 Capital
expenditures (in millions) $ 67 $ 7
TOTAL OIL AND GAS
OPERATIONS Oil (MBbls) 23,453 3,400 130 114 Natural gas (MMcf)
39,782 7,737 220 263 NGLs (MBbls) 2,076 315 11 11 MBOE 32,160 5,005
178 169 Cash operating margin per BOE:d Realized revenue $ 77.37 $
74.37 Cash production costs 19.03 16.58 Cash
operating margin $ 58.34 $ 57.79 Depreciation, depletion and
amortization per BOE $ 38.30 $ 33.82 Capital expenditures (in
millions) $ 1,484 g $ 190 g
a. Includes the results of the Eagle Ford
field through June 19, 2014.
b. Includes the results of FM O&G
beginning June 1, 2013.
c. Reflects properties in the Deepwater
GOM and on the Shelf, including the Inboard Lower
Tertiary/Cretaceous natural gas trend.
d. Cash operating margin for oil and gas
operations reflects realized revenues less cash production costs.
Realized revenues exclude noncash mark-to-market adjustments on
derivative contracts, and cash production costs exclude accretion
and other costs. In addition, the derivative contracts for oil and
gas operations are managed on a consolidated basis; accordingly,
the average realized price per BOE by region does not reflect
adjustments for derivative contracts. For reconciliations of
average realized price and cash production costs per BOE to
revenues and production and delivery costs reported in FCX's
consolidated financial statements, refer to the supplemental
schedule, “Product Revenues and Production Costs,” beginning on
page XIV, which is available on FCX's website, “www.fcx.com.”
e. Includes $300 million for the first six
months of 2014 and $18 million in June 2013 for the Inboard Lower
Tertiary/Cretaceous natural gas trend.
f. Rounds to less than 1 MBbl per day.
g. Consolidated capital expenditures for
oil and gas operations reflect total spending, which is net of
accrual and other adjustments totaling $(67) million for the first
six months of 2014 and $(18) million for the first six months of
2013 that are not specifically allocated to the regions.
FREEPORT-McMoRan INC. CONSOLIDATED STATEMENTS OF
INCOME (Unaudited) Three Months Ended Six Months
Ended June 30, June 30, 2014 2013a 2014 2013a (In
Millions, Except Per Share Amounts) Revenues $ 5,522
b,c
$ 4,288 b,c $ 10,507 b.c $ 8,871 b,c Cost of sales: Production and
delivery 3,082 d 2,853 5,819 d 5,572 Depreciation, depletion and
amortization 1,013 530 1,979 859 Total
cost of sales 4,095 3,383 7,798 6,431 Selling, general and
administrative expenses 164 186 e 299 299 e Mining exploration and
research expenses 34 64 64 116 Environmental obligations and
shutdown costs 76 f 16 f 82 f 31 f
Total costs and expenses 4,369 3,649 8,243
6,877 Operating income 1,153 639 2,264 1,994 Interest
expense, net (164 ) g (132 ) g (325 ) g (189 ) g Net gain (loss) on
early extinguishment of debt 5 — 5 (45 ) Gain on investment in
McMoRan Exploration Co. (MMR) — 128 — 128 Other (expense) income,
net (8 ) 13 25 10 Income before income taxes
and equity in affiliated companies' net earnings 986 648 1,969
1,898 Provision for income taxes (328 ) h (40 ) h (685 ) h (468 ) h
Equity in affiliated companies' net earnings 2 2 2
4 Net income 660 610 1,286 1,434 Net income
attributable to noncontrolling interests (168 ) (125 ) (274 ) (301
) Preferred dividends attributable to redeemable noncontrolling
interest (10 ) (3 ) (20 ) (3 ) Net income attributable to FCX
common stock $ 482 i $ 482 i $ 992 i $ 1,130
i Net income per share attributable to FCX common
stock: Basic $ 0.46 $ 0.49 $ 0.95 $ 1.17
Diluted $ 0.46 $ 0.49 $ 0.95 $ 1.17
Weighted-average common shares outstanding: Basic
1,039 980 1,039 965 Diluted 1,045
984 1,045 968 Dividends declared
per share of common stock $ 0.3125 $ 1.3125 $ 0.625
$ 1.625
a. The 2013 periods reflect the results of
FM O&G beginning June 1, 2013.
b. Includes favorable (unfavorable)
adjustments to provisionally priced concentrate and cathode copper
sales recognized in prior periods totaling $35 million ($16 million
to net income attributable to common stock) for second- quarter
2014, $(117) million ($(55) million to net income attributable to
common stock) for second-quarter 2013, $(118) million ($(65)
million to net income attributable to common stock) for the first
six months of 2014 and $(26) million ($(12) million to net income
attributable to common stock) for the first six months of 2013.
c. Includes net noncash mark-to-market
(losses) gains associated with crude oil and natural gas derivative
contracts totaling $(7) million ($(4) million to net income
attributable to common stock) for second-quarter 2014, $8 million
($5 million to net income attributable to common stock) for the
first six months of 2014, and $(36) million ($(23) million to net
income attributable to common stock) for June 2013.
d. Includes fixed costs charged directly
to cost of sales as a result of the impact of export restrictions
on PT Freeport Indonesia's (PT-FI) operating rates totaling $56
million ($30 million to net income attributable to common stock)
for second-quarter 2014 and $109 million ($58 million to net income
attributable to common stock) for the first six months of 2014.
e. Includes charges of $61 million ($46
million to net income attributable to common stock) for
second-quarter 2013 and $75 million ($57 million to net income
attributable to common stock) for the first six months of 2013 for
transaction and related costs principally associated with FCX's
second-quarter 2013 oil and gas acquisitions.
f. Includes net charges for adjustments to
environmental obligations and related litigation reserves of $69
million ($68 million to net income attributable to common stock)
for the second quarter and first six months of 2014, $3 million ($2
million to net income attributable to common stock) for
second-quarter 2013 and $7 million ($7 million to net income
attributable to common stock) for the first six months of 2013.
g. Consolidated interest expense,
excluding capitalized interest, totaled $225 million in
second-quarter 2014, $167 million in second-quarter 2013, $449
million for the first six months of 2014 and $242 million for the
first six months of 2013.
h. The 2014 periods include a charge of
$58 million related to deferred taxes recorded in connection with
the allocation of goodwill to the sale of Eagle Ford. The 2013
periods included a gain of $183 million associated with net
reductions in FCX's deferred tax liabilities and deferred tax asset
valuation allowances.
i. FCX defers recognizing profits on
intercompany sales until final sales to third parties occur.
Changes in these deferrals attributable to variability in
intercompany volumes resulted in net additions to net income
attributable to common stock of $41 million in second-quarter 2014,
$2 million in second-quarter 2013, $56 million for the first six
months of 2014, and $27 million for the first six months of
2013.
FREEPORT-McMoRan INC. CONDENSED CONSOLIDATED
BALANCE SHEETS (Unaudited) June 30, December 31,
2014 2013 (In Millions) ASSETS Current assets: Cash
and cash equivalents $ 1,458 $ 1,985 Trade accounts receivable
1,838 1,728 Other accounts receivables 920 834 Inventories: Mill
and leach stockpiles 1,880 1,705 Materials and supplies, net 1,825
1,730 Product 1,665 1,583 Other current assets 668 407
Total current assets 10,254 9,972 Property, plant, equipment
and mining development costs, net 25,407 24,042 Oil and gas
properties - full cost method Subject to amortization, less
accumulated amortization 11,057 12,472 Not subject to amortization
10,769 10,887 Long-term mill and leach stockpiles 2,518 2,386
Goodwill 1,717 1,916 Other assets 2,287 1,798 Total
assets $ 64,009 $ 63,473 LIABILITIES AND
EQUITY Current liabilities: Accounts payable and accrued
liabilities $ 3,950 $ 3,708 Current portion of debt 2,784 a 312
Dividends payable 334 333 Current portion of environmental and
asset retirement obligations 250 236 Accrued income taxes 240
184 Total current liabilities 7,558 4,773 Long-term
debt, less current portion 17,512 20,394 Deferred income taxes
7,451 7,410 Environmental and asset retirement obligations, less
current portion 3,294 3,259 Other liabilities 1,782 1,690
Total liabilities 37,597 37,526 Redeemable
noncontrolling interest 745 716 Equity: FCX stockholders'
equity: Common stock 117 117 Capital in excess of par value 22,221
22,161 Retained earnings 3,081 2,742 Accumulated other
comprehensive loss (401 ) (405 ) Common stock held in treasury
(3,686 ) (3,681 ) Total FCX stockholders' equity 21,332 20,934
Noncontrolling interests 4,335 4,297 Total equity
25,667 25,231 Total liabilities and equity $ 64,009
$ 63,473
a. Includes $1.8 billion of senior notes
redeemed on July 23, 2014.
FREEPORT-McMoRan INC. CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) Six Months Ended June 30,
2014 2013 (In Millions) Cash flow from
operating activities: Net income $ 1,286 $ 1,434 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization 1,979 859 Net losses on
crude oil and natural gas derivative contracts 120 35 Stock-based
compensation 69 65 Pension plan contributions (28 ) (42 ) Net
charges for environmental and asset retirement obligations,
including accretion 97 73 Payments for environmental and asset
retirement obligations (96 ) (91 ) Net (gain) loss on early
extinguishment of debt (5 ) 45 Gain on investment in MMR — (128 )
Deferred income taxes 37 43 Increase in long-term mill and leach
stockpiles (131 ) (236 ) Other, net 36 3 (Increases) decreases in
working capital and changes in other tax payments, excluding
amounts from acquisitions: Accounts receivable (243 ) 350
Inventories (230 ) (160 ) Other current assets 35 58 Accounts
payable and accrued liabilities (186 ) (371 ) Accrued income taxes
and other tax payments (153 ) (72 ) Net cash provided by operating
activities 2,587 1,865 Cash flow from
investing activities: Capital expenditures: North America copper
mines (627 ) (543 ) South America (839 ) (470 ) Indonesia (479 )
(511 ) Africa (60 ) (103 ) Molybdenum mines (33 ) (82 ) U.S. oil
and gas operations (1,484 ) (190 ) Other (40 ) (79 ) Acquisition of
Deepwater Gulf of Mexico interests (925 ) — Acquisition of Plains
Exploration & Production Company, net of cash acquired — (3,465
) Acquisition of MMR, net of cash acquired — (1,628 ) Acquisition
of cobalt chemical business, net of cash acquired — (321 ) Net
proceeds from sale of Eagle Ford shale assets 3,009 — Other, net
(363 ) (264 ) Net cash used in investing activities (1,841 ) (7,656
) Cash flow from financing activities: Proceeds from debt
1,248 11,021 Repayments of debt (1,611 ) (4,541 ) Redemption of MMR
preferred stock — (202 ) Cash dividends and distributions paid:
Common stock (653 ) (595 ) Noncontrolling interests (250 ) (90 )
Contribution from noncontrolling interests 24 — Debt financing
costs (34 ) (111 ) Stock-based awards net proceeds (payments) and
excess tax benefit 3 (102 ) Net cash (used in) provided by
financing activities (1,273 ) 5,380 Net decrease in
cash and cash equivalents (527 ) (411 ) Cash and cash equivalents
at beginning of year 1,985 3,705 Cash and cash
equivalents at end of period $ 1,458 $ 3,294
Freeport-McMoRan Inc.Financial Contacts:Kathleen L. Quirk,
602-366-8016orDavid P. Joint, 504-582-4203orMedia Contact:Eric E.
Kinneberg, 602-366-7994
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