Freeport-McMoRan Inc. (NYSE: FCX):
- Net loss attributable to common
stock totaled $3.8 billion, $3.58 per share, for third-quarter
2015. After adjusting for net charges totaling $3.7 billion, $3.43
per share, third-quarter 2015 adjusted net loss attributable to
common stock totaled $156 million, $0.15 per share.
- Consolidated sales totaled 1.0
billion pounds of copper, 294 thousand ounces of gold, 23 million
pounds of molybdenum and 13.8 million barrels of oil equivalents
(MMBOE) for third-quarter 2015, compared with 1.1 billion pounds of
copper, 525 thousand ounces of gold, 22 million pounds of
molybdenum and 12.5 MMBOE for third-quarter 2014.
- Consolidated sales for the year
2015 are expected to approximate 4.1 billion pounds of copper, 1.2
million ounces of gold, 90 million pounds of molybdenum and 52.7
MMBOE, including 1.1 billion pounds of copper, 310 thousand ounces
of gold, 21 million pounds of molybdenum and 13.3 MMBOE for
fourth-quarter 2015.
- Average realized prices were
$2.38 per pound for copper, $1,117 per ounce for gold and $55.88
per barrel for oil (including $11.03 per barrel for cash gains on
derivative contracts) for third-quarter 2015.
- Consolidated unit net cash costs
for third-quarter 2015 averaged $1.52 per pound of copper for
mining operations and $18.85 per barrel of oil equivalents (BOE)
for oil and gas operations.
- Operating cash flows totaled
$822 million (including $507 million in working capital sources and
changes in other tax payments) for third-quarter 2015. Based on
current sales volume and cost estimates and assuming average prices
of $2.40 per pound for copper, $1,150 per ounce for gold, $5.50 per
pound for molybdenum and $50 per barrel for Brent crude oil for
fourth-quarter 2015, operating cash flows are expected to
approximate $3.3 billion for the year 2015. Using similar price
assumptions, operating cash flows are expected to approximate $6.8
billion for the year 2016.
- Capital expenditures totaled
$1.5 billion for third-quarter 2015, including $0.6 billion for
major projects at mining operations and $0.7 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. Capital expenditures are expected to approximate $4.0
billion for the year 2016.
- The Cerro Verde expansion
project commenced operations in September 2015 and is expected
to achieve full rates by early 2016.
- In third-quarter 2015, FCX announced
revised capital and operating plans in response to market
conditions. The revised plans include significant reductions in
planned capital expenditures, production curtailments and cost
reductions. FCX also announced today additional actions to further
curtail copper and molybdenum production.
- FCX has sold 114.8 million shares of
its common stock and generated gross proceeds of $1.2 billion under
its at-the-market equity programs, including 97.5 million
shares and gross proceeds of $1.0 billion during third-quarter
2015.
- At September 30, 2015,
consolidated debt totaled $20.7 billion and consolidated
cash totaled $338 million.
- In October 2015, FCX announced it is
undertaking a review of its oil and gas business to evaluate
strategic alternatives designed to enhance value to FCX
shareholders and achieve self-funding of the oil and gas business
from its cash flows and resources.
- In October 2015, the Indonesian
government provided assurances to PT Freeport Indonesia on its
long-term mining rights.
Freeport-McMoRan Inc. (NYSE: FCX) reported a net loss
attributable to common stock of $3.8 billion, $3.58 per share, for
third-quarter 2015 and $8.2 billion, $7.77 per share, for the first
nine months of 2015, compared with net income attributable to
common stock of $552 million, $0.53 per share, for third-quarter
2014 and $1.5 billion, $1.47 per share, for the first nine months
of 2014. FCX’s net loss attributable to common stock includes net
charges totaling $3.7 billion, $3.43 per share, for third-quarter
2015 and $8.1 billion, $7.71 per share, for the first nine 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 for the 2014 periods included net
charges totaling $114 million, $0.11 per share, for third-quarter
2014 and $236 million, $0.23 per share, for the first nine months
of 2014, including charges for the reduction of the carrying value
of oil and gas properties and other items described below.
James R. Moffett, Chairman of the Board, and Richard C.
Adkerson, Vice Chairman, President and Chief Executive Officer,
said, "During the third quarter, we took a series of aggressive
actions to reduce costs and capital expenditures and to strengthen
our financial position. These actions, combined with the recent
achievement of several important project milestones, position FCX
for enhanced free cash flow generation in a weak market environment
while maintaining exposure to improved future market conditions for
our large resource base. We remain focused on managing our
production, costs and capital expenditures under volatile market
conditions as we seek to strengthen our balance sheet and build
value for shareholders from our high quality portfolio of
assets."
SUMMARY FINANCIAL DATA
Three Months Ended Nine Months Ended
September 30, September 30, 2015
2014 2015 2014 (in millions, except per
share amounts) Revenuesa,b,c $ 3,681 $ 5,696 $ 12,082 $ 16,203
Operating (loss) incomea,b,c,d,e $ (3,945 ) f,g $ 1,132 h $ (9,282
) f,g,h $ 3,396 h Net (loss) income attributable to common
stockb,c,d,e,i $ (3,830 ) f,g $ 552 h,j,k $ (8,155 ) f,g,h,l $
1,544 h,j,k Diluted net (loss) income per share of common
stockb,c,d,e,i $ (3.58 ) f,g $ 0.53 h,j,k $ (7.77 ) f,g,h,l $ 1.47
h,j,k Diluted weighted-average common shares outstanding 1,071
1,046 1,050 1,045 Operating cash flowsm $ 822 $ 1,926 $ 2,608 $
4,513 Capital expenditures $ 1,527 $ 1,853 $ 5,055 $ 5,415 At
September 30: Cash and cash equivalents $ 338 $ 658 $ 338 $ 658
Total debt, including current portion $ 20,698 $ 19,636 $ 20,698 $
19,636
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 adjustments to
provisionally priced concentrate and cathode copper sales
recognized in prior periods totaling $126 million ($62 million to
net loss attributable to common stock or $0.06 per share) for
third-quarter 2015, $22 million ($10 million to net income
attributable to common stock or $0.01 per share) for third-quarter
2014, $107 million ($50 million to net loss attributable to common
stock or $0.05 per share) for the first nine months of 2015 and
$118 million ($65 million to net income attributable to common
stock or $0.06 per share) for the first nine 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 $(74) million ($(46) million to net loss
attributable to common stock or $(0.04) per share) for
third-quarter 2015, $122 million ($76 million to net income
attributable to common stock or $0.07 per share) for third-quarter
2014, $(217) million ($(135) million to net loss attributable to
common stock or $(0.13) per share) for the first nine months of
2015 and $130 million ($80 million to net income attributable to
common stock or $0.08 per share) for the first nine 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 to reduce the carrying
value of oil and gas properties pursuant to full cost accounting
rules of $3.7 billion ($3.5 billion to net loss attributable to
common stock or $3.25 per share) for third-quarter 2015 and $9.4
billion ($7.9 billion to net loss attributable to common stock or
$7.48 per share) for the first nine months of 2015. These after-tax
impacts include net tax charges of $1.1 billion for third-quarter
2015 and $1.9 billion for the first nine months of 2015 primarily
to establish a valuation allowance against United States (U.S.)
federal alternative minimum tax credits and foreign tax credits.
The third quarter and first nine months of 2014 also includes
charges of $308 million ($192 million to net income attributable to
common stock of $0.18 per share) to reduce the carrying value of
oil and gas properties.
e.
Includes net (charges) credits for
adjustments to environmental obligations and related litigation
reserves totaling $(28) million ($(18) million to net loss
attributable to common stock or $(0.02) per share) for
third-quarter 2015, $1 million ($1 million to net income
attributable to common stock or less than $0.01 per share) for
third-quarter 2014, $(36) million ($(23) million to net loss
attributable to common stock or $(0.02) per share) for the first
nine months of 2015 and $(68) million ($(67) million to net income
attributable to common stock or $(0.06) per share) for the first
nine months of 2014.
f.
Includes charges at mining operations for
(i) adjustments to copper and molybdenum inventories totaling $91
million ($58 million to net loss attributable to common stock or
$0.05 per share) for third-quarter 2015 and $154 million ($99
million to net loss attributable to common stock or $0.09 per
share) for the first nine months of 2015 and (ii) impairment and
restructuring charges totaling $95 million ($58 million to net loss
attributable to common stock or $0.05 per share) for the third
quarter and first nine months of 2015.
g.
Includes charges at oil and gas operations
for tax assessments related to prior periods at the California
properties, idle/terminated rig costs and inventory write-downs
totaling $21 million ($13 million to net loss attributable to
common stock or $0.01 per share) for third-quarter 2015 and $59
million ($36 million to net loss attributable to common stock or
$0.03 per share) for the first nine months of 2015.
h.
Includes net gains on the sales of assets
totaling $39 million ($25 million to net loss attributable to
common stock or $0.02 per share) for the first nine months of 2015
associated with the sale of FCX's one-third interest in the Luna
Energy power facility in New Mexico and $46 million ($31 million to
net income attributable to common stock or $0.03 per share) for the
third quarter and first nine months of 2014 associated with the
sale of a metals injection molding plant.
i.
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."
j.
Includes net gains on early extinguishment
of debt totaling $58 million ($17 million to net income
attributable to common stock or $0.02 per share) in third-quarter
2014 and $63 million ($21 million to net income attributable to
common stock or $0.02 per share) for the first nine months of 2014
related to the redemption of senior notes.
k.
The third quarter and first nine months of
2014 include a tax charge of $54 million ($47 million net of
noncontrolling interests or $0.04 per share) related to changes in
Chilean tax rules. The first nine months of 2014 also includes a
tax charge of $62 million ($0.06 per share) associated with
deferred taxes recorded in connection with the allocation of
goodwill to the sale of Eagle Ford.
l.
The first nine months of 2015 includes a
gain of $92 million ($0.09 per share) related to net proceeds
received from insurance carriers and other third parties related to
the shareholder derivative litigation settlement.
m.
Includes net working capital sources
(uses) and changes in other tax payments of $507 million for
third-quarter 2015, $78 million for third-quarter 2014, $342
million for the first nine months of 2015 and $(699) million for
the first nine months of 2014.
REVISED OPERATING PLANS AND OIL AND GAS REVIEW
During third-quarter 2015, FCX took aggressive actions to
enhance the outlook for free cash flow generation at low commodity
prices, including further reductions in capital spending,
production curtailments at certain mining operations and actions to
reduce operating, exploration and administrative costs. These
actions include:
- A 29 percent reduction in estimated
2016 capital expenditures (from $5.6 billion to $4.0 billion),
including:
- A 25 percent reduction in estimated
mining capital expenditures (from $2.7 billion to $2.0
billion)
- A 30 percent reduction in estimated oil
and gas capital expenditures (from $2.9 billion to $2.0
billion)
- Production curtailments at certain
North and South America copper mines
- Reductions in mining operating
costs
FCX continues to review its capital projects and costs to
maximize cash flow in a weak market environment and to preserve its
resources for improved market conditions. During October 2015, FCX
initiated a plan to reduce operating rates at its Sierrita mine in
Arizona in response to low copper and molybdenum prices. Initially,
the plan involves operating the Sierrita mine at 50 percent of its
current operating rate. FCX is also evaluating the economics of a
full shutdown. The impact of a 50 percent curtailment is
approximately 100 million pounds of copper and 10 million pounds of
molybdenum per year. Combined with the previously announced
curtailments, the consolidated impact is an aggregate reduction of
250 million pounds of copper and 20 million pounds of molybdenum
per year.
As previously announced on October 6, 2015, the FCX Board of
Directors is undertaking a strategic review of its oil and gas
business (FCX Oil & Gas Inc., or FM O&G) to evaluate
alternatives designed to enhance value to FCX shareholders and
achieve self funding of the oil and gas business from its cash
flows and resources. The previously announced potential initial
public offering (IPO) of a minority interest in FCX’s oil and gas
business remains an alternative for future consideration, the
timing of which is subject to market conditions. Other alternatives
currently under consideration include a spinoff of the oil and gas
business to FCX shareholders, joint venture arrangements and
further spending reductions. FM O&G’s high-quality asset base,
substantial underutilized Deepwater Gulf of Mexico (GOM)
infrastructure, large inventory of low-risk development
opportunities and talented and experienced personnel and management
team provide opportunities to generate value.
FCX’s strategy will focus on its global leading position in the
copper industry. Near term, this strategy will involve managing its
production activities, spending on capital projects and operations,
and the administration of its business to enhance cash flows and
protect liquidity. While taking prudent near-term steps responsive
to the currently weak market conditions, FCX remains confident
about the longer term outlook for copper prices based on the global
demand and supply fundamentals. A primary objective of FCX's
strategy will be a significant reduction over time of FCX’s current
debt level. With its established reserves and large-scale current
production base, its significant portfolio of undeveloped
resources, and its global organization of highly qualified
dedicated workers and management, FCX is well positioned to build
value for its shareholders.
SUMMARY OPERATING DATA
Three Months Ended Nine Months Ended September
30, September 30, 2015
2014a 2015 2014a,b
Copper (millions of recoverable pounds) Production 1,003
1,027 2,895 2,906 Sales, excluding purchases 1,001 1,077 2,925
2,916 Average realized price per pound $ 2.38 $ 3.12 $ 2.54 $ 3.14
Site production and delivery costs per poundc $ 1.74 $ 1.91 $ 1.84
$ 1.92 Unit net cash costs per poundc $ 1.52 $ 1.34 $ 1.56 $ 1.52
Gold (thousands of recoverable ounces) Production 281 449
907 846 Sales, excluding purchases 294 525 909 871 Average realized
price per ounce $ 1,117 $ 1,220 $ 1,149 $ 1,251
Molybdenum
(millions of recoverable pounds) Production 23 24 72 73 Sales,
excluding purchases 23 22 69 74 Average realized price per pound $
7.91 $ 14.71 $ 9.21 $ 13.01
Oil Equivalents Sales volumes
MMBOE 13.8 12.5 39.4 44.7 Thousand BOE (MBOE) per day 150 136 144
164 Cash operating margin per BOEd Realized revenues $ 43.00 $
69.08 $ 45.57 $ 75.04 Cash production costs 18.85 20.93
19.42 19.57 Cash operating margin $ 24.15 $
48.15 $ 26.15 $ 55.47
a.
The 2014 periods include the results of
the Candelaria and Ojos del Salado mines (Candelaria/Ojos) that
were sold in November 2014. Sales volumes from Candelaria/Ojos
totaled 62 million pounds of copper and 16 thousand ounces of gold
for third-quarter 2014 and 236 million pounds of copper and 59
thousand ounces of gold for the first nine months of 2014.
b.
The first nine months of 2014 include the
results of the Eagle Ford properties that were sold in June 2014.
Sales volumes from Eagle Ford totaled 8.7 MMBOE (32 MBOE per day)
for the first nine months of 2014; excluding Eagle Ford, oil and
gas cash production costs were $21.16 per BOE for the first nine
months of 2014.
c.
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 are
available on FCX's website, "fcx.com."
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. 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 are available on
FCX's website, “fcx.com.”
Consolidated Sales Volumes
Third-quarter 2015 consolidated copper sales of 1.0
billion pounds were slightly below the August 2015 estimate and
lower than third-quarter 2014 sales of 1.1 billion pounds. The
variance to third-quarter 2014 primarily reflects lower volumes
from South America as a result of the sale of Candelaria/Ojos in
fourth-quarter 2014 and lower volumes at PT Freeport Indonesia
(PT-FI) associated with lower ore grades and the impact of El Niño
weather conditions, partly offset by higher volumes from North
America.
Third-quarter 2015 consolidated gold sales of 294
thousand ounces were slightly lower than the July 2015 estimate of
315 thousand ounces and lower than third-quarter 2014 sales of 525
thousand ounces, primarily reflecting lower volumes at PT-FI
associated with lower ore grades and the impacts of El Niño weather
conditions.
Third-quarter 2015 consolidated molybdenum sales of 23
million pounds approximated the July 2015 estimate and the
third-quarter 2014 sales of 22 million pounds.
Third-quarter 2015 sales from oil and gas operations of 13.8
MMBOE, including 9.3 million barrels (MMBbls) of crude oil,
22.8 billion cubic feet (Bcf) of natural gas and 0.7 MMBbls
of natural gas liquids (NGLs), approximated the July 2015
estimate of 13.6 MMBOE and were higher than third-quarter 2014
sales of 12.5 MMBOE, primarily reflecting higher volumes in the
GOM, partly offset by lower volumes in California.
Consolidated sales for the year 2015 are expected to approximate
4.1 billion pounds of copper, 1.2 million ounces of gold, 90
million pounds of molybdenum and 52.7 MMBOE, including 1.1 billion
pounds of copper, 310 thousand ounces of gold, 21 million pounds of
molybdenum and 13.3 MMBOE for fourth-quarter 2015. Projected 2015
sales volumes are approximately 130 million pounds of copper and 90
thousand ounces of gold below the July 2015 estimates reflecting
revised operating plans and ongoing El Niño weather conditions in
Indonesia. With the completion of the Cerro Verde expansion project
and access to higher grade ore at Grasberg in 2016, FCX expects
sales volumes to approximate 5.2 billion pounds of copper for the
year 2016.
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 $1.52
per pound of copper in third-quarter 2015 were higher than unit net
cash costs of $1.34 per pound in third-quarter 2014, primarily
reflecting lower by-product credits, partly offset by lower site
production and delivery costs mostly associated with higher volumes
in North America.
Assuming average prices of $1,150 per ounce of gold and $5.50
per pound of molybdenum for fourth-quarter 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 $1.52 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 fourth-quarter 2015 on consolidated unit net
cash costs would approximate $0.006 per pound for each $50 per
ounce change in the average price of gold and $0.003 per pound for
each $2 per pound change in the average price of molybdenum.
Unit net cash costs are expected to decline significantly in
2016, principally reflecting higher anticipated copper and gold
volumes. Using the same metals price assumptions and assuming
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 $1.15 per pound of copper for
the year 2016.
Oil and Gas Cash Production Costs per BOE. Cash production costs
for oil and gas operations of $18.85 per BOE in third-quarter 2015
were lower than cash production costs of $20.93 per BOE in
third-quarter 2014, primarily reflecting lower production costs in
California related to reductions in well workover expense and steam
costs.
Based on current sales volume and cost estimates for
fourth-quarter 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 concentrates and silver are also produced by
certain of FCX's North America copper mines.
Operating and Development Activities. FCX has significant
undeveloped reserves and resources in North America and a portfolio
of potential long-term development projects. In the near term, FCX
is deferring developing new projects as a result of current market
conditions. 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 and an improvement in Morenci's cost
structure. Morenci's copper production is expected to average 900
million pounds per year over the next five years.
FCX's revised plans for its North America copper mines
incorporate reductions in mining rates to reduce operating and
capital costs, including the suspension of mining operations at the
Miami mine (which produced 33 million pounds of copper for the
first nine months of 2015), a 50 percent reduction in mining rates
at the Tyrone mine (which produced 65 million pounds of copper for
the first nine months of 2015), a 50 percent reduction in operating
rates at the Sierrita mine (which produced 140 million pounds of
copper and 17 million pounds of molybdenum for the first nine
months of 2015) as well as adjustments to mining rates at other
North America mines. The revised plans at each of the operations
incorporate the impacts of lower energy, acid and other
consumables, reduced labor costs and a significant reduction in
capital spending plans. These plans will continue to be reviewed
and additional adjustments may be made as market conditions
warrant.
Operating Data. Following is a summary of consolidated operating
data for the North America copper mines for the third quarters and
first nine months of 2015 and 2014:
Three Months Ended Nine
Months Ended September 30, September 30,
2015 2014 2015
2014 Copper (millions of recoverable pounds)
Production 499 423 1,420 1,203 Sales 483 436 1,441 1,230 Average
realized price per pound $ 2.42 $ 3.17 $ 2.59 $ 3.19
Molybdenum (millions of recoverable pounds) Productiona 9 8
28 25
Unit net cash costs per pound of copperb
Site production and delivery, excluding adjustments $ 1.68 $ 1.83 $
1.76 $ 1.86 By-product credits (0.12 ) (0.26 ) (0.15 ) (0.25 )
Treatment charges 0.12 0.11 0.12 0.11
Unit net cash costs $ 1.68 $ 1.68 $ 1.73 $
1.72
a.
Refer to summary operating data on page 5
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 are available on FCX's website,
"fcx.com."
North America's consolidated copper sales volumes of 483 million
pounds in third-quarter 2015 were higher than third-quarter 2014
sales of 436 million pounds, primarily reflecting higher milling
rates and ore grades at Morenci and Chino, and higher ore grades at
Safford. North America copper sales are estimated to approximate
1.95 billion pounds for the year 2015, compared with 1.66 billion
pounds in 2014.
Average unit net cash costs (net of by-product credits) for the
North America copper mines were $1.68 per pound of copper in both
the third quarters of 2015 and 2014, with favorable impacts from
higher volumes offset by lower by-product credits. Average unit net
cash costs (net of by-product credits) for the North America copper
mines are expected to approximate $1.70 per pound of copper for the
year 2015, based on current sales volume and cost estimates and
assuming an average molybdenum price of $5.50 per pound for
fourth-quarter 2015. North America's average unit net cash costs
for fourth-quarter 2015 would change by approximately $0.004 per
pound for each $2 per pound change in the average price of
molybdenum.
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 concentrates and silver.
Operating and Development Activities. The Cerro Verde expansion
project commenced operations in September 2015 and is expected to
reach full rates by early 2016. This expansion will enable Cerro
Verde to contribute significant cash flows in coming years from its
large-scale, long-lived and cost-efficient operation. The project
expands the concentrator facilities from 120,000 metric tons of ore
per day to 360,000 metric tons of ore per day and provides
incremental annual production of approximately 600 million pounds
of copper and 15 million pounds of molybdenum beginning in
2016.
During third-quarter 2015, FCX revised plans for its South
America copper mines, principally to reflect adjustments to the
mine plan at El Abra (which produced 251 million pounds of copper
for the first nine months of 2015) to reduce mining and stacking
rates by approximately 50 percent to achieve lower operating and
labor costs, defer capital expenditures and extend the life of the
existing operations.
Operating Data. Following is a summary of consolidated operating
data for the South America mining operations for the third quarters
and first nine months of 2015 and 2014:
Three Months Ended Nine
Months Ended September 30, September 30,
2015 2014a 2015
2014a Copper (millions of recoverable
pounds) Production 204 284 585 898 Sales 207 271 585 888 Average
realized price per pound $ 2.37 $ 3.10 $ 2.52 $ 3.12
Gold (thousands of recoverable ounces) Production — 20 — 62
Sales — 16 — 59 Average realized price per ounce $ — $ 1,234 $ — $
1,280
Molybdenum (millions of recoverable pounds)
Productionb 1 3 5 8
Unit net cash costs per pound of
copperc Site production and delivery, excluding
adjustments $ 1.54 $ 1.67 $ 1.68 $ 1.61 By-product credits (0.04 )
(0.23 ) (0.05 ) (0.24 ) Treatment charges 0.18 0.16
0.17 0.17 Unit net cash costs $ 1.68 $ 1.60
$ 1.80 $ 1.54
a.
The 2014 periods include the results of
Candelaria/Ojos that were sold in November 2014. Candelaria/Ojos
had sales volumes totaling 62 million pounds of copper and 16
thousand ounces of gold for third-quarter 2014 and 236 million
pounds of copper and 59 thousand ounces of gold for the first nine
months of 2014. Excluding Candelaria/Ojos, South America mining's
unit net cash costs averaged $1.54 per pound of copper for
third-quarter 2014 and $1.52 per pound of copper for the first nine
months of 2014.
b.
Refer to summary operating data on page 5
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 are available on FCX's
website, "fcx.com."
South America's consolidated copper sales volumes of 207 million
pounds in third-quarter 2015 were lower than third-quarter 2014
sales of 271 million pounds, primarily reflecting the sale of
Candelaria/Ojos. Sales from South America mining are expected to
approximate 885 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 $1.68 per pound of copper in third-quarter
2015 were higher than unit net cash costs of $1.60 per pound in
third-quarter 2014, primarily reflecting lower by-product credits
as a result 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 $1.73 per pound of
copper for the year 2015, based on current sales volume and cost
estimates and assuming average prices of $5.50 per pound of
molybdenum for fourth-quarter 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 has advanced discussions with the
Indonesian government regarding its Contract of Work (COW) and
long-term operating rights. The Indonesian government is currently
developing economic stimulus measures, which include revisions to
mining regulations, to promote economic and employment growth. In
consideration of PT-FI’s major investments, and prior and ongoing
commitments to increase benefits to Indonesia, including previously
agreed higher royalties, domestic processing, divestment and local
content, the Indonesian government provided a letter of assurance
to PT-FI in October 2015 indicating that it will approve the
extension of operations beyond 2021, and provide the same rights
and the same level of legal and fiscal certainty provided under its
current COW.
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
and is developing plans for the construction of additional smelter
capacity. FCX is engaged in discussions with potential partners for
the project.
As previously reported and upon completion of its amended COW,
FCX and PT-FI have agreed to a divestment to the Indonesian
government and/or Indonesian nationals of up to a 30 percent
interest (an additional 20.64 percent) in PT-FI at fair market
value.
Operating and Development Activities. PT-FI's revised plans
incorporate improved operational efficiencies, reductions in input
costs, supplies and contractor costs, foreign exchange impacts and
a deferral of 15 percent of capital expenditures in 2016.
PT-FI has several projects in progress in the Grasberg minerals
district related to the development of its large-scale, long-lived,
high-grade underground ore bodies. In aggregate, these underground
ore bodies are expected to produce large-scale quantities of copper
and gold 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. Production from the DMLZ commenced during
September 2015, and the Grasberg Block Cave mine is anticipated to
commence production in 2018.
Over the period from 2016 to 2019, estimated aggregate capital
spending on these projects is currently expected to average $1.0
billion per year ($0.8 billion per year net to PT-FI). Considering
the long-term nature and size of these projects, actual costs could
vary from these estimates. In response to recent market conditions
and the uncertain global economic environment, the timing of these
expenditures is being evaluated.
Operating Data. Following is a summary of consolidated operating
data for the Indonesia mining operations for the third quarters and
first nine months of 2015 and 2014:
Three Months Ended Nine
Months Ended September 30, September 30,
2015 2014 2015
2014 Copper (millions of recoverable pounds)
Production 192 203 551 465 Sales 198 258 549 484 Average realized
price per pound $ 2.35 $ 3.05 $ 2.45 $ 3.09
Gold
(thousands of recoverable ounces) Production 272 426 887 776 Sales
285 505 891 802 Average realized price per ounce $ 1,117 $ 1,219 $
1,149 $ 1,248
Unit net cash costs per pound of
coppera Site production and delivery, excluding
adjustments $ 2.16 $ 2.42 $ 2.39 $ 2.90 b Gold and silver credits
(1.59 ) (2.44 ) (1.93 ) (2.16 ) Treatment charges 0.31 0.25 0.31
0.25 Export duties 0.17 0.16 0.16 0.09 Royalty on metalsc 0.13
0.21 0.16 0.16 Unit net cash costs $
1.18 $ 0.60 $ 1.09 $ 1.24
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 schedules, "Product Revenues and Production
Costs," beginning on page XIV, which are available on FCX's
website, "fcx.com."
b.
The first nine months of 2014 excludes
fixed costs totaling $0.30 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 increased royalty rates of $0.06
per pound for both the third quarter and first nine months of 2015,
$0.08 per pound in third-quarter 2014 and $0.04 per pound for the
first nine months of 2014.
Indonesia's third-quarter 2015 sales of 198 million pounds of
copper and 285 thousand ounces of gold were lower than
third-quarter 2014 sales of 258 million pounds of copper and 505
thousand ounces of gold, primarily reflecting lower ore grades and
El Niño weather conditions, as well as timing of shipments in
third-quarter 2014 related to the lifting of export restrictions in
late July 2014. As a result of mill process water limitations
because of continuing El Niño weather conditions and mill
maintenance activities, PT-FI has adjusted its forecast to
anticipate an approximate 15 percent reduction in fourth-quarter
2015 mill rates from the previous plan. The resulting impact of
these factors is a deferral of 70 million pounds of copper and 70
thousand ounces of gold from fourth-quarter 2015 to future periods.
In addition, lower than forecasted mining rates in the second half
of 2015 are expected to result in a deferral of high-grade ore to
future periods.
PT-FI expects ore grades to improve significantly in 2016 and
2017 with access to higher grade sections of the Grasberg open pit,
resulting in higher production and lower unit net cash costs.
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 760 million pounds of copper and 1.2
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 $1.18 per pound of
copper in third-quarter 2015 were higher than unit net cash costs
of $0.60 per pound in third-quarter 2014, primarily reflecting
lower volumes and lower gold and silver credits.
Unit net cash costs (net of gold and silver credits) for
Indonesia mining are expected to approximate $1.06 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 fourth-quarter 2015. Indonesia mining's projected unit net cash
costs would change by approximately $0.03 per pound for each $50
per ounce change in the average price of gold for fourth-quarter
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.
PT-FI is progressing negotiations with union officials to
complete its biennial labor agreement for the two-year period
beginning September 30, 2015.
Africa Mining. Through its 56 percent owned and
consolidated subsidiary Tenke Fungurume Mining S.A. (TFM), FCX
operates in the 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. Future
development and expansion opportunities are being deferred pending
improved market conditions.
During third-quarter 2015, FCX revised plans at Tenke to
incorporate a 50 percent reduction in capital spending for 2016 and
various initiatives to reduce operating, administrative and
exploration costs.
Operating Data. Following is a summary of consolidated operating
data for the Africa mining operations for the third quarters and
first nine months of 2015 and 2014:
Three Months Ended Nine
Months Ended September 30, September 30,
2015 2014 2015
2014 Copper (millions of recoverable pounds)
Production 108 117 339 340 Sales 113 112 350 314 Average realized
price per pounda $ 2.32 $ 3.11 $ 2.52 $ 3.09
Cobalt
(millions of contained pounds) Production 9 8 25 22 Sales 10 8 26
23 Average realized price per pound $ 8.96 $ 9.99 $ 9.04 $ 9.68
Unit net cash costs per pound of copperb Site
production and delivery, excluding adjustments $ 1.63 $ 1.61 $ 1.58
$ 1.51 Cobalt creditsc (0.53 ) (0.58 ) (0.47 ) (0.51 ) Royalty on
metals 0.05 0.07 0.06 0.07 Unit net
cash costs $ 1.15 $ 1.10 $ 1.17 $ 1.07
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 are available on FCX's
website, "fcx.com."
c.
Net of cobalt downstream processing and
freight costs.
TFM's copper sales of 113 million pounds in third-quarter 2015
approximated third-quarter 2014 copper sales of 112 million pounds.
TFM's sales are expected to approximate 465 million pounds of
copper and 35 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
$1.15 per pound of copper in third-quarter 2015 were higher than
unit net cash costs of $1.10 per pound of copper in third-quarter
2014, primarily reflecting lower cobalt credits associated with
lower cobalt prices. Unit net cash costs (net of cobalt credits)
for Africa mining are expected to approximate $1.16 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
fourth-quarter 2015. Africa mining's projected unit net cash costs
would change by approximately $0.025 per pound for each $2 per
pound change in the average price of cobalt for fourth-quarter
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.
Operating and Development Activities. FCX's revised plans for
its Henderson molybdenum mine incorporate lower operating rates,
resulting in a 35 percent reduction in Henderson's annual
production volumes. FCX is also continuing to review its molybdenum
production plans at its by-product mines and has announced plans to
reduce production at its Sierrita mine. FCX is engaged in
discussions with its customers to incorporate potential changes in
the pricing structure for its chemicals products to ensure
continuation of chemical-grade production.
Production from the Molybdenum mines totaled 13 million pounds
of molybdenum for both third-quarter 2015 and 2014, 39 million
pounds in the first nine months of 2015 and 40 million pounds in
the first nine months of 2014. Refer to summary operating data on
page 5 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 $6.93
per pound of molybdenum in third-quarter 2015 were lower than
average unit net cash costs of $7.12 per pound in third-quarter
2014, primarily reflecting lower supply costs. 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.
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 are 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 provide a
long-term pipeline for future growth in reserves and production
capacity in established minerals districts. Exploration spending
has been reduced in recent years from historical levels as a result
of market conditions and is expected to approximate $105 million
for the year 2015, compared to $96 million in 2014. FCX's revised
plans also include a further reduction in its 2016 minerals
exploration costs to approximately $50 million.
OIL AND GAS OPERATIONS
Through its wholly owned oil and gas subsidiary, FM O&G,
FCX's portfolio of oil and gas 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 a position in the Inboard Lower
Tertiary/Cretaceous natural gas trend onshore in South Louisiana.
For the first nine months of 2015, 87 percent of FCX's oil and gas
revenues, excluding the impact of derivative contracts, were from
oil and NGLs.
During third-quarter 2015, FCX also announced the deferral of
investments in several long-term projects in its oil and gas
business, which will result in a reduction of $0.9 billion in
projected capital expenditures for each of the years 2016 and 2017.
Additionally, FM O&G revised its estimate of the start-up of
initial tieback production in the Horn Mountain area to 2016, which
will allow FM O&G to continue to grow production and enhance
cash flow in a weak oil and gas price environment. The revised
plans, together with initiatives to obtain third-party financing,
the potential IPO or other alternatives, will be pursued as
required to fund oil and gas capital spending for 2016 and
subsequent years.
Impairment of Oil and Gas Properties. 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 test limitation. Using
West Texas Intermediate (WTI) as the reference oil price, the
average price was $59.21 per barrel at September 30, 2015,
compared with $71.68 per barrel at June 30, 2015. At
September 30, 2015, net capitalized costs with respect to FM
O&G's proved U.S. oil and gas properties exceeded the ceiling
test limitation specified by the SEC's full cost accounting rules,
which resulted in the recognition of a third-quarter 2015
impairment charge totaling $3.5 billion. If the twelve-month
historical average price remains below the September 30, 2015,
twelve-month average of $59.21 per barrel, the ceiling test
limitation will decrease, resulting in potentially significant
additional ceiling test impairments of FCX's oil and gas
properties. The WTI spot oil price was $45.20 per barrel at
October 21, 2015.
FM O&G periodically (and at least annually) assesses the
carrying value of its unevaluated properties to determine whether
impairment has occurred. Following a review of the carrying values
of unevaluated properties during third-quarter 2015, FM O&G
determined that the carrying value of its unevaluated properties in
the onshore California area were impaired primarily resulting from
declines in oil prices. As a result, FM O&G transferred $837
million of costs to the full cost pool, which were included in the
September 30, 2015, ceiling test discussed above.
In addition to a decline in the trailing twelve-month average
oil and gas prices, other factors that could result in future
impairment of FCX's oil and gas properties 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. At September 30, 2015, there was $7.6 billion in
carrying costs for unevaluated properties. As activities on these
properties are completed, costs are 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.
FM O&G has a farm-in arrangement to earn interests in
exploration blocks located in the Mazagan permit area offshore
Morocco. The exploration area covers 2.2 million gross acres in
water depths of 4,500 to 9,900 feet. In August 2015, drilling of
the MZ-1 well associated with the Ouanoukrim prospect was completed
to its targeted depth below 20,000 feet to evaluate the primary
objectives, which did not contain hydrocarbons. During
third-quarter 2015, costs associated with the well were transferred
to the Moroccan full cost pool. As FM O&G does not have proved
reserves or production in Morocco, an impairment charge of $0.2
billion was recorded in third-quarter 2015.
Financial and Operating Data. Following is a summary of
financial and operating data for the U.S. oil and gas operations
for the third quarters and first nine months of 2015 and 2014:
Three Months Ended Nine
Months Ended September 30, September 30, 2015
2014 2015 2014a
Financial Summary
(in millions) Realized revenuesb $ 593 $ 867 $ 1,796 $ 3,355
Less: cash production costsb 260 263 765 875
Cash operating margin $ 333 $ 604 $ 1,031 $ 2,480 Capital
expendituresc $ 635 $ 908 $ 2,430 $ 2,392
Sales Volumes Oil
(MMBbls) 9.3 8.6 26.3 32.1 Natural gas (Bcf) 22.8 20.2 68.1 59.9
NGLs (MMBbls) 0.7 0.6 1.8 2.7 MMBOE 13.8 12.5 39.4 44.7
Average
Realized Pricesb Oil (per barrel) $ 55.88 $ 88.58 $
59.92 $ 93.00 Natural gas (per million British thermal units, or
MMBtu) $ 2.72 $ 4.02 $ 2.74 $ 4.37 NGLs (per barrel) $ 16.68 $
39.69 $ 19.78 $ 41.77
Cash Operating Margin per BOEb
Realized revenues $ 43.00 $ 69.08 $ 45.57 $ 75.04 Less: cash
production costs 18.85 20.93 19.42 19.57 Cash
operating margin $ 24.15 $ 48.15 $ 26.15 $
55.47
a.
Include results from the Eagle Ford field
through June 19, 2014. Eagle Ford had sales volumes totaling 8.7
MMBOE for the first nine months of 2014; excluding Eagle Ford, oil
and gas cash production costs were $21.16 per BOE for the first
nine 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 are available on FCX's
website, “fcx.com.”
c.
Excludes international oil and gas capital
expenditures primarily related to Morocco of $37 million for
third-quarter 2015, $81 million for the first nine months of 2015
and $7 million for both the third quarter and first nine months of
2014.
In third-quarter 2015, FM O&G's average realized price for
crude oil was $55.88 per barrel, including $11.03 per barrel of
realized cash gains on derivative contracts. Excluding the impact
of derivative contracts, the third-quarter 2015 average realized
price for crude oil was $44.85 per barrel (87 percent of the
average Brent crude oil price of $51.31 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 approximately 85 percent of estimated 2015
oil production. Assuming an average price of $50 per barrel for
Brent crude oil, FCX would receive a benefit of $20 per barrel on
remaining fourth-quarter 2015 derivative contract volumes of 7.7
million barrels, before taking into account weighted-average
premiums of $6.89 per barrel.
In third-quarter 2015, FM O&G's average realized price for
natural gas was $2.72 per MMBtu, compared to the New York
Mercantile Exchange natural gas price average of $2.77 per MMBtu
for the July through September 2015 contracts.
Realized revenues for oil and gas operations of $43.00 per BOE
in third-quarter 2015 were lower than realized revenues of $69.08
per BOE in third-quarter 2014, primarily reflecting lower oil
prices, partially offset by the impact of higher cash gains on
derivative contracts (cash gains were $103 million or $7.44 per BOE
in third-quarter 2015, compared with losses of $58 million or $4.62
per BOE in third-quarter 2014).
Cash production costs for oil and gas operations of $18.85 per
BOE in third-quarter 2015 were lower than cash production costs of
$20.93 per BOE in third-quarter 2014, primarily reflecting lower
production costs in California related to reductions in well
workover expense and steam costs.
Following is a summary of average oil and gas sales volumes per
day by region for the third quarters and first nine months of 2015
and 2014:
Three Months Ended Nine Months
Ended September 30, September 30, Sales
Volumes (MBOE per day) 2015 2014 2015
2014 GOMa 91 75 82 74 California 35 39 37 39
Haynesville/Madden/Other 24 22 b 25 19 b Eagle Fordc — —
— 32 Total oil and gas operations 150
136 144 164
a.
Includes sales from properties on the GOM
Shelf and in the Deepwater GOM; the 2015 periods also include sales
from properties in the Inboard Lower Tertiary/Cretaceous natural
gas trend.
b.
Results include volume adjustments related
to Eagle Ford's pre-close sales.
c.
FM O&G completed the sale of Eagle
Ford in June 2014.
Daily sales volumes averaged 150 MBOE for third-quarter 2015,
including 101 thousand barrels (MBbls) of crude oil, 248 million
cubic feet (MMcf) of natural gas and 8 MBbls of NGLs. Oil and gas
sales volumes are expected to average 144 MBOE per day for the year
2015, comprised of 67 percent oil, 28 percent natural gas and 5
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
opportunities for funding capital expenditures for its oil and gas
business, including the potential IPO for a minority interest in
Freeport-McMoRan Oil & Gas Inc. and other funding
alternatives.
During third-quarter 2015, FM O&G continued its successful
strategy to focus on its high-return, low-risk tieback projects
using its existing Deepwater GOM infrastructure (total processing
capacity of approximately 250 MBbls of oil per day) and large
Deepwater GOM project inventory (over 150 undeveloped locations).
FM O&G achieved several important accomplishments, principally
in its Deepwater GOM focus areas, that are expected to contribute
to future growth. Positive drilling results were achieved at two
wells in the King area and at the Horn Mountain Deep
well. Since commencing development activities in 2014 at its three
100-percent-owned production platforms in the Deepwater GOM, FM
O&G has drilled 13 wells in producing fields with positive
results. Three of these wells have been brought on production, and
FM O&G plans to complete and place the remaining wells on
production in late 2015, 2016 and 2017. FCX will continue to assess
opportunities to partner with strategic investors potentially
interested in investing capital with FCX in the development of its
oil and gas properties. FM O&G has a broad set of assets with
valuable infrastructure and associated resources with attractive
long-term production and development potential.
U.S. Oil and Gas Capital Expenditures. Capital expenditures for
U.S. oil and gas operations totaled $0.6 billion for third-quarter
2015, primarily associated with Deepwater GOM and $2.4 billion
(including $1.8 billion incurred for Deepwater GOM and $0.2 billion
for the Inboard Lower Tertiary/Cretaceous natural gas trend) for
the first nine months of 2015.
Capital expenditures for oil and gas operations are estimated to
total $2.8 billion for the year 2015, with approximately 80 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, as well as interests in the Ram Powell and Hoover deepwater
production platforms.
During third-quarter 2015, field development continued at
Heidelberg in the Green Canyon focus area.
Installation of topside equipment and development well completion
activities are currently underway. 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.
At Holstein Deep, completion activities for the initial
three-well subsea tieback development program are progressing on
schedule, with first production expected by mid-2016. In aggregate,
the three wells are estimated to commence production at
approximately 24 MBOE per day. Successful results from the initial
three-well drilling program established opportunities for
additional wells, and a fourth well is being planned as part of the
second phase of the Holstein Deep program. The Holstein Deep
development is located in Green Canyon Block 643, west of the
100-percent owned 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.
The initial FM O&G-drilled Dorado well was placed in
production in March 2015 after a successful production test with
gross volumes 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 late 2015/early 2016. The Dorado development is located on
Viosca Knoll Block 915 in 3,860 feet of water.
During third-quarter 2015, FM O&G drilled its second
successful development well, D-13, at the King field, which
is located in Mississippi Canyon south of the Marlin facility in
5,200 feet of water. During October 2015, the third King well, D-9,
was drilled to a total depth of 13,110 feet. Logging tools
indicated that the well encountered a total true vertical depth pay
count of approximately 288 net feet of Miocene oil pay with
excellent reservoir characteristics, including 148 net feet in the
primary objective and 140 feet in the secondary objective. FM
O&G plans to develop the primary objective in the D-9 well and
a fourth well, D-11, is being planned to develop a take point in
the secondary objective.
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. As previously reported, the Horn Mountain
Deep well was drilled to a total depth of 16,925 feet in
September 2015 and successfully logged 142 net feet of Middle
Miocene oil pay with excellent reservoir characteristics. In
addition, these results indicate the presence of sand sections
deeper than known pay sections in the field. Initial production
from this discovery, which will be tied back to existing
facilities, is expected in the first half of 2017.
The positive results at Horn Mountain Deep and FM O&G's
geophysical data support the existence of prolific Middle Miocene
reservoir potential for several additional opportunities in the
area, including the 100-percent-owned Sugar, Rose, Fiesta,
Platinum and Peach prospects. FM O&G controls rights
to over 55,000 acres associated with these prospects.
The success at Horn Mountain Deep follows the positive drilling
results previously announced from the three wells drilled in the
Horn Mountain area, including the Quebec/Victory, Kilo/Oscar
and Horn Mountain Updip tieback prospects.
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. The operator is evaluating development options.
Success at the Power Nap exploration well and appraisal
sidetracks, which are located in close proximity to Vito, produced
positive results in the first half of 2015, and the operator is
assessing development options. FM O&G owns a 50 percent
working interest in the Power Nap prospect.
In September 2015, the operator completed its assessment of the
Deep Sleep exploration well. No proved reserves were
identified, and the well was plugged and abandoned.
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 September 2015, workover operations were completed on the
Highlander well, and production was re-established. Recent
gross rates from the well, which are restricted because of limited
production facilities, approximated 25 MMcf per day (approximately
12 MMcf per day net to FM O&G). 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 expects to complete the installation of additional
processing facilities to accommodate higher flow rates from the
Highlander well by year-end 2015. 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 35 MBOE per
day for third-quarter 2015, compared with 39 MBOE per day for
third-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. Since
second-quarter 2015, production from Point Arguello platforms has
been 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.
CASH FLOWS, CASH, DEBT and EQUITY TRANSACTIONS
Operating Cash Flows. FCX generated operating cash flows of $822
million (including $507 million in working capital sources and
changes in other tax payments) for third-quarter 2015 and $2.6
billion (including $342 million in working capital sources and
changes in other tax payments) for the first nine months of
2015.
Based on current sales volume and cost estimates and assuming
average prices of $2.40 per pound of copper, $1,150 per ounce of
gold, $5.50 per pound of molybdenum and $50 per barrel of Brent
crude oil for fourth-quarter 2015, FCX's consolidated operating
cash flows are estimated to approximate $3.3 billion for the year
2015. The impact of price changes for fourth-quarter 2015 on
operating cash flows would approximate $110 million for each $0.10
per pound change in the average price of copper, $15 million for
each $50 per ounce change in the average price of gold, $20 million
for each $2 per pound change in the average price of molybdenum and
$30 million for each $5 per barrel change in the average Brent
crude oil price.
Based on projected 2016 sales volumes of 5.2 billion pounds of
copper, 1.9 million ounces of gold, 75 million pounds of molybdenum
and 58.9 MMBOE and using similar price assumptions and the recent
2016 future price of $54 per barrel of Brent crude oil, FCX's
consolidated operating cash flows are estimated to approximate $6.8
billion for the year 2016, providing cash flow for required capital
investments, dividends and repayment of debt. The impact of price
changes on operating cash flows for the year 2016 would approximate
$350 million for each $0.10 per pound change in the average price
of copper, $50 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 $130 million for each $5 per barrel
change in the average Brent crude oil price.
Capital Expenditures. Capital expenditures totaled $1.5 billion
for third-quarter 2015 (including $0.6 billion for major projects
at mining operations and $0.7 billion for oil and gas operations)
and $5.1 billion for the first nine months of 2015 (including $1.8
billion for major projects at mining operations and $2.5 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 plans to fund its
capital expenditures with operating cash flows, borrowings under
the FCX and Cerro Verde credit facilities and proceeds from FCX's
at-the-market (ATM) equity programs. FCX is also evaluating
opportunities for funding capital expenditures for its oil and gas
business.
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. Capital expenditures for 2016 are expected to
approximate $4.0 billion, including $1.4 billion for major projects
at mining operations (primarily for underground development
activities at Grasberg and completion of the Cerro Verde expansion)
and $2.0 billion for oil and gas operations.
Cash. Following is a summary of the U.S. and international
components of consolidated cash and cash equivalents available to
the parent company, net of noncontrolling interests' share, taxes
and other costs at September 30, 2015 (in millions):
Cash at domestic companies $ 11 Cash at international
operations 327 Total consolidated cash and cash equivalents
338 Less: noncontrolling interests' share (82 ) Cash, net of
noncontrolling interests' share 256 Less: withholding taxes and
other (13 )
Net cash available $ 243
Debt. 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. Following is a
summary of total debt and the related weighted-average interest
rates at September 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 2.5 6.6%
Cerro Verde Credit Facility 1.5 a 2.6% FCX Revolving Credit
Facility 0.5 b 1.9% Other FCX debt 1.3 c 3.2% $ 20.7
3.7%
a.
As of September 30, 2015, Cerro Verde had
no letters of credit issued and availability of $0.3 billion under
its $1.8 billion credit facility to fund a portion of its expansion
project and for its general corporate purposes.
b.
As of September 30, 2015, FCX has $42
million in letters of credit issued and availability of $3.5
billion under its $4.0 billion revolving credit facility.
c.
Includes FCX's uncommitted and short-term
lines of credit, which had outstanding borrowings totaling $235
million as of September 30, 2015, and Cerro Verde's uncommitted and
short-term lines of credit, which had outstanding borrowings
totaling $381 million as of September 30, 2015.
Equity Transactions. During third-quarter 2015, FCX sold 97.5
million shares of common stock under its ATM equity programs, which
generated gross proceeds of $1.0 billion. From October 1, 2015, to
October 21, 2015, FCX sold an additional 17.3 million shares of its
common stock, generating gross proceeds of $0.2 billion. In total
$1.2 billion of gross proceeds have been raised under FCX's $2
billion of ATM equity programs. FCX intends to use future net
proceeds for general corporate purposes, which may include, among
other things, the repayment of amounts outstanding under its
revolving credit facility and other borrowings, and the financing
of working capital and capital expenditures. As of September 30,
2015, FCX had 1.1 billion common shares outstanding.
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 $547 million in the first nine months of 2015, which
included $115 million of special dividends paid in accordance with
the settlement terms of the shareholder derivative litigation.
On September 30, 2015, the Board of Directors (the Board)
declared a regular quarterly dividend of $0.05 per share, which
will be paid on November 2, 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
third-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, November 20,
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 and
sales. 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, drilling results, potential
effects of cost and capital expenditure reductions and production
curtailments on financial results and cash flow, the outcome of
FCX’s strategic review of its oil and gas business, potential
additional oil and gas property impairment charges, potential
inventory adjustments, potential impairment of long-lived mining
assets, the outcome of ongoing discussions with the Indonesian
government regarding PT-FI's COW, PT-FI’s ability to obtain renewal
of its export license after January 28, 2016, PF-FI’s ability to
renew its biennial labor agreement which expired in September 2015,
the potential effects of violence in Indonesia, the resolution of
administrative disputes in the DRC, industry risks, regulatory
changes, political risks, 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 September 30, Production Sales
COPPER (millions of recoverable pounds) 2015
2014 2015 2014 (FCX's net interest in %)
North America
Morenci (85%)a 232 181 224 181 Bagdad (100%) 53 58 52 61 Safford
(100%) 57 29 51 33 Sierrita (100%) 45 46 46 50 Miami (100%) 10 15
10 16 Chino (100%) 82 69 79 68 Tyrone (100%) 20 23 21 25 Other
(100%) — 2 — 2 Total North America 499 423 483
436
South America
Cerro Verde (53.56%) 123 117 128 118 El Abra (51%) 81 90 79 91
Candelaria/Ojos del Salado (80%)b — 77 — 62 Total
South America 204 284 207 271
Indonesia
Grasberg (90.64%)c 192 203 198 258
Africa
Tenke Fungurume (56%) 108 117 113 112
Consolidated 1,003 1,027 1,001
1,077 Less noncontrolling interests 162 184
167 186
Net 841 843 834
891 Consolidated sales from mines 1,001 1,077
Purchased copper 28 23 Total copper sales, including
purchases 1,029 1,100 Average realized price
per pound $ 2.38 $ 3.12
GOLD (thousands
of recoverable ounces) (FCX's net interest in %) North America
(100%) 9 3 9 4 South America (80%)b — 20 — 16 Indonesia (90.64%)c
272 426 285 505
Consolidated 281
449 294 525 Less noncontrolling
interests 25 44 27 51
Net 256
405 267 474 Average
realized price per ounce $ 1,117 $ 1,220
MOLYBDENUM (millions of recoverable pounds)
(FCX's net interest in %) Henderson (100%) 7 7 N/A N/A Climax
(100%) 6 6 N/A N/A North America copper mines (100%)a 9 8 N/A N/A
Cerro Verde (53.56%) 1 3 N/A N/A
Consolidated
23 24 23 22 Less
noncontrolling interests — 1 1 1
Net 23
23 22 21 Average realized
price per pound $ 7.91 $ 14.71
COBALT
(millions of contained pounds) (FCX's net interest in %)
Consolidated - Tenke Fungurume (56%)
9 8
10 8 Less noncontrolling interests 4 4
4 3
Net 5 4 6
5 Average realized price per pound $ 8.96 $
9.99
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)
Nine Months Ended September 30,
Production Sales
COPPER (millions of
recoverable pounds) 2015 2014 2015 2014 (FCX's net interest in %)
North America Morenci (85%)a 656 482 660 489 Bagdad
(100%) 157 175 166 181 Safford (100%) 136 100 132 107 Sierrita
(100%) 140 147 146 150 Miami (100%) 33 44 35 47 Chino (100%) 231
179 232 177 Tyrone (100%) 65 70 68 73 Other (100%) 2 6 2
6 Total North America 1,420 1,203 1,441 1,230
South America Cerro Verde (53.56%) 334 377 335
379 El Abra (51%) 251 275 250 273 Candelaria/Ojos del Salado (80%)b
— 246 — 236 Total South America 585 898 585
888
Indonesia Grasberg (90.64%)c 551 465
549 484
Africa Tenke Fungurume
(56%) 339 340 350 314
Consolidated
2,895 2,906 2,925 2,916
Less noncontrolling interests 479 552 484 541
Net 2,416 2,354 2,441
2,375 Consolidated sales from mines 2,925 2,916
Purchased copper 92 89 Total copper sales, including
purchases 3,017 3,005 Average realized price
per pound $ 2.54 $ 3.14
GOLD (thousands
of recoverable ounces) (FCX's net interest in %) North America
(100%) 20 8 18 10 South America (80%)b — 62 — 59 Indonesia
(90.64%)c 887 776 891 802
Consolidated
907 846 909 871 Less
noncontrolling interests 83 85 84 87
Net
824 761 825 784
Average realized price per ounce $ 1,149 $ 1,251
MOLYBDENUM (millions of recoverable pounds)
(FCX's net interest in %) Henderson (100%) 21 23 N/A N/A Climax
(100%) 18 17 N/A N/A North America copper mines (100%)a 28 25 N/A
N/A Cerro Verde (53.56%) 5 8 N/A N/A
Consolidated 72 73 69
74 Less noncontrolling interests 2 4 3 4
Net 70 69 66 70
Average realized price per pound $ 9.21 $ 13.01
COBALT (millions of contained pounds) (FCX's
net interest in %)
Consolidated - Tenke Fungurume (56%)
25 22 26 23 Less
noncontrolling interests 11 10 11 10
Net
14 12 15 13
Average realized price per pound $ 9.04 $ 9.68
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 Nine Months Ended
September 30, September 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) 927,900 1,003,900 911,100 1,010,600 Average copper
ore grade (percent) 0.27 0.25 0.26 0.25 Copper production (millions
of recoverable pounds) 300 244 808 707
Mill
Operations Ore milled (metric tons per day) 311,500 278,000
309,700 264,500 Average ore grades (percent): Copper 0.50 0.44 0.48
0.43 Molybdenum 0.03 0.03 0.03 0.03 Copper recovery rate (percent)
85.6 87.5 85.6 85.5 Production (millions of recoverable pounds):
Copper 240 211 728 581 Molybdenum 9 8 28 25
100% South
America Mininga SX/EW Operations Leach ore
placed in stockpiles (metric tons per day) 192,300 269,600 220,800
279,300 Average copper ore grade (percent) 0.46 0.50 0.43 0.50
Copper production (millions of recoverable pounds) 107 122 330 370
Mill Operations Ore milled (metric tons per
day) 131,200 192,100 122,400 187,700 Average ore grades: Copper
(percent) 0.49 0.50 0.46 0.55 Molybdenum (percent) 0.02 0.02 0.02
0.02 Gold (grams per metric ton) — 0.09 — 0.10 Copper recovery rate
(percent) 79.2 86.9 79.0 88.6 Production (recoverable): Copper
(millions of pounds) 97 162 255 528 Molybdenum (millions of pounds)
1 3 5 8 Gold (thousands of ounces) — 20 — 62
100%
Indonesia Mining Ore milled (metric tons per day)b Grasberg
open pit 117,300 78,100 118,400 64,900 Deep Ore Zone underground
mine 40,400 57,600 44,000 52,800 Deep Mill Level Zone underground
mine 3,800 — 2,700 — Big Gossan underground mine — — — 1,200 Total
161,500 135,700 165,100 118,900 Average ore grades: Copper
(percent) 0.68 0.88 0.65 0.78 Gold (grams per metric ton) 0.71 1.28
0.76 0.94 Recovery rates (percent): Copper 89.6 91.4 90.2 89.9 Gold
81.1 84.6 83.1 81.5 Production (recoverable): Copper (millions of
pounds) 192 207 551 476 Gold (thousands of ounces) 272 426 887 777
100% Africa Mining Ore milled (metric tons per day)
14,000 15,500 14,600 15,100 Average ore grades (percent): Copper
4.02 4.13 4.13 4.09 Cobalt 0.43 0.33 0.41 0.33 Copper recovery rate
(percent) 94.0 91.3 94.0 92.8 Production (millions of pounds):
Copper (recoverable) 108 117 339 340 Cobalt (contained) 9 8 25 22
100% Molybdenum Mines Ore milled (metric tons per
day) 36,800 39,300 37,700 41,200 Average molybdenum ore grade
(percent) 0.20 0.19 0.20 0.19 Molybdenum production (millions of
recoverable pounds) 13 13 39 40
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 September 30, Sales Volumes
Sales per Day 2015 2014 2015 2014
Gulf of Mexico
(GOM)a Oil (thousand barrels or MBbls) 6,168 5,018 67 55
Natural gas (million cubic feet or MMcf) 9,513 8,225 103 89 Natural
gas liquids (NGLs, in MBbls) 632 516 7 5 Thousand barrels of oil
equivalents (MBOE) 8,386 6,905 91 75 Average realized price per
BOEb $ 38.99 $ 80.36 Cash production costs per BOEb $ 15.96 $ 15.39
Capital expenditures (in millions) $ 630 c $ 701 c
CALIFORNIA Oil (MBbls) 3,073 3,464 33 37 Natural gas (MMcf)
518 625 6 7 NGLs (MBbls) 44 47 1 1 MBOE 3,203 3,615 35 39 Average
realized price per BOEb $ 39.84 $ 86.03 Cash production costs per
BOEb $ 32.82 $ 37.96 Capital expenditures (in millions) $ 19 $ 75
HAYNESVILLE/MADDEN/OTHER Oil (MBbls) 46 128 1 1
Natural gas (MMcf) 12,788 11,301 139 123 NGLs (MBbls) 14 13 —
d
—
d
MBOE 2,191 2,024 e 24 22 Average realized price per BOEb $ 16.20 $
28.92 e Cash production costs per BOEb $ 9.49 $ 9.41 e Capital
expenditures (in millions) $ 2 $ 36
TOTAL U.S. OIL AND
GAS OPERATIONS Oil (MBbls) 9,287 8,610 101 93 Natural gas
(MMcf) 22,819 20,151 248 219 NGLs (MBbls) 690 576 8 6 MBOE 13,780
12,544 150 136 Cash operating margin per BOE:b Realized revenues $
43.00 $ 69.08 Cash production costs 18.85 20.93 Cash operating
margin $ 24.15 $ 48.15 Depreciation, depletion and amortization per
BOE $ 32.71 $ 40.12 Capital expenditures (in millions) $ 635
f
$ 908 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 are available on FCX's website, fcx.com.
c. Includes $1 million in third-quarter
2015 and $187 million in third-quarter 2014 for the Inboard Lower
Tertiary/Cretaceous natural gas trend.
d. Rounds to less than 1 MBbl per day.
e. Includes volume adjustments related to
Eagle Ford's pre-close sales totaling 113 MBOE; excluding these
amounts, average realized price was $24.51 per BOE and cash
production costs were $11.55 per BOE in third-quarter 2014.
f. Consolidated capital expenditures for
United States (U.S.) oil and gas operations reflect total spending,
which includes accrual and other adjustments totaling $(16) million
for third-quarter 2015 and $96 million for third-quarter 2014 that
are not specifically allocated to the above regions. Excludes
international oil and gas capital expenditures primarily related to
Morocco of $37 million in third-quarter 2015 and $7 million for
third-quarter 2014.
FREEPORT-McMoRan
INC. SELECTED U.S. OIL AND GAS OPERATING DATA
(continued) Nine Months Ended
September 30, Sales Volumes Sales per Day 2015 2014 2015
2014
GOMa Oil (MBbls) 16,365 15,081 60 55 Natural gas
(MMcf) 26,147 20,801 96 76 NGLs (MBbls) 1,633 1,520 6 6 MBOE 22,356
20,068 82 74 Average realized price per BOEb $ 42.37 $ 84.99 Cash
production costs per BOEb $ 16.72 $ 14.88 Capital expenditures (in
millions) $ 2,011 c $ 1,832 c
CALIFORNIA Oil (MBbls)
9,773 10,319 36 38 Natural gas (MMcf) 1,664 1,770 6 7 NGLs (MBbls)
128 130 —
d
—
d
MBOE 10,178 10,744 37 39 Average realized price per BOEb $ 42.33 $
90.70 Cash production costs per BOEb $ 30.71 $ 37.40 Capital
expenditures (in millions) $ 72 $ 196
HAYNESVILLE/MADDEN/OTHER Oil (MBbls) 120 182 —
d
1 Natural gas (MMcf) 40,309 29,952 148 110 NGLs (MBbls) 39 24 —
d
— d MBOE 6,877 5,198 e 25 19 Average realized price per BOEb $
16.52 $ 28.93 e Cash production costs per BOEb $ 11.48 $ 11.85 e
Capital expenditures (in millions) $ 29 $ 88
EAGLE
FORDf Oil (MBbls) — 6,481 — 23 Natural gas (MMcf) —
7,410 — 27 NGLs (MBbls) — 978 — 4 MBOE — 8,694 — 32 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) 26,258 32,063
96 117 Natural gas (MMcf) 68,120 59,933 250 220 NGLs (MBbls) 1,800
2,652 6 10 MBOE 39,411 44,704 144 164 Cash operating margin per
BOE:b Realized revenue $ 45.57 $ 75.04 Cash production costs 19.42
19.57
Cash operating margin $ 26.15 $ 55.47 Depreciation, depletion and
amortization per BOE $ 37.18 $ 38.81 Capital expenditures (in
millions) $ 2,430 g $ 2,392 g
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 are available on FCX's website, fcx.com.
c. Includes $143 million for the first
nine months of 2015 and $487 million for the first nine months of
2014 for the Inboard Lower Tertiary/Cretaceous natural gas
trend.
d. Rounds to less than 1 MBbl per day.
e. Includes volume adjustments related to
Eagle Ford's pre-close sales totaling 113 MBOE; excluding these
amounts, average realized price was $27.27 per BOE and cash
production costs were $12.70 per BOE for the first nine months of
2014.
f. FCX completed the sale of its Eagle
Ford shale assets on June 20, 2014.
g. Consolidated capital expenditures for
U.S. oil and gas operations reflect total spending, which includes
accrual and other adjustments totaling $318 million for the first
nine months of 2015 and $44 million for the first nine months of
2014 that are not specifically allocated to the above regions.
Excludes international oil and gas capital expenditures primarily
related to Morocco of $81 million for the first nine months of 2015
and $7 million for the first nine months of 2014.
FREEPORT-McMoRan
INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three
Months Ended Nine Months Ended September 30, September 30, 2015
2014 2015 2014 (In millions, except per share amounts) Revenuesa,b
$ 3,681 $ 5,696 $ 12,082 $ 16,203 Cost of sales: Production and
delivery 2,893
c,d
3,152 8,653
c,d
8,971 Depreciation, depletion and amortization 888 945 2,717 2,924
Impairment of oil and gas properties 3,652 308 9,442
308 Total cost of sales 7,433 4,405 20,812 12,203
Selling, general and administrative expenses 124 158 429 457 Mining
exploration and research expenses 32 29 101 93 Environmental
obligations and shutdown costs 37 18 61 100 Net gain on sales of
assets — (46 ) (39 ) (46 ) Total costs and expenses 7,626
4,564 21,364 12,807 Operating (loss)
income (3,945 ) 1,132 (9,282 ) 3,396 Interest expense, nete (163 )
(158 ) (458 ) (483 ) Insurance and other third-party recoveries — —
92 — Net gain on early extinguishment of debt — 58 — 63 Other
(expense) income, net (40 ) 23 (88 ) 48 (Loss) income
before income taxes and equity in affiliated companies' net losses
(4,148 ) 1,055 (9,736 ) 3,024 Benefit from (provision for) income
taxes 360
f
(349
)g
1,742
f
(1,034
)g
Equity in affiliated companies' net losses (2 ) (2 ) (1 ) —
Net (loss) income (3,790 ) 704 (7,995 ) 1,990 Net income
attributable to noncontrolling interests (29 ) (142 ) (129 ) (416 )
Preferred dividends attributable to redeemable noncontrolling
interest (11 ) (10 ) (31 ) (30 ) Net (loss) income attributable to
common stockholdersh $ (3,830 ) $ 552 $ (8,155 ) $ 1,544
Net (loss) income per share attributable to common
stockholders: Basic $ (3.58 ) $ 0.53 $ (7.77 ) $ 1.48
Diluted $ (3.58 ) $ 0.53 $ (7.77 ) $ 1.47
Weighted-average common shares outstanding: Basic 1,071
1,039 1,050 1,039 Diluted 1,071 1,046
1,050 1,045 Dividends declared per
share of common stock $ 0.05 $ 0.3125 $ 0.2605
$ 0.9375
a. Includes unfavorable adjustments to
provisionally priced concentrate and cathode copper sales
recognized in prior periods totaling $126 million ($62 million to
net loss attributable to common stock) for third-quarter 2015, $22
million ($10 million to net income attributable to common stock)
for third-quarter 2014, $107 million ($50 million to net loss
attributable to common stock) for the first nine months of 2015 and
$118 million ($65 million to net income attributable to common
stock) for the first nine 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 $(74) million ($(46) million to net loss
attributable to common stock) for third-quarter 2015, $122 million
($76 million to net income attributable to common stock) for
third-quarter 2014, $(217) million ($(135) million to net loss
attributable to common stock) for the first nine months of 2015 and
$130 million ($80 million to net income attributable to common
stock) for the first nine months of 2014. For further discussion,
refer to the supplemental schedule, "Derivative Instruments,"
beginning on page X.
c. Includes charges at mining operations
for (i) adjustments to copper and molybdenum inventories totaling
$91 million ($58 million to net loss attributable to common stock)
for third-quarter 2015 and $154 million ($99 million to net loss
attributable to common stock) for the first nine months of 2015 and
(ii) impairment and restructuring charges totaling $95 million ($58
million to net loss attributable to common stock) for the third
quarter and first nine months of 2015.
d. Includes charges at oil and gas
operations for tax assessments related to prior periods at the
California properties, idle/terminated rig costs and inventory
write-downs totaling $21 million ($13 million to net loss
attributable to common stock) for third-quarter 2015 and $59
million ($36 million to net loss attributable to common stock) for
the first nine months of 2015.
e. Consolidated interest expense,
excluding capitalized interest, totaled $217 million in
third-quarter 2015, $212 million in third-quarter 2014, $642
million for the first nine months of 2015 and $661 million for the
first nine months of 2014.
f. As a result of the impairment to oil
and gas properties, FCX recorded net tax charges of $1.1 billion
for third-quarter 2015 and $1.9 billion for the first nine months
of 2015, primarily to establish a valuation allowance against U.S.
federal alternative minimum tax credits and foreign tax credits.
For a summary of the benefit from (provision for) income taxes,
refer to the supplementary schedule, "Income Taxes," on page
IX.
g. The third quarter and first nine months
of 2014 include a tax charge of $54 million ($47 million net of
noncontrolling interests) related to changes in Chilean tax rules.
The first nine months of 2014 also includes a tax charge of $62
million associated with 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 (reductions) to net
income attributable to common stock of less than $1 million in
third-quarter 2015, $(20) million in third-quarter 2014, $37
million for the first nine months of 2015 and $36 million for the
first nine months of 2014. For further discussion, refer to the
supplemental schedule, "Deferred Profits," on page XI.
FREEPORT-McMoRan
INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
September 30, December 31, 2015
2014 (In millions) ASSETS Current assets: Cash and cash equivalents
$ 338 $ 464 Trade accounts receivable 626 953 Other accounts
receivables 1,276 1,610 Inventories: Materials and supplies, net
2,071 1,886 Mill and leach stockpiles 1,895 1,914 Product 1,379
1,561 Other current assets 570 657
Total current assets 8,155 9,045 Property, plant, equipment and
mining development costs, net 27,355 26,220 Oil and gas properties,
net - full cost method: Subject to amortization, less accumulated
amortization 3,002 9,187 Not subject to amortization 7,568 10,087
Long-term mill and leach stockpiles 2,326 2,179 Other assets
1,977 1,956 Total assets $ 50,383 $
58,674 LIABILITIES AND EQUITY Current liabilities:
Accounts payable and accrued liabilities $ 3,445 $ 3,653 Current
portion of debt 906 478 Current portion of environmental and asset
retirement obligations 336 296 Accrued income taxes 75 410
Dividends payable 65 335 Total current
liabilities 4,827 5,172 Long-term debt, less current portion 19,792
18,371 Deferred income taxes 4,363 6,398 Environmental and asset
retirement obligations, less current portion 3,708 3,647 Other
liabilities 1,727 1,861 Total
liabilities 34,417 35,449 Redeemable noncontrolling interest
761 751 Equity: Stockholders' equity: Common stock 127 117
Capital in excess of par value 23,335 22,281 (Accumulated deficit)
retained earnings (8,305 ) 128 Accumulated other comprehensive loss
(509 ) (544 ) Common stock held in treasury (3,702 )
(3,695 ) Total stockholders' equity 10,946 18,287 Noncontrolling
interests 4,259 4,187 Total equity
15,205 22,474 Total liabilities and
equity $ 50,383 $ 58,674
FREEPORT-McMoRan INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, 2015 2014 (In
millions) Cash flow from operating activities: Net (loss) income $
(7,995 ) $ 1,990 Adjustments to reconcile net (loss) income to net
cash provided by operating activities: Depreciation, depletion and
amortization 2,717 2,924 Impairment of oil and gas properties 9,442
308 Inventory adjustments 154 — Net gain on sale of assets (39 )
(46 ) Net (gains) losses on crude oil and natural gas derivative
contracts (87 ) 56 Net charges for environmental and asset
retirement obligations, including accretion 174 146 Payments for
environmental and asset retirement obligations (135 ) (134 ) Net
gain on early extinguishment of debt — (63 ) Deferred income taxes
(1,926 ) 107 Increase in long-term mill and leach stockpiles (183 )
(182 ) Other, net 144 106 Changes in working capital and other tax
payments, excluding amounts from acquisitions and dispositions:
Accounts receivable 990 200 Inventories 83 (267 ) Other current
assets (13 ) (26 ) Accounts payable and accrued liabilities (150 )
(379 ) Accrued income taxes and changes in other tax payments
(568 ) (227 ) Net cash provided by operating activities
2,608 4,513 Cash flow from investing
activities: Capital expenditures: North America copper mines (308 )
(815 ) South America (1,339 ) (1,278 ) Indonesia (660 ) (722 )
Africa (166 ) (100 ) Molybdenum mines (10 ) (45 ) U.S. oil and gas
operations (2,430 ) (2,392 ) Other (142 ) (63 ) Acquisition of
Deepwater GOM interests — (1,421 ) Net proceeds from sale of Eagle
Ford shale assets — 2,971 Other, net 114 221
Net cash used in investing activities (4,941 ) (3,644 )
Cash flow from financing activities: Proceeds from debt
6,552 3,346 Repayments of debt (4,693 ) (4,196 ) Net proceeds from
sale of common stock 999 — Cash dividends and distributions paid:
Common stock (547 ) (979 ) Noncontrolling interests (89 ) (365 )
Stock-based awards net (payments) proceeds, including excess tax
benefit (8 ) 7 Debt financing costs and other, net (7 ) (9 )
Net cash provided by (used in) financing activities 2,207
(2,196 ) Net decrease in cash and cash equivalents
(126 ) (1,327 ) Cash and cash equivalents at beginning of year
464 1,985 Cash and cash equivalents at end of
period $ 338 $ 658
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151022005712/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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