Freeport-McMoRan Inc. (NYSE: FCX):
- Net loss attributable to common
stock totaled $1.85 billion, $1.78 per share, for second-quarter
2015. After adjusting for net charges totaling $2.0 billion, $1.92
per share, second-quarter 2015 adjusted net income attributable to
common stock totaled $143 million, $0.14 per share.
- Consolidated sales totaled 964
million pounds of copper, 352 thousand ounces of gold, 23 million
pounds of molybdenum and 13.1 million barrels of oil equivalents
(MMBOE) for second-quarter 2015, compared with 968 million pounds
of copper, 159 thousand ounces of gold, 25 million pounds of
molybdenum and 16.0 MMBOE for second-quarter 2014.
- Consolidated sales for the year
2015 are expected to approximate 4.2 billion pounds of copper, 1.3
million ounces of gold, 93 million pounds of molybdenum and 52.3
MMBOE, including 1.0 billion pounds of copper, 315 thousand ounces
of gold, 24 million pounds of molybdenum and 13.6 MMBOE for
third-quarter 2015.
- Average realized prices were
$2.71 per pound for copper, $1,174 per ounce for gold and $67.61
per barrel for oil (including $11.79 per barrel for cash gains on
derivative contracts) for second-quarter 2015.
- Consolidated unit net cash costs
for second-quarter 2015 averaged $1.50 per pound of copper for
mining operations and $19.04 per barrel of oil equivalents (BOE)
for oil and gas operations.
- Operating cash flows totaled
$1.1 billion (net of $104 million in working capital uses and
changes in other tax payments) for second-quarter 2015. Based on
current sales volume and cost estimates and assuming average prices
of $2.50 per pound for copper, $1,150 per ounce for gold, $6 per
pound for molybdenum and $56 per barrel for Brent crude oil for the
second half of 2015, operating cash flows for the year 2015 are
expected to approximate $3.6 billion.
- Capital expenditures totaled
$1.7 billion for second-quarter 2015, including $0.6 billion for
major projects at mining operations and $0.8 billion for oil and
gas operations. Capital expenditures are expected to approximate
$6.3 billion for the year 2015, including $2.5 billion for major
projects at mining operations and $2.8 billion for oil and gas
operations.
- FCX has made substantial progress
toward the completion of its major mining development
projects, which are expected to result in increased near-term
production, lower unit costs, declining capital expenditures and
growth in free cash flow over the next several quarters. In
addition, positive oil and gas drilling and development
activities are expected to result in a growing oil production
profile. FCX remains focused on maintaining a strong balance sheet
and on continuing to manage costs, capital spending plans and other
actions as required to maintain financial strength.
- On June 23, 2015, Freeport-McMoRan
Oil & Gas Inc. filed a registration statement related to
its potential initial public offering (IPO) of Class A common stock
representing a minority interest in the entity.
- At June 30, 2015, consolidated
debt totaled $20.9 billion and consolidated cash totaled
$466 million.
Freeport-McMoRan Inc. (NYSE: FCX) reported a net loss
attributable to common stock of $1.85 billion, $1.78 per share, for
second-quarter 2015 and $4.3 billion, $4.16 per share, for the
first six months of 2015, compared with net income attributable to
common stock of $482 million, $0.46 per share, for second-quarter
2014 and $992 million, $0.95 per share, for the first six months of
2014. FCX’s net loss attributable to common stock included net
charges totaling $2.0 billion, $1.92 per share, for second-quarter
2015 and $4.4 billion, $4.24 per share, for the first six months of
2015, primarily for the reduction of the carrying value of oil and
gas properties and other items described below. Net income
attributable to common stock included charges for special items
totaling $160 million, $0.15 per share, for second-quarter 2014 and
$179 million, $0.17 per share, for the first six months of 2014,
comprised of items described below.
James R. Moffett, Chairman of the Board; Richard C. Adkerson,
Vice Chairman and FCX Chief Executive Officer; and James C. Flores,
Vice Chairman and FM O&G Chief Executive Officer, said, "Our
second-quarter results reflect strong operating performance in our
global mining business, and solid production results and continued
positive drilling and development results in our oil and gas
operations. We are pleased to report achievement of several
important milestones as we complete our major development projects
and position FCX for improving free cash flow generation. We remain
focused on managing our costs and capital expenditures under
volatile market conditions as we seek to strengthen our balance
sheet and build values from our strong portfolio of
resources."
SUMMARY FINANCIAL DATA
Three Months Ended Six
Months Ended June 30, June 30, 2015
2014 2015
2014 (in millions, except per share amounts) Revenuesa,b,c $
4,248 $ 5,522 $ 8,401 $ 10,507 Operating (loss) incomea $
(2,374 ) d,e,f $ 1,153 g,h $ (5,337 ) d,e,f,i $ 2,264 g,h Net
(loss) income attributable to common stockb,c,j $ (1,851 )
d,e,f,k,l $ 482 g,h,m $ (4,325 ) d,e,f,i,k,l $ 992 g,h,m Diluted
net (loss) income per share of common stockb,c $ (1.78 ) d,e,f,k,l
$ 0.46 g,h,m $ (4.16 ) d,e,f,i,k,l $ 0.95 g,h,m Diluted
weighted-average common shares outstanding 1,040 1,045 1,040 1,045
Operating cash flowsn $ 1,069 $ 1,386 $ 1,786 $ 2,587 Capital
expenditures $ 1,661 $ 1,950 $ 3,528 $ 3,562 At June 30: Cash and
cash equivalents $ 466 $ 1,458 $ 466 $ 1,458 Total debt, including
current portion $ 20,902 $ 20,190 $ 20,902 $ 20,190
a. For segment financial results, refer to the supplemental
schedule, "Business Segments," beginning on page XI, which is
available on FCX's website, "fcx.com."
b. Includes (unfavorable) favorable adjustments to provisionally
priced concentrate and cathode copper sales recognized in prior
periods totaling $(20) million ($(10) million to net loss
attributable to common stock or $(0.01) per share) for
second-quarter 2015, $35 million ($16 million to net income
attributable to common stock or $0.01 per share) for second-quarter
2014, $(106) million ($(50) million to net loss attributable to
common stock or $(0.05) per share) for the first six months of 2015
and $(118) million ($(65) million to net income attributable to
common stock or $(0.06) per share) for the first six months of
2014. For further discussion, refer to the supplemental schedule,
"Derivative Instruments," beginning on page X, which is available
on FCX's website, "fcx.com."
c. Includes net noncash mark-to-market (losses) gains associated
with crude oil and natural gas derivative contracts totaling $(95)
million ($(59) million to net loss attributable to common stock or
$(0.06) per share) for second-quarter 2015, $(7) million ($(4)
million to net income attributable to common stock or less than
$(0.01) per share) for second-quarter 2014, $(143) million ($(89)
million to net loss attributable to common stock or $(0.09) per
share) for the first six months of 2015 and $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. For further discussion,
refer to the supplemental schedule, "Derivative Instruments,"
beginning on page X, which is available on FCX's website,
"fcx.com."
d. Includes charges of $2.7 billion ($1.7 billion to net loss
attributable to common stock or $1.61 per share) for second-quarter
2015 and $5.8 billion ($3.6 billion to net loss attributable to
common stock or $3.47 per share) for the first six months of 2015
to reduce the carrying value of oil and gas properties pursuant to
full cost accounting rules. Refer to page 11 for further
discussion.
e. Includes charges totaling $59 million ($38 million to net
loss attributable to common stock or $0.04 per share) for
second-quarter 2015 and $63 million ($41 million to net loss
attributable to common stock or $0.04 per share) for the first six
months of 2015 for lower of cost or market (LCM) adjustments
primarily attributable to molybdenum inventories.
f. Includes net charges of $22 million ($14 million to net loss
attributable to common stock or $0.01 per share) for second-quarter
2015 and $39 million ($24 million to net loss attributable to
common stock or $0.02 per share) for the first six months of 2015
for idle/terminated rig costs and inventory write-downs at oil and
gas operations.
g. 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.
h. Includes charges of $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
for 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.
i. The first six months of 2015 includes a net gain of $39
million ($25 million to net loss attributable to common stock or
$0.02 per share) associated with the sale of FCX's one-third
interest in the Luna Energy power facility in New Mexico.
j. 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, "fcx.com."
k. The second quarter and first six months of 2015 include a
gain of $92 million ($0.09 per share) related to net proceeds
received from insurance carriers and other third parties related to
a shareholder derivative litigation settlement.
l. As a result of the impairment to oil and gas properties, FCX
recorded tax charges of $305 million ($0.29 per share) for
second-quarter 2015 and $763 million ($0.73 per share) for the
first six months of 2015 to establish a valuation allowance
primarily against United States (U.S.) federal alternative minimum
tax credits.
m. The second quarter and first six months of 2014 included a
tax charge of $58 million ($0.06 per share) associated with
deferred taxes recorded in connection with the allocation of
goodwill to the sale of Eagle Ford.
n. Includes net working capital uses and changes in other tax
payments of $104 million for second-quarter 2015, $364 million for
second-quarter 2014, $190 million for the first six months of 2015,
and $777 million for the first six months of 2014.
SUMMARY OPERATING DATA
Three Months Ended Six Months Ended June
30, June 30, 2015
2014a 2015 2014a
Copper (millions of recoverable pounds) Production 977 931
1,892 1,879 Sales, excluding purchases 964 968 1,924 1,839 Average
realized price per pound $ 2.71 $ 3.16 $ 2.70 $ 3.17 Site
production and delivery costs per poundb $ 1.85 $ 1.99 $ 1.89 $
1.94 Unit net cash costs per poundb $ 1.50 $ 1.72 $ 1.57 $ 1.64
Gold (thousands of recoverable ounces) Production 367 166
626 397 Sales, excluding purchases 352 159 615 346 Average realized
price per ounce $ 1,174 $ 1,296 $ 1,183 $ 1,299
Molybdenum
(millions of recoverable pounds) Production 25 25 49 49 Sales,
excluding purchases 23 25 46 52 Average realized price per pound $
9.51 $ 13.43 $ 9.84 $ 12.27
Oil Equivalents Sales volumes
MMBOE 13.1 16.0 25.6 32.2 Thousand BOE (MBOE) per day 144 176 142
178 Cash operating margin per BOEc Realized revenues $ 50.04 $
77.53 $ 46.95 $ 77.37 Cash production costs 19.04 19.57
19.62 19.03 Cash operating margin $ 31.00 $
57.96 $ 27.33 $ 58.34
a. The 2014 periods include the results of the Candelaria and
Ojos del Salado mines (Candelaria/Ojos) that were sold in November
2014, and the Eagle Ford properties that were sold in June 2014.
Sales volumes from Candelaria/Ojos totaled 80 million pounds of
copper and 20 thousand ounces of gold for second-quarter 2014 and
174 million pounds of copper and 43 thousand ounces of gold for the
first six months of 2014; sales volumes from Eagle Ford totaled 4.0
MMBOE (44 MBOE per day) for second-quarter 2014 and 8.7 MMBOE (48
MBOE per day) for the first six months of 2014.
b. Reflects per pound weighted-average production and delivery
costs and unit net cash costs (net of by-product credits) for all
copper mines. 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 schedules, "Product Revenues and Production
Costs," beginning on page XIV, which is available on FCX's website,
"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.
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
schedules, “Product Revenues and Production Costs,” beginning on
page XIV, which is available on FCX's website, “fcx.com.”
Consolidated Sales Volumes
Second-quarter 2015 consolidated copper sales of 964
million pounds approximated the April 2015 estimate of 960 million
pounds and second-quarter 2014 sales of 968 million pounds.
Second-quarter 2015 reflects higher copper sales volumes from North
America and Indonesia, offset by lower sales volumes from South
America, resulting from the sale of Candelaria/Ojos in
fourth-quarter 2014 and lower production from Cerro Verde and El
Abra.
Second-quarter 2015 consolidated gold sales of 352
thousand ounces were higher than the April 2015 estimate of 300
thousand ounces and second-quarter 2014 sales of 159 thousand
ounces, primarily reflecting higher ore grades and operating rates
at PT-FI.
Second-quarter 2015 consolidated molybdenum sales of 23
million pounds were slightly lower than the April 2015 estimate and
second-quarter 2014 sales of 25 million pounds, reflecting slowing
demand in the metallurgic market for molybdenum.
Second-quarter 2015 sales from oil and gas operations of 13.1
MMBOE, including 8.6 million barrels (MMBbls) of crude oil,
23.5 billion cubic feet (Bcf) of natural gas and 0.6 MMBbls
of natural gas liquids (NGLs), were higher than the April
2015 estimate of 12.9 MMBOE, but were lower than second-quarter
2014 sales of 16.0 MMBOE, primarily reflecting the sale of the
Eagle Ford properties in June 2014.
Consolidated sales for the year 2015 are expected to approximate
4.2 billion pounds of copper, 1.3 million ounces of gold, 93
million pounds of molybdenum and 52.3 MMBOE, including 1.0 billion
pounds of copper, 315 thousand ounces of gold, 24 million pounds of
molybdenum and 13.6 MMBOE for third-quarter 2015.
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 $1.50
per pound of copper in second-quarter 2015 were lower than unit net
cash costs of $1.72 per pound in second-quarter 2014, primarily
reflecting lower site production and delivery costs as a result of
higher sales volumes in Indonesia and North America, and higher
by-product credits.
Assuming average prices of $1,150 per ounce of gold and $6 per
pound of molybdenum for the second half of 2015 and achievement of
current sales volume and cost estimates, consolidated unit net cash
costs (net of by-product credits) for copper mines are expected to
average $1.53 per pound of copper for the year 2015. 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 2015 on consolidated unit
net cash costs would approximate $0.01 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 $19.04 per BOE in second-quarter 2015
were lower than cash production costs of $19.57 per BOE in
second-quarter 2014, primarily reflecting lower cash production
costs in California related to reductions in repair and maintenance
costs and well workover expense.
Based on current sales volume and cost estimates for the second
half of 2015, cash production costs are expected to approximate $19
per BOE for the year 2015.
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 concentrate and silver 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 add production
capacity following positive exploration results. Future investments
will be undertaken based on the results of economic and technical
feasibility studies and market conditions.
The Morenci mill expansion project commenced operations in May
2014 and successfully achieved full rates in second-quarter 2015.
The project expanded mill capacity from 50,000 metric tons of ore
per day to approximately 115,000 metric tons of ore per day, which
results in incremental annual production of approximately 225
million pounds of copper. Morenci's copper production is expected
to average over 900 million pounds per year over the next five
years. Additionally, the molybdenum circuit began production in
first-quarter 2015. Remaining items associated with the project
include construction of the expanded tailings storage facility,
which is expected to be completed in the second half of 2015.
Operating Data. Following is summary consolidated operating data
for the North America copper mines for the second quarters and
first six months of 2015 and 2014:
Three Months Ended Six
Months Ended June 30, June 30, 2015
2014 2015 2014
Copper (millions of recoverable pounds) Production 469 395
921 780 Sales 486 423 958 794 Average realized price per pound $
2.77 $ 3.16 $ 2.73 $ 3.21
Molybdenum (millions of
recoverable pounds) Productiona 10 9 19 17
Unit net cash
costs per pound of copperb Site production and delivery,
excluding adjustments $ 1.78 $ 1.87 $ 1.79 $ 1.87 By-product
credits (0.16 ) (0.28 ) (0.17 ) (0.25 ) Treatment charges 0.12
0.11 0.13 0.12 Unit net cash costs $
1.74 $ 1.70 $ 1.75 $ 1.74
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
schedules, "Product Revenues and Production Costs," beginning on
page XIV, which is available on FCX's website, "fcx.com."
North America's consolidated copper sales volumes of 486 million
pounds in second-quarter 2015 were higher than second-quarter 2014
sales of 423 million pounds, primarily reflecting higher milling
rates at Morenci and Chino. North America sales are estimated to
approximate 1.96 billion pounds for the year 2015, compared with
1.66 billion pounds of copper in 2014.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.74 per pound of copper in
second-quarter 2015 were higher than unit net cash costs of $1.70
per pound in second-quarter 2014, primarily reflecting lower
by-product credits, partly offset by higher copper sales volumes.
Average unit net cash costs (net of by-product credits) for the
North America copper mines are expected to approximate $1.72 per
pound of copper for the year 2015, based on current sales volume
and cost estimates and assuming an average molybdenum price of $6
per pound for the second half of 2015. North America's average unit
net cash costs would change by approximately $0.02 per pound for
each $2 per pound change in the average price of molybdenum for the
second half of 2015.
South America Mining. FCX operates two copper mines in
South America - Cerro Verde in Peru (in which FCX owns a 53.56
percent interest) and El Abra in Chile (in which FCX owns a 51
percent interest). These operations are consolidated in FCX's
financial statements. In addition to copper, the Cerro Verde mine
produces molybdenum concentrate and silver.
In November 2014, FCX completed the sale of its ownership
interests in Candelaria/Ojos in Chile.
Development Activities. Construction activities associated with
a large-scale expansion at Cerro Verde are advancing on schedule
toward completion in late 2015. Detailed engineering and major
procurement activities are complete and construction is more than
87 percent complete. 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,
2015, $3.9 billion had been incurred for this project, with
approximately $0.7 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
depend 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 2015 and 2014:
Three Months Ended Six
Months Ended June 30, June 30, 2015
2014a 2015
2014a Copper (millions of recoverable pounds)
Production 188 300 381 614 Sales 178 310 378 617 Average realized
price per pound $ 2.69 $ 3.17 $ 2.68 $ 3.16
Gold
(thousands of recoverable ounces) Production — 21 — 42 Sales — 20 —
43 Average realized price per ounce $ — $ 1,302 $ — $ 1,302
Molybdenum (millions of recoverable pounds) Productionb 2 2
4 5
Unit net cash costs per pound of copperc
Site production and delivery, excluding adjustments $ 1.77 $ 1.64 $
1.76 $ 1.57 By-product credits (0.04 ) (0.23 ) (0.06 ) (0.24 )
Treatment charges 0.17 0.18 0.17 0.18 Royalty on metals —
0.01 — — Unit net cash costs $ 1.90 $
1.60 $ 1.87 $ 1.51
a. The 2014 periods include the results of Candelaria/Ojos that
were sold in November 2014. Candelaria/Ojos had sales volumes
totaling 80 million pounds of copper and 20 thousand ounces of gold
for second-quarter 2014 and 174 million pounds of copper and 43
thousand ounces of gold for the first six months of 2014. Excluding
Candelaria/Ojos, South America mining's unit net cash costs
averaged $1.55 per pound of copper for second-quarter 2014 and
$1.51 per pound of copper for the first six months of 2014.
b. Refer to summary operating data on page 4 for FCX's
consolidated molybdenum sales, which includes sales of molybdenum
produced at Cerro Verde.
c. 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
schedules, "Product Revenues and Production Costs," beginning on
page XIV, which is available on FCX's website, "fcx.com."
South America's consolidated copper sales volumes of 178 million
pounds in second-quarter 2015 were lower than second-quarter 2014
sales of 310 million pounds, reflecting the sale of Candelaria/Ojos
and lower production from Cerro Verde and El Abra primarily
associated with lower ore grades and recovery rates. Sales from
South America mining are expected to approximate 900 million pounds
of copper for the year 2015, compared with 1.14 billion pounds of
copper in 2014 (which included 268 million pounds from
Candelaria/Ojos).
Average unit net cash costs (net of by-product credits) for
South America mining of $1.90 per pound of copper in second-quarter
2015 were higher than unit net cash costs of $1.60 per pound in
second-quarter 2014, primarily reflecting lower sales volumes and
lower by-product credits. Lower by-product credits were mostly
because of the sale of Candelaria/Ojos in fourth-quarter 2014.
Average unit net cash costs (net of by-product credits) for South
America mining are expected to approximate $1.75 per pound of
copper for the year 2015, based on current sales volume and cost
estimates and assuming average prices of $6 per pound of molybdenum
for the second half of 2015.
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.
Regulatory Matters. PT-FI is engaged in active discussions with
the Indonesian government regarding its Contract of Work (COW) and
long-term operating rights. Negotiations are taking into
consideration PT-FI's requirement for assurance of legal and fiscal
terms post-2021 for PT-FI to continue with its large-scale
investment program in Papua, Indonesia.
PT-FI is advancing plans for the construction of new smelter
capacity in parallel with completing negotiations on its COW and
long-term operating rights. PT-FI has identified potential sites
for the construction of additional smelter capacity and is in
discussions with potential partners for the project.
Under the July 2014 Memorandum of Understanding (MOU) between
PT-FI and the Indonesia government, no terms of the COW other than
those relating to export duties, a smelter bond and increased
royalties will be changed until the completion of an amended
COW.
PT-FI is required to apply for renewal of export permits at
six-month intervals and the next renewal date is July 25, 2015.
PT-FI has submitted the requirements for renewal of its license and
government approvals are pending.
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 late 2017. Development of the
Grasberg Block Cave and Deep Mill Level Zone (DMLZ) underground
mines is advancing to enable DMLZ to commence production in late
2015 and the Grasberg Block Cave mine to commence production in
2018. Over the next five years, estimated aggregate capital
spending on these projects is currently expected to average $0.8
billion per year ($0.7 billion per year net to PT-FI).
Additionally, over the next five years, estimated aggregate capital
spending for processing and power facilities to optimize the
handling of underground ore is expected to average $0.3 billion per
year. Considering the long-term nature and size of these projects,
actual costs could vary from these estimates. PT-FI may reduce or
defer these activities pending resolution of negotiations for an
amended COW.
Operating Data. Following is summary consolidated operating data
for the Indonesia mining operations for the second quarters and
first six months of 2015 and 2014:
Three Months Ended Six
Months Ended June 30, June 30, 2015
2014 2015 2014
Copper (millions of recoverable pounds) Production 205 122
359 262 Sales 196 117 351 226 Average realized price per pound $
2.61 $ 3.19 $ 2.66 $ 3.15
Gold (thousands of
recoverable ounces) Production 360 142 615 350 Sales 346 135 606
297 Average realized price per ounce $ 1,173 $ 1,294 $ 1,183 $
1,299
Unit net cash costs per pound of coppera
Site production and delivery, excluding adjustments $ 2.26 $ 3.86 b
$ 2.51 $ 3.60 b Gold and silver credits (2.13 ) (1.57 ) (2.11 )
(1.85 ) Treatment charges 0.32 0.26 0.31 0.25 Export duties 0.18 —
0.16 — Royalty on metals 0.18 c 0.11 0.17 c
0.12 Unit net cash costs $ 0.81 $ 2.66 $ 1.04
$ 2.12
a. 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, "fcx.com."
b. The second quarter and first six months of 2014 excludes
fixed costs totaling $0.48 per pound of copper charged directly to
cost of sales as a result of the impact of export restrictions on
PT-FI's operating rates.
c. Includes $0.07 per pound of copper for the second quarter and
first six months of 2015 associated with PT-FI's increased royalty
rates pursuant to the MOU.
Indonesia's second-quarter 2015 sales of 196 million pounds of
copper and 346 thousand ounces of gold were higher than
second-quarter 2014 sales of 117 million pounds of copper and 135
thousand ounces of gold, primarily reflecting higher operating and
recovery rates, and higher ore grades for gold. PT-FI expects ore
grades to increase beginning in fourth-quarter 2015 through 2017 as
high-grade sections of the Grasberg open pit are mined.
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 860 million pounds of copper and 1.3
million ounces of gold for the year 2015, compared with 664 million
pounds of copper and 1.2 million ounces of gold for the year
2014.
A significant portion of PT-FI's costs are fixed and unit costs
vary depending on production volumes. Indonesia's unit net cash
costs (including gold and silver credits) of $0.81 per pound of
copper in second-quarter 2015 were lower than unit net cash costs
of $2.66 per pound in second-quarter 2014, primarily reflecting
higher gold and silver credits and higher copper sales volumes,
partly offset by the impact of export duties and increased royalty
rates.
Unit net cash costs (net of gold and silver credits) for
Indonesia mining are expected to approximate $1.08 per pound of
copper for the year 2015, based on current sales volume and cost
estimates, and assuming an average gold price of $1,150 per ounce
for the second half of 2015. Indonesia mining's projected unit net
cash costs would change by approximately $0.05 per pound for each
$50 per ounce change in the average price of gold for the second
half of 2015. 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. (TFM), FCX
operates in 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. Construction of a second
sulphuric acid plant is under way, with completion expected in the
first half of 2016. 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 power availability, 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 2015 and 2014:
Three Months Ended Six
Months Ended June 30, June 30, 2015
2014 2015 2014
Copper (millions of recoverable pounds) Production 115 114
231 223 Sales 104 118 237 202 Average realized price per pounda $
2.63 $ 3.08 $ 2.66 $ 3.08
Cobalt (millions of
contained pounds) Production 9 7 16 14 Sales 8 7 16 15 Average
realized price per pound $ 9.27 $ 9.58 $ 9.23 $ 9.29
Unit
net cash costs per pound of copperb Site production and
delivery, excluding adjustments $ 1.54 $ 1.46 $ 1.56 $ 1.47 Cobalt
creditsc (0.53 ) (0.34 ) (0.44 ) (0.48 ) Royalty on metals 0.06
0.06 0.06 0.07 Unit net cash costs $
1.07 $ 1.18 $ 1.18 $ 1.06
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
schedules, "Product Revenues and Production Costs," beginning on
page XIV, which is available on FCX's website, "fcx.com."
c. Net of cobalt downstream processing and freight costs.
TFM's copper sales of 104 million pounds in second-quarter 2015
were lower than second-quarter 2014 copper sales of 118 million
pounds primarily because of timing of shipments. TFM's sales are
expected to approximate 460 million pounds of copper and 36 million
pounds of cobalt for the year 2015, compared with 425 million
pounds of copper and 30 million pounds of cobalt for the year
2014.
Africa mining's unit net cash costs (net of cobalt credits) of
$1.07 per pound of copper in second-quarter 2015 were lower than
unit net cash costs of $1.18 per pound of copper in second-quarter
2014, primarily reflecting higher cobalt credits, partly offset by
lower copper sales volumes. Unit net cash costs (net of cobalt
credits) for Africa mining are expected to approximate $1.12 per
pound of copper for the year 2015, based on current sales volume
and cost estimates and assuming an average cobalt price of $13 per
pound for the second half of 2015. Africa mining's projected unit
net cash costs would change by approximately $0.05 per pound for
each $2 per pound change in the average price of cobalt for the
second half of 2015.
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 FCX's North and
South America copper mines, are processed at FCX's conversion
facilities.
Production from the Molybdenum mines totaled 13 million pounds
of molybdenum in second-quarter 2015, 14 million pounds in
second-quarter 2014, 26 million pounds in the first six months of
2015 and 27 million pounds in the first six months of 2014. 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 FCX's North and South America copper
mines.
Average unit net cash costs for the Molybdenum mines of $7.19
per pound of molybdenum in second-quarter 2015 were higher than
average unit net cash costs of $6.47 per pound in second-quarter
2014, primarily reflecting lower production volumes from the
Henderson mine. Based on current sales volume and cost estimates,
unit net cash costs for the Molybdenum mines are expected to
average approximately $7.50 per pound of molybdenum for the year
2015.
FCX continues to monitor market conditions and may adjust its
molybdenum operating plans as market conditions warrant. 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 schedules, "Product
Revenues and Production Costs," beginning on page XIV, which is
available on FCX's website, "fcx.com."
Mining Exploration Activities. FCX's mining exploration
activities are generally 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
continue to indicate opportunities for significant future potential
reserve additions in North and South America, and in the Tenke
minerals district. The drilling data in North America also
indicates the potential for significantly expanded sulfide
production. Drilling results and exploration modeling in North
America have identified large-scale potential sulfide resources in
the Morenci and Safford/Lone Star districts, providing a long-term
pipeline for future growth in reserves and production capacity in
an established minerals district. Exploration spending associated
with mining operations is expected to approximate $110 million for
the year 2015, compared to $96 million in 2014.
OIL AND GAS OPERATIONS
Through its wholly owned oil and gas subsidiary, FCX Oil &
Gas Inc. (FM O&G), FCX's portfolio of oil and gas assets
includes significant oil production facilities and growth potential
in the Deepwater Gulf of Mexico (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 a
position in the Inboard Lower Tertiary/Cretaceous natural gas trend
onshore in South Louisiana. For the first six months of 2015, 88
percent of FCX's oil and gas revenues, excluding the impact of
derivative contracts, were from oil and NGLs.
On June 23, 2015, Freeport-McMoRan Oil & Gas Inc. filed a
registration statement on Form S-1 with the U.S Securities and
Exchange Commission (SEC) related to its potential IPO of Class A
common stock representing a minority interest in the entity.
Freeport-McMoRan Oil & Gas Inc. intends to apply to list the
common stock on the NYSE under the ticker “FMOG.” The registration
statement has not yet become effective, and securities may not be
sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective.
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 and
amortized to expense under the unit-of-production method on a
country-by-country basis using estimates of proved oil and natural
gas reserves relating to each country where such activities are
conducted. The costs of unproved oil and gas properties are
excluded from amortization until the properties are evaluated.
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. The SEC requires the twelve-month
average of the first-day-of-the-month historical reference oil
price be used in determining the ceiling amount. Using West Texas
Intermediate (WTI) as the reference oil price, the average price
was $71.68 per barrel at June 30, 2015, compared with $82.72 per
barrel at March 31, 2015. At June 30, 2015, net capitalized costs
with respect to FM O&G's proved U.S. oil and gas properties
exceeded the ceiling amount specified by the SEC's full cost
accounting rules, which resulted in the recognition of an
impairment charge totaling $2.7 billion ($1.7 billion to net loss
attributable to common stock) for second-quarter 2015.
Because the ceiling test limitation uses a twelve-month
historical average price, if WTI oil prices remain below the June
30, 2015, twelve-month average of $71.68 per barrel, the ceiling
limitation will decrease, resulting in potentially significant
additional ceiling test impairments of FCX's oil and gas
properties. The WTI spot oil price was $49.19 per barrel at
July 22, 2015.
In addition to a decline in trailing average oil and gas prices,
other factors that could result in impairment of FCX's oil and gas
properties in future periods include costs transferred from
unevaluated properties to the full cost pool without corresponding
proved oil and natural gas reserve additions, negative reserve
revisions and increased future development or production costs. As
FM O&G completes activities to assess its $9.3 billion in
unevaluated properties, related costs currently recorded as
unevaluated properties not subject to amortization will be
transferred to the full cost pool. If these activities do not
result in additions to discounted future net cash flows from proved
oil and natural gas reserves at least equal to the related costs
transferred (net of related tax effects), additional ceiling test
impairments may occur.
Financial and Operating Data. Following is summary financial and
operating data for the U.S. oil and gas operations for the second
quarters and first six months of 2015 and 2014:
Three Months Ended Six
Months Ended June 30, June 30, 2015
2014a 2015 2014a
Financial Summary (in
millions) Realized revenuesb $ 656 $ 1,243 $ 1,203 $ 2,488
Less: cash production costsb 249 314 503 612
Cash operating margin $ 407 $ 929 $ 700 $ 1,876 Capital
expenditures $ 777 $ 903 $ 1,795 $ 1,484
Sales Volumes Oil
(MMBbls) 8.6 11.7 17.0 23.5 Natural gas (Bcf) 23.5 20.3 45.3 39.8
NGLs (MMBbls) 0.6 1.0 1.1 2.1 MMBOE 13.1 16.0 25.6 32.2
Average
Realized Pricesb Oil (per barrel) $ 67.61 $ 95.50 $
62.13 $ 94.63 Natural gas (per million British thermal units, or
MMBtu) $ 2.66 $ 4.44 $ 2.75 $ 4.55 NGLs (per barrel) $ 20.50 $
38.79 $ 21.71 $ 42.35
Cash Operating Margin per BOEb
Realized revenues $ 50.04 $ 77.53 $ 46.95 $ 77.37 Less: cash
production costs 19.04 19.57 19.62 19.03 Cash
operating margin $ 31.00 $ 57.96 $ 27.33 $
58.34
a. The 2014 periods include results from the Eagle Ford field
through June 19, 2014. Eagle Ford had sales volumes totaling 4.0
MMBOE for second-quarter 2014 and 8.7 MMBOE for the first six
months of 2014; excluding Eagle Ford, oil and gas cash production
costs were $21.66 per BOE for second-quarter 2014 and $21.29 per
BOE for the first six months of 2014.
b. 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.
For reconciliations of realized revenues (including average
realized prices 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
schedules, “Product Revenues and Production Costs,” beginning on
page XIV, which is available on FCX's website, “fcx.com.”
In second-quarter 2015, FM O&G's average realized price for
crude oil was $67.61 per barrel, including $11.79 per barrel of
realized cash gains on derivative contracts. Excluding the impact
of derivative contracts, the second-quarter 2015 average realized
price for crude oil was $55.82 per barrel (88 percent of the
average Brent crude oil price of $63.57 per barrel).
FM O&G has derivative contracts that provide price
protection averaging between approximately $70 and $90 per barrel
of Brent crude oil for more than 80 percent of estimated 2015 oil
production. Assuming an average price of $56 per barrel for Brent
crude oil, FCX would receive a benefit of $20 per barrel on
remaining 2015 derivative contract volumes of 15.46 million
barrels, before taking into account weighted-average premiums of
$6.89 per barrel.
In second-quarter 2015, FM O&G's average realized price for
natural gas was $2.66 per MMBtu, compared to the New York
Mercantile Exchange natural gas price average of $2.65 per MMBtu
for the April through June 2015 contracts.
Realized revenues for oil and gas operations of $50.04 per BOE
in second-quarter 2015 were lower than realized revenues of $77.53
per BOE in second-quarter 2014, primarily reflecting lower oil
prices, partially offset by the impact of higher cash gains on
derivative contracts (cash gains were $101 million or $7.73 per BOE
in second-quarter 2015, compared with losses of $63 million or
$3.94 per BOE in second-quarter 2014).
Cash production costs for oil and gas operations of $19.04 per
BOE in second-quarter 2015 were lower than cash production costs of
$19.57 per BOE in second-quarter 2014, primarily reflecting lower
cash production costs in California related to reductions in repair
and maintenance costs and well workover expense.
Following is a summary of average oil and gas sales volumes per
day by region for the second quarters and first six months of 2015
and 2014:
Three Months Ended Six
Months Ended June 30, June 30, Sales Volumes
(MBOE per day) 2015 2014 2015 2014
GOMa 80 75 77 73 California 38 39 39 39 Haynesville/Madden/Other 26
18 26 18 Eagle Fordb — 44 — 48 Total oil and
gas operations 144 176 142 178
a. Includes sales from properties on the GOM Shelf and in the
Deepwater GOM.
b. FM O&G completed the sale of Eagle Ford in June 2014.
Daily sales volumes averaged 144 MBOE for second-quarter 2015,
including 95 thousand barrels (MBbls) of crude oil, 259 million
cubic feet (MMcf) of natural gas and 5 MBbls of NGLs. Oil and gas
sales volumes are expected to average 143 MBOE per day for the year
2015, comprised of 67 percent oil, 29 percent natural gas and 4
percent NGLs.
Based on current sales volume and cost estimates, cash
production costs are expected to approximate $19 per BOE for the
year 2015.
Oil and Gas Exploration, Operating and Development
Activities. FCX's oil and gas business has significant proved,
probable and possible reserves, a broad range of development
opportunities and high-potential exploration prospects. The
business is managed to reinvest its cash flows in projects with
attractive rates of return and risk profiles. Following the sharp
decline in oil prices in late 2014, FCX has taken steps to
significantly reduce capital spending plans and is evaluating
funding opportunities for capital expenditures for its oil and gas
business, including the potential IPO for a minority interest in
Freeport-McMoRan Oil & Gas Inc.
FM O&G is focused on growing its strategic position in the
Deepwater GOM with significant current oil production, strong cash
margins and existing infrastructure and facilities with excess
production and handling 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. FM O&G’s
capital allocation strategy is principally focused on development
opportunities that can be tied back to existing facilities.
During second-quarter 2015, FM O&G achieved several
important accomplishments, principally in its Deepwater GOM focus
areas, that are expected to contribute to future growth. Production
reached full capacity at the Lucius facility and development
advanced at the Heidelberg field. Positive drilling results
were achieved at the Holstein Deep, Quebec/Victory (QV),
Kilo/Oscar (KO) and Horn Mountain Updip tieback prospects.
Since commencing development activities in 2014 at its three
100-percent-owned production platforms in the Deepwater GOM, FM
O&G has drilled 10 wells with positive results. Three of these
wells have been brought on production, and FM O&G plans to
complete and place in production four wells over the next 12 months
and the remaining three wells in 2017. Longer term, FM O&G's
production is expected to benefit from the success in the Atwater
Valley focus area, where multiple discoveries have been drilled to
date. During second-quarter 2015, FM O&G commenced drilling at
the Deep Sleep exploration well in the Atwater Valley focus
area and the MZ-1 exploration well offshore Morocco.
U.S. Oil and Gas Capital Expenditures. Capital expenditures for
U.S. oil and gas operations totaled $0.8 billion (including $0.6
billion incurred for the Deepwater GOM and $0.1 billion for the
Inboard Lower Tertiary/Cretaceous natural gas trend) for
second-quarter 2015 and $1.8 billion (including $1.2 billion
incurred for Deepwater GOM and $0.2 billion for the Inboard Lower
Tertiary/Cretaceous natural gas trend) for the first six months of
2015.
Capital expenditures for oil and gas operations are estimated to
total $2.8 billion for the year 2015, with approximately 85 percent
of the 2015 capital budget expected to be directed to the highest
potential return focus areas in the GOM.
Deepwater GOM. The drilling and evaluation of multiple
development and exploration opportunities in the Deepwater GOM is
in progress. These prospects benefit from tieback opportunities to
significant available production capacity at the FM O&G
operated large-scale Holstein, Marlin and Horn Mountain deepwater
production platforms. In addition, FM O&G has interests in the
Lucius and Heidelberg oil fields, and in the Atwater Valley focus
area.
After successfully commencing first production in January 2015,
the Lucius oil facility in Keathley Canyon reached
capacity of 80 MBbls of oil per day in second-quarter 2015. FM
O&G has a 25.1 percent working interest in Lucius, which
consists of six subsea wells located in 7,200 feet of water tied
back to a truss spar hull.
Field development continued at Heidelberg in the Green
Canyon focus area during second-quarter 2015. Fabrication of
the main topsides module is complete, the hull is on location, and
mooring lines are completed. The Heidelberg truss spar was designed
as a Lucius-look-alike facility with capacity of 80 MBbls of oil
per day. Development drilling in the field is ongoing and first
production is anticipated in mid-2016. FM O&G has a 12.5
percent working interest in Heidelberg, which is a large,
high-quality oil development project located in 5,300 feet of
water.
In July 2015, FM O&G logged its third successful subsalt
Miocene delineation well at the 100-percent-owned Holstein
Deep development project in the Green Canyon focus area since
commencing drilling in the area in third-quarter 2014. The third
delineation well, which is the most updip in the reservoir, was
drilled to 29,440 feet and wireline logs indicated that the well
encountered approximately 200 feet of net oil pay. Drilling results
from this initial three-well development program successfully
established sand continuity across the primary reservoir.
Completion activities for the initial three-well subsea tieback
development program are expected to commence in third-quarter 2015
and production is expected to begin in 2016. Successful results
from the initial three-well drilling program established
opportunities for additional wells. When fully developed, this
project will have the potential to produce up to 75 MBOE per day.
The Holstein Deep development is located in Green Canyon Block 643,
west of the Holstein platform in 3,890 feet of water with
production facilities capable of processing 113 MBbls of oil per
day.
FM O&G’s 100-percent-owned Marlin Hub is located in
the Mississippi Canyon focus area and has production
facilities capable of processing 60 MBbls of oil per day. Several
tieback opportunities have been identified, including the
100-percent-owned Dorado and King development projects. Future
wells can be brought on-line using existing infrastructure with the
potential to utilize subsea enhancement technologies that could
increase total recovery efficiencies. In second-quarter 2015, FM
O&G completed maintenance activities, including the
installation of new export flow line flex joints, which will extend
the life of the Marlin platform.
The initial FM O&G drilled Dorado well was placed in
production in March 2015 after a successful production test in
excess of 8 MBOE per day and continues to produce at strong rates.
Drilling operations for the second and third wells, which are
targeting similar undrained fault blocks and updip resource
potential south of the Marlin facility, are expected to begin in
2016. The Dorado development is located on Viosca Knoll Block 915
in 3,860 feet of water.
Initial production from the first development well at
King is expected to commence in fourth-quarter 2015, and
additional drilling is planned in the area starting in the
second-half of 2015. King is located in Mississippi Canyon south of
the Marlin facility in 5,200 feet of water.
FM O&G’s 100-percent-owned Horn Mountain field is
also located in the Mississippi Canyon focus area and has
production facilities capable of processing 75 MBbls of oil per
day. To enhance recovery of remaining oil in place, future
development plans will target subsea tieback from multiple stacked
sands in the area. In second-quarter 2015, the QV well, the
first location of this program, was drilled to 14,780 feet and
successfully encountered 355 feet of oil and gas pay as indicated
by wireline logs. FM O&G plans to complete this well and place
it in production in 2017. In June 2015, drilling operations
commenced at the KO and Horn Mountain Updip wells. In
July 2015, interim results from KO indicated the well encountered
62 feet of oil pay and drilling continues to evaluate additional
objectives. At Horn Mountain Updip, the well was drilled to a total
depth of 14,780 feet in July 2015 and successfully logged 83 feet
of oil pay. These infill wells are targeting undrained fault blocks
and updip resource potential east and west of the Horn Mountain
facility, which is located in approximately 5,400 feet of
water.
FM O&G has an 18.67 percent working interest in the
Vito oil discovery and a significant lease position in the
Atwater Valley focus area. Vito is a large, deep subsalt Miocene
oil discovery made in 2009, located in approximately 4,000 feet of
water. Exploration and delineation drilling in recent years
confirmed a significant resource in high-quality, subsalt Miocene
sands. Development options are under evaluation, and FM O&G
expects the operator to propose a sanctioning development plan in
2016.
As previously reported, success at the Power Nap
exploration well and appraisal sidetracks, which are located in
close proximity to Vito, produced positive results, and development
options are being assessed. The neighboring Deep Sleep
exploration well in the greater Mars/Ursa basin commenced drilling
in June 2015. Deep Sleep is located in 4,200 feet of water
approximately five miles south of Power Nap. FM O&G owns a
50 percent working interest in the Power Nap and Deep Sleep
prospects.
Inboard Lower Tertiary/Cretaceous. FM O&G has a position in
the Inboard Lower Tertiary/Cretaceous natural gas trend, located
onshore in South Louisiana.
In second-quarter 2015, the Highlander well, which has
been restricted because of limited processing facilities, averaged
a gross rate of 22 MMcf per day (approximately 11 MMcf per day net
to FM O&G). As previously reported, production testing in
February 2015 indicated a flow rate of 75 MMcf per day
(approximately 37 MMcf per day net to FM O&G). FM O&G is
developing additional processing facilities to accommodate the
higher flow rates with installation expected by year-end 2015. In
July 2015, the Highlander well was shut in for remedial workover
operations to address a mechanical issue encountered in the
wellbore. A second well location has been identified, and future
plans are being considered. FM O&G is the operator and has a 72
percent working interest and an approximate 49 percent net revenue
interest in Highlander. FM O&G has identified multiple
additional locations on the Highlander structure, which is located
onshore in South Louisiana where FM O&G controls rights to more
than 50,000 gross acres.
California. Sales volumes from California averaged 38 MBOE
per day for second-quarter 2015, compared with 39 MBOE per day for
second-quarter 2014. 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. During
second-quarter 2015, production from Point Arguello platforms,
which produced approximately 2 MBOE per day in first-quarter 2015,
was temporarily shut in following the shutdown of a third-party
operated pipeline system that transports oil to various California
refineries.
Haynesville. FM O&G has rights to a substantial natural gas
resource, located in the Haynesville shale play in North Louisiana.
Drilling activities remain constrained in response to low natural
gas prices in order to maximize near-term cash flows and to
preserve the resource for potentially higher future natural gas
prices.
International Exploration (Morocco). In May 2015, FM O&G
commenced drilling the MZ-1 well associated with the
Ouanoukrim prospect in the Mazagan permit area offshore Morocco
under a farm-in arrangement to earn interests in exploration
blocks. The well is currently drilling below 15,260 feet towards a
proposed total depth of approximately 18,500 feet. The exploration
area covers 2.2 million gross acres in water depths of 4,500 to
9,900 feet. Capital expenditures for international oil and gas
exploration activities in Morocco totaled $29 million for
second-quarter 2015 and $44 million for the first six months of
2015.
CASH FLOWS, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of $1.1
billion (net of $104 million in working capital uses and changes in
other tax payments) for second-quarter 2015 and $1.8 billion (net
of $190 million in working capital uses and changes in other tax
payments) for the first six months of 2015.
Based on current sales volume and cost estimates and assuming
average prices of $2.50 per pound of copper, $1,150 per ounce of
gold, $6 per pound of molybdenum and $56 per barrel of Brent crude
oil for the second half of 2015, FCX's consolidated operating cash
flows are estimated to approximate $3.6 billion for the year 2015.
The impact of price changes for the second half of 2015 on
operating cash flows would approximate $190 million for each $0.10
per pound change in the average price of copper, $25 million for
each $50 per ounce change in the average price of gold, $60 million
for each $2 per pound change in the average price of molybdenum and
$55 million for each $5 per barrel change in the average Brent
crude oil price.
Capital Expenditures. Capital expenditures totaled $1.7 billion
for second-quarter 2015 (including $0.6 billion for major projects
at mining operations and $0.8 billion for oil and gas operations)
and $3.5 billion for the first six months of 2015 (including $1.2
billion for major projects at mining operations and $1.8 billion
for oil and gas operations).
Capital expenditures are currently expected to approximate $6.3
billion for the year 2015, including $2.5 billion for major
projects at mining operations (primarily for the Cerro Verde
expansion and underground development activities at Grasberg) and
$2.8 billion for oil and gas operations. FCX has made substantial
progress toward the completion of its major mining development
projects, which are expected to result in increased near-term
production, lower unit costs, declining capital expenditures and
growth in free cash flow over the next several quarters. In
addition, positive oil and gas drilling and development activities
are expected to result in a growing oil production profile. FCX
remains focused on maintaining a strong balance sheet and on
continuing to manage costs, capital spending plans and other
actions as required to maintain financial strength. FCX has a broad
set of natural resource assets that provide many alternatives for
future actions to enhance its financial flexibility.
Cash. Following is a summary of cash available to the parent
company, net of noncontrolling interests' share, taxes and other
costs at June 30, 2015 (in millions):
Cash at domestic companies $ 29 Cash at
international operations 437 Total consolidated cash and
cash equivalents 466 Less: noncontrolling interests' share (119 )
Cash, net of noncontrolling interests' share 347 Less: withholding
taxes and other (19 )
Net cash available $ 328
Debt. FCX remains committed to a strong balance sheet and will
take prudent actions in response to market conditions. FCX has
taken steps to sell assets, defer capital spending and reduce
dividends on its common stock. FCX will continue to evaluate its
portfolio for potential future actions. Following is a summary
of total debt and related weighted-average interest rates at
June 30, 2015 (in billions, except percentages):
Weighted- Average
Interest Rate FCX Senior Notes $ 11.9 3.8 % FCX Term Loan 3.0 1.9 %
FM O&G Senior Notes 2.6 6.6 % Cerro Verde Credit Facility 1.3 a
2.1 % Other FCX debt 2.1 b 2.7 % $ 20.9 3.6 %
a. Cerro Verde had $1.3 billion of borrowings outstanding and no
letters of credit issued under its $1.8 billion credit facility to
fund a portion of its expansion project and for its general
corporate purposes.
b. FCX had $985 million of borrowings outstanding and $42
million in letters of credit issued under its $4 billion revolving
credit facility. FCX also has uncommitted and short-term lines of
credit with certain financial institutions that are unsecured,
which have terms and pricing that are generally more favorable than
our revolving credit facility. At June 30, 2015, there was
$410 million of borrowings drawn under these lines of credit.
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 $380 million in the first six months of 2015.
On June 24, 2015, FCX's Board of Directors (the Board) declared
a regular quarterly dividend of $0.05 per share and a one-time
special dividend of $0.1105 per share in accordance with the
approved settlement terms of shareholder derivative litigation.
Both the regular quarterly dividend and the special dividend will
be paid on August 3, 2015. 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 and anticipates increasing cash returns
to shareholders as market and business conditions warrant.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX's
second-quarter 2015 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 "fcx.com." A replay of
the webcast will be available through Friday, August 21,
2015.
-----------------------------------------------------------------------------------------------------------
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 U.S. oil and natural
gas assets in the Deepwater GOM, 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. Additional information about FCX is available on
FCX's website at "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
the 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 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, crude oil and natural
gas, mine sequencing, production rates, industry risks, regulatory
changes, political risks, drilling results, potential additional
oil and gas property impairment charges, the outcome of ongoing
discussions with the Indonesian government regarding an amendment
to PT-FI's COW, PT-FI's ability to obtain renewal of its export
license after July 25, 2015, the potential effects of violence in
Indonesia, the resolution of administrative disputes in the DRC,
labor relations, 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, 2014, 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 upon which
FCX's forward-looking statements are based are likely to change
after the 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 not be able to
control. Further, FCX may make changes to its business plans that
could affect its results. FCX cautions investors that it does not
intend to update forward-looking statements more frequently than
quarterly notwithstanding any changes in its 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 molybdenum, oil and
gas realized revenues, cash production costs and cash operating
margin, which are not recognized under U.S. generally accepted
accounting principles. 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,
"fcx.com."
FREEPORT-McMoRan INC.
SELECTED MINING OPERATING DATA
Three Months Ended June 30, Production Sales
COPPER (millions of recoverable pounds) 2015
2014 2015 2014 (FCX's net interest in %)
North America
Morenci (85%)a 219 153 225 164 Bagdad (100%) 51 59 56 64 Safford
(100%) 39 34 40 38 Sierrita (100%) 48 51 51 54 Miami (100%) 12 15
12 16 Chino (100%) 76 57 78 60 Tyrone (100%) 23 24 23 25 Other
(100%) 1 2 1 2 Total North America 469 395 486
423
South America Cerro Verde (53.56%)
104 125 97 138 El Abra (51%) 84 93 81 92 Candelaria/Ojos del Salado
(80%)b — 82 — 80 Total South America 188 300
178 310
Indonesia Grasberg (90.64%)c 205
122 196 117
Africa Tenke
Fungurume (56%) 115 114 104 118
Consolidated 977 931 964
968 Less noncontrolling interests 160 182 149
188
Net 817 749 815
780 Consolidated sales from mines 964 968 Purchased
copper 24 34 Total copper sales, including purchases
988 1,002 Average realized price per pound $
2.71 $ 3.16
GOLD (thousands of
recoverable ounces) (FCX's net interest in %) North America (100%)
7 3 6 4 South America (80%)b — 21 — 20 Indonesia (90.64%)c 360 142
346 135
Consolidated 367 166
352 159 Less noncontrolling interests
34 17 33 16
Net 333 149
319 143 Average realized price per
ounce $ 1,174 $ 1,296
MOLYBDENUM
(millions of recoverable pounds) (FCX's net interest in %)
Henderson (100%) 7 8 N/A N/A Climax (100%) 6 6 N/A N/A North
America copper mines (100%)a 10 9 N/A N/A Cerro Verde (53.56%) 2 2
N/A N/A
Consolidated 25 25
23 25 Less noncontrolling interests 1 1
1 1
Net 24 24 22
24 Average realized price per pound $ 9.51 $
13.43
COBALT (millions of contained
pounds) (FCX's net interest in %)
Consolidated - Tenke
Fungurume (56%)
9 7 8 7
Less noncontrolling interests 4 3 4 3
Net
5 4 4 4 Average
realized price per pound $ 9.27 $ 9.58
a. Amounts are net of Morenci's 15 percent
joint venture partner's interest.
b. On November 3, 2014, FCX completed the
sale of its 80 percent interests in the Candelaria and Ojos del
Salado mines.
c. 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) 2015 2014 2015 2014 (FCX's net interest in %)
North America Morenci (85%)a 424 301 436 308 Bagdad
(100%) 104 117 114 120 Safford (100%) 79 71 81 74 Sierrita (100%)
95 101 100 100 Miami (100%) 23 29 25 31 Chino (100%) 149 110 153
109 Tyrone (100%) 45 47 47 48 Other (100%) 2 4 2 4
Total North America 921 780 958 794
South America Cerro Verde (53.56%) 211 260 207 261 El
Abra (51%) 170 185 171 182 Candelaria/Ojos del Salado (80%)b — 169
— 174 Total South America 381 614 378
617
Indonesia Grasberg (90.64%)c 359 262
351 226
Africa Tenke Fungurume (56%) 231
223 237 202
Consolidated 1,892
1,879 1,924 1,839 Less
noncontrolling interests 317 368 317 355
Net
1,575 1,511 1,607 1,484
Consolidated sales from mines 1,924 1,839 Purchased copper
64 66 Total copper sales, including purchases
1,988 1,905 Average realized price per pound $ 2.70 $
3.17
GOLD (thousands of recoverable
ounces) (FCX's net interest in %) North America (100%) 11 5 9 6
South America (80%)b — 42 — 43 Indonesia (90.64%)c 615 350
606 297
Consolidated 626 397
615 346 Less noncontrolling interests 58 41
57 36
Net 568 356
558 310 Average realized price per
ounce $ 1,183 $ 1,299
MOLYBDENUM
(millions of recoverable pounds) (FCX's net interest in %)
Henderson (100%) 14 16 N/A N/A Climax (100%) 12 11 N/A N/A North
America copper mines (100%)a 19 17 N/A N/A Cerro Verde (53.56%) 4 5
N/A N/A
Consolidated 49 49
46 52 Less noncontrolling interests 2 3
2 3
Net 47 46 44
49 Average realized price per pound $ 9.84 $
12.27
COBALT (millions of contained
pounds) (FCX's net interest in %)
Consolidated - Tenke
Fungurume (56%)
16 14 16
15 Less noncontrolling interests 7 6 7 7
Net 9 8 9 8
Average realized price per pound $ 9.23 $ 9.29
a. Amounts are net of Morenci's 15 percent
joint venture partner's interest.
b. On November 3, 2014, FCX completed the
sale of its 80 percent interests in the Candelaria and Ojos del
Salado mines.
c. 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, 2015 2014 2015 2014
100% North America
Copper Mines Solution Extraction/Electrowinning (SX/EW)
Operations Leach ore placed in stockpiles (metric tons per
day) 890,000 1,044,500 902,500 1,014,000 Average copper ore grade
(percent) 0.26 0.25 0.25 0.25 Copper production (millions of
recoverable pounds) 261 234 508 463
Mill
Operations Ore milled (metric tons per day) 316,000 260,100
308,800 257,700 Average ore grades (percent): Copper 0.47 0.44 0.48
0.43 Molybdenum 0.03 0.03 0.03 0.03 Copper recovery rate (percent)
85.8 82.8 85.6 84.4 Production (millions of recoverable pounds):
Copper 247 188 488 370 Molybdenum 10 9 19 17
100% South
America Mininga SX/EW Operations Leach ore
placed in stockpiles (metric tons per day) 237,000 281,700 235,300
284,200 Average copper ore grade (percent) 0.41 0.52 0.41 0.51
Copper production (millions of recoverable pounds) 109 125 223 248
Mill Operations Ore milled (metric tons per
day) 116,500 182,200 117,900 185,500 Average ore grades: Copper
(percent) 0.46 0.56 0.45 0.58 Molybdenum (percent) 0.01 0.02 0.02
0.02 Gold (grams per metric ton) — 0.11 — 0.11 Copper recovery rate
(percent) 78.2 88.7 78.9 89.4 Production (recoverable): Copper
(millions of pounds) 79 175 158 366 Molybdenum (millions of pounds)
2 2 4 5 Gold (thousands of ounces) — 21 — 42
100%
Indonesia Mining Ore milled (metric tons per day)b Grasberg
open pit 134,200 50,700 121,200 58,200 DOZ underground mine 42,700
50,500 45,800 50,400 Big Gossan underground mine — 1,700 — 1,800
Total 176,900 102,900 167,000 110,400 Average ore grades: Copper
(percent) 0.67 0.73 0.63 0.72 Gold (grams per metric ton) 0.86 0.65
0.78 0.72 Recovery rates (percent): Copper 90.6 89.0 90.6 88.7 Gold
83.5 76.3 83.9 78.1 Production (recoverable): Copper (millions of
pounds) 205 125 359 269 Gold (thousands of ounces) 360 142 615 351
100% Africa Mining Ore milled (metric tons per day)
15,300 15,200 14,900 14,800 Average ore grades (percent): Copper
4.02 4.08 4.18 4.07 Cobalt 0.44 0.34 0.40 0.33 Copper recovery rate
(percent) 93.9 92.7 93.9 93.7 Production (millions of pounds):
Copper (recoverable) 115 114 231 223 Cobalt (contained) 9 7 16 14
100% Molybdenum Mines Ore milled (metric tons per
day) 35,900 44,800 38,200 42,200 Average molybdenum ore grade
(percent) 0.20 0.18 0.19 0.18 Molybdenum production (millions of
recoverable pounds) 13 14 26 27
a. On November 3, 2014, FCX completed the
sale of its 80 percent interests in the Candelaria and Ojos del
Salado mines.
b. Amounts represent the approximate
average daily throughput processed at PT-FI's mill facilities from
each producing mine.
FREEPORT-McMoRan
INC. SELECTED U.S. OIL AND GAS OPERATING DATA
Three Months Ended
June 30, Sales Volumes Sales per Day 2015 2014 2015
2014
Gulf of Mexico (GOM)a Oil (thousand barrels or
MBbls) 5,234 5,262 58 58 Natural gas (million cubic feet or MMcf)
9,279 6,669 102 73 Natural gas liquids (NGLs, in MBbls) 529 489 5 5
Thousand barrels of oil equivalents (MBOE) 7,309 6,862 80 75
Average realized price per BOEb $ 47.82 $ 87.49 Cash production
costs per BOEb $ 16.98 $ 14.80 Capital expenditures (in millions) $
676 c $ 728 c
CALIFORNIA Oil (MBbls) 3,326 3,436 37
37 Natural gas (MMcf) 562 597 6 7 NGLs (MBbls) 42 42 — d 1 MBOE
3,462 3,578 38 39 Average realized price per BOEb $ 48.30 $ 94.37
Cash production costs per BOEb $ 27.13 $ 37.70 Capital expenditures
(in millions) $ 24 $ 68
HAYNESVILLE/MADDEN/OTHER Oil
(MBbls) 39 26 — d — d Natural gas (MMcf) 13,693 9,585 151 105 NGLs
(MBbls) 15 5 — d — d MBOE 2,336 1,629 26 18 Average realized price
per BOEb $ 16.15 $ 27.59 Cash production costs per BOEb $ 13.55 $
15.35 Capital expenditures (in millions) $ 6 $ 40
EAGLE
FORDe Oil (MBbls) — 2,950 — 33 Natural gas (MMcf) —
3,452 — 38 NGLs (MBbls) — 433 — 5 MBOE — 3,959 — 44 Average
realized price per BOEb $ — $ 81.52 Cash production costs per BOEb
$ — $ 13.23 Capital expenditures (in millions) $ — $ 105
TOTAL U.S. OIL AND GAS OPERATIONS Oil (MBbls) 8,599 11,674
95 128 Natural gas (MMcf) 23,534 20,303 259 223 NGLs (MBbls) 586
969 5 11 MBOE 13,107 16,028 144 176 Cash operating margin per BOE:b
Realized revenues $ 50.04 $ 77.53 Cash production costs
19.04 19.57 Cash operating margin $ 31.00 $ 57.96
Depreciation, depletion and amortization per BOE $ 36.99 $ 38.39
Capital expenditures (in millions) $ 777 f $ 903 f
a. Reflects properties in the Deepwater
GOM and on the Shelf, including the Inboard Lower
Tertiary/Cretaceous natural gas trend.
b. 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 which 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
schedules, “Product Revenues and Production Costs,” beginning on
page XIV, which is available on FCX's website, fcx.com.
c. Includes $58 million in second-quarter
2015 and $174 million in second-quarter 2014 for the Inboard Lower
Tertiary/Cretaceous natural gas trend.
d. Rounds to less than 1 MBbl per day.
e. FCX completed the sale of its Eagle
Ford shale assets on June 20, 2014.
f. Consolidated capital expenditures for
United States (U.S.) oil and gas operations reflect total spending,
which include accrual and other adjustments totaling $71 million
for second-quarter 2015 and $(38) million for second-quarter 2014
that are not specifically allocated to the above regions.
FREEPORT-McMoRan
INC. SELECTED OIL AND GAS OPERATING DATA (continued)
Six Months
Ended June 30, Sales Volumes Sales per Day 2015 2014 2015
2014
GOMa Oil (MBbls) 10,197 10,063 56 56
Natural gas (MMcf) 16,634 12,576 92 70 NGLs (MBbls) 1,001 1,004 6 6
MBOE 13,970 13,163 77 73 Average realized price per BOEb $44.40
$87.42 Cash production costs per BOEb $17.17 $14.62 Capital
expenditures (in millions) $1,381 c $1,131 c
CALIFORNIA Oil (MBbls) 6,700 6,855 37 38 Natural gas (MMcf)
1,146 1,145 6 6 NGLs (MBbls) 84 83 — d — d MBOE 6,975 7,129 39 39
Average realized price per BOEb $43.49 $93.07 Cash production costs
per BOEb $29.43 $37.12 Capital expenditures (in millions) $53 $121
HAYNESVILLE/MADDEN/OTHER Oil (MBbls) 74 54 1 — d
Natural gas (MMcf) 27,521 18,651 152 103 NGLs (MBbls) 25 11 — d — d
MBOE 4,686 3,174 26 18 Average realized price per BOEb $16.66
$28.93 Cash production costs per BOEb $12.42 $13.40 Capital
expenditures (in millions) $27 $67
EAGLE FORDe
Oil (MBbls) — 6,481 — 36 Natural gas (MMcf) — 7,410 — 41 NGLs
(MBbls) — 978 — 5 MBOE — 8,694 — 48 Average realized price per BOEb
$— $81.66 Cash production costs per BOEb $— $12.97 Capital
expenditures (in millions) $— $232
TOTAL U.S. OIL AND GAS
OPERATIONS Oil (MBbls) 16,971 23,453 94 130 Natural gas (MMcf)
45,301 39,782 250 220 NGLs (MBbls) 1,110 2,076 6 11 MBOE 25,631
32,160 142 178 Cash operating margin per BOE:b Realized revenue
$46.95 $77.37 Cash production costs 19.62 19.03 Cash operating
margin $27.33 $58.34 Depreciation, depletion and amortization per
BOE $39.59 $38.30 Capital expenditures (in millions) $1,795 f
$1,484 f
a. Reflects properties in the Deepwater
GOM and on the Shelf, including the Inboard Lower
Tertiary/Cretaceous natural gas trend.
b. 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 which 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
schedules, “Product Revenues and Production Costs,” beginning on
page XIV, which is available on FCX's website, fcx.com.
c. Includes $142 million for the first six
months of 2015 and $300 million for the first six months of 2014
for the Inboard Lower Tertiary/Cretaceous natural gas trend.
d. Rounds to less than 1 MBbl per day.
e. FCX completed the sale of its Eagle
Ford shale assets on June 20, 2014.
f. Consolidated capital expenditures for
U.S. oil and gas operations reflect total spending, which include
accrual and other adjustments totaling $334 million for the first
six months of 2015 and $(67) million for the first six months of
2014 that are not specifically allocated to the above regions.
FREEPORT-McMoRan
INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six
Months Ended June 30, June 30, 2015 2014 2015 2014 (In millions,
except per share amounts) Revenues $ 4,248 a,b $ 5,522 a,b $ 8,401
a,b $ 10,507 a,b Cost of sales: Production and delivery 2,848 c,d
3,082 e 5,760 c,d 5,819 e Depreciation, depletion and amortization
890 1,013 1,829 1,979 Impairment of oil and gas properties
2,686 — 5,790 —
Total cost of sales 6,424 4,095 13,379 7,798 Selling, general and
administrative expenses 151 164 305 299 Mining exploration and
research expenses 36 34 69 64 Environmental obligations and
shutdown costs 11 76 24 82 Net gain on sale of assets —
— (39 ) — Total costs and
expenses 6,622 4,369 13,738
8,243 Operating (loss) income (2,374 ) 1,153
(5,337 ) 2,264 Interest expense, net (149 ) f (164 ) f (295 ) f
(325 ) f Insurance and other third-party recoveries 92 — 92 — Net
gain on early extinguishment of debt — 5 — 5 Other (expense)
income, net (55 ) (8 ) (48 ) 25
(Loss) income before income taxes and equity in affiliated
companies' net earnings (2,486 ) 986 (5,588 ) 1,969 Benefit from
(provision for) income taxes 687 g (328 ) g 1,382 g (685 ) g Equity
in affiliated companies' net earnings — 2
1 2 Net (loss) income (1,799 )
660 (4,205 ) 1,286 Net income attributable to noncontrolling
interests (42 ) (168 ) (100 ) (274 ) Preferred dividends
attributable to redeemable noncontrolling interest (10 )
(10 ) (20 ) (20 ) Net (loss) income
attributable to common stockholders $ (1,851 ) h $ 482 h $
(4,325 ) h $ 992 h Net (loss) income per share
attributable to common stockholders: Basic $ (1.78 ) $ 0.46
$ (4.16 ) $ 0.95 Diluted $ (1.78 ) $ 0.46 $ (4.16 ) $
0.95 Weighted-average common shares outstanding:
Basic 1,040 1,039 1,040
1,039 Diluted 1,040 1,045
1,040 1,045 Dividends declared
per share of common stock $ 0.1605 $ 0.3125 $ 0.2105
$ 0.6250
a. Includes (unfavorable) favorable
adjustments to provisionally priced concentrate and cathode copper
sales recognized in prior periods totaling $(20) million ($(10)
million to net loss attributable to common stock) for
second-quarter 2015, $35 million ($16 million to net income
attributable to common stock) for second-quarter 2014, $(106)
million ($(50) million to net loss attributable to common stock)
for the first six months of 2015 and $(118) million ($(65) million
to net income attributable to common stock) for the first six
months of 2014. For further discussion, refer to the supplemental
schedule, "Derivative Instruments," beginning on page X.
b. Includes net noncash mark-to-market
(losses) gains associated with crude oil and natural gas derivative
contracts totaling $(95) million ($(59) million to net loss
attributable to common stock) for second-quarter 2015, $(7) million
($(4) million to net income attributable to common stock) for
second-quarter 2014, $(143) million ($(89) million to net loss
attributable to common stock) for the first six months of 2015 and
$8 million ($5 million to net income attributable to common stock)
for the first six months of 2014. For further discussion, refer to
the supplemental schedule, "Derivative Instruments," beginning on
page X.
c. Includes charges totaling $59 million
($38 million to net loss attributable to common stock) for
second-quarter 2015 and $63 million ($41 million to net loss
attributable to common stock) for the first six months of 2015 for
lower of cost or market (LCM) adjustments primarily attributable to
molybdenum inventories.
d. Includes net charges of $22 million
($14 million to net loss attributable to common stock) for
second-quarter 2015 and $39 million ($24 million to net loss
attributable to common stock) for the first six months of 2015 for
idle/terminated rig costs and inventory write-downs at oil and gas
operations.
e. Includes $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 for 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.
f. Consolidated interest expense,
excluding capitalized interest, totaled $215 million in
second-quarter 2015, $225 million in second-quarter 2014, $425
million for the first six months of 2015 and $449 million for the
first six months of 2014.
g. As a result of the impairment to oil
and gas properties, FCX recorded tax charges of $305 million for
second-quarter 2015 and $763 million for the first six months of
2015 to establish a valuation allowance primarily against U.S.
federal alternative minimum tax credits. The second-quarter and
first six months of 2014 include a charge of $58 million related to
deferred taxes recorded in connection with the allocation of
goodwill to the sale of Eagle Ford. For a summary of the benefit
from (provision for) income taxes, refer to the supplementary
schedule, "Income Taxes," on page IX.
h. 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 $13 million in second-quarter 2015,
$41 million in second-quarter 2014, $37 million for the first six
months of 2015 and $56 million for the first six months of 2014.
For further discussion, refer to the supplemental schedule,
"Deferred Profits," on page XI.
FREEPORT-McMoRan
INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
June 30, December 31, 2015 2014 (In
millions) ASSETS Current assets: Cash and cash equivalents $ 466 $
464 Trade accounts receivable 949 953 Other accounts receivables
1,323 1,610 Inventories: Materials and supplies, net 2,014 1,886
Mill and leach stockpiles 1,933 1,914 Product 1,484 1,561 Other
current assets 528 657 Total current
assets 8,697 9,045 Property, plant, equipment and mining
development costs, net 27,095 26,220 Oil and gas properties, net -
full cost method: Subject to amortization, less accumulated
amortization 4,649 9,187 Not subject to amortization 9,312 10,087
Long-term mill and leach stockpiles 2,277 2,179 Other assets
1,978 1,956 Total assets $ 54,008 $
58,674 LIABILITIES AND EQUITY Current liabilities:
Accounts payable and accrued liabilities $ 3,376 $ 3,653 Current
portion of debt 791 478 Current portion of environmental and asset
retirement obligations 330 296 Dividends payable 175 335 Accrued
income taxes 67 410 Total current
liabilities 4,739 5,172 Long-term debt, less current portion 20,111
18,371 Deferred income taxes 4,870 6,398 Environmental and asset
retirement obligations, less current portion 3,716 3,647 Other
liabilities 1,760 1,861 Total
liabilities 35,196 35,449 Redeemable noncontrolling interest
757 751 Equity: Stockholders' equity: Common stock 117 117
Capital in excess of par value 22,330 22,281 (Accumulated deficit)
retained earnings (4,417 ) 128 Accumulated other comprehensive loss
(523 ) (544 ) Common stock held in treasury (3,702 )
(3,695 ) Total stockholders' equity 13,805 18,287 Noncontrolling
interests 4,250 4,187 Total equity
18,055 22,474 Total liabilities and
equity $ 54,008 $ 58,674
FREEPORT-McMoRan INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) Six
Months Ended June 30, 2015 2014 (In millions) Cash
flow from operating activities: Net (loss) income $ (4,205 ) $
1,286 Adjustments to reconcile net (loss) income to net cash
provided by operating activities: Depreciation, depletion and
amortization 1,829 1,979 Impairment of oil and gas properties 5,790
— LCM inventory adjustments 63 — Net gain on sale of assets (39 ) —
Net (gains) losses on crude oil and natural gas derivative
contracts (58 ) 120 Net charges for environmental and asset
retirement obligations, including accretion 109 97 Payments for
environmental and asset retirement obligations (81 ) (96 ) Net gain
on early extinguishment of debt — (5 ) Deferred income taxes (1,432
) 37 Increase in long-term mill and leach stockpiles (104 ) (131 )
Other, net 104 77 Changes in working capital and other tax
payments, excluding amounts from acquisitions and dispositions:
Accounts receivable 493 (243 ) Inventories 8 (230 ) Other current
assets (1 ) 35 Accounts payable and accrued liabilities (205 ) (186
) Accrued income taxes and changes in other tax payments
(485 ) (153 ) Net cash provided by operating activities
1,786 2,587 Cash flow from
investing activities: Capital expenditures: North America copper
mines (214 ) (627 ) South America (902 ) (839 ) Indonesia (438 )
(479 ) Africa (97 ) (60 ) Molybdenum mines (7 ) (33 ) U.S. oil and
gas operations (1,795 ) (1,484 ) Other (75 ) (40 ) Acquisition of
Deepwater Gulf of Mexico interests — (925 ) Net proceeds from sale
of Eagle Ford shale assets — 3,009 Other, net 136
(363 ) Net cash used in investing activities (3,392 )
(1,841 ) Cash flow from financing activities:
Proceeds from debt 4,422 1,248 Repayments of debt (2,360 ) (1,611 )
Cash dividends and distributions paid: Common stock (380 ) (653 )
Noncontrolling interests (60 ) (250 ) Stock-based awards net
(payments) proceeds, including excess tax benefit (7 ) 3 Debt
financing costs and other, net (7 ) (10 ) Net cash
provided by (used in) financing activities 1,608
(1,273 ) Net increase (decrease) in cash and cash
equivalents 2 (527 ) Cash and cash equivalents at beginning of year
464 1,985 Cash and cash equivalents at
end of period $ 466 $ 1,458
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150723005623/en/
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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