Freeport-McMoRan Swings to Loss, Takes Big Oil-and-Gas Write-Down--Update
22 Oktober 2015 - 10:20PM
Dow Jones News
By John W. Miller And Tess Stynes
Freeport-McMoRan Inc. posted a big third-quarter loss tied to
its flailing oil and gas operations and stated bluntly that it sees
its future in mining copper around the world.
Phoenix-based Freeport, the U.S.'s biggest mining company, has
been in turmoil as falling energy prices have exposed a disastrous
investment in oil and gas drilling. The fallout of that investment
kept biting in the third quarter, with Freeport reporting a loss of
$3.8 billion, or $3.58 a share, compared with a year-earlier profit
of $552 million, or 53 cents a share. A write-down of $3.5 billion
on the oil and gas division accounted for the majority of the red
ink.
The company is under increased scrutiny following a buy-in by
activist investor Carl Icahn, who first disclosed an 8.5% stake in
Freeport in August. Freeport managed to pre-empt Mr. Icahn's
initial round of criticism, by almost simultaneously announcing
that it would slash 2016 capital spending by 29%, cut expected
copper production by 150 million pounds, and eliminate about 10% of
its U.S. workforce of roughly 15,600. But Mr. Icahn has secured two
board seats and is agitating for more change.
At the top of the to-do list is Freeport's oil and gas business,
which it significantly expanded in 2013 when it bought McMoRan
Exploration Co. and Plains Exploration & Production Co. for a
total of $9 billion. The purchase, which saddled the company with a
heavy debt load, also came just ahead of the oil-price rout. For
the first six months of 2015, Freeport took a $4.24 billion charge
related to depreciating oil and gas reserves.
On Thursday, it reiterated that options for the energy assets
included an initial public offering, a joint venture, a spinoff,
and "further spending reductions."
Write to Tess Stynes at tess.stynes@wsj.com
More clearly than ever, Freeport said Thursday that its strategy
is to focus on copper, which it digs up at massive mines in
Arizona, Peru, Chile, Indonesia and the Democratic Republic of
Congo. The orange-tinted metal is used to make pipes and wiring,
and, despite a 33% fall in copper prices in the past two years, is
still a profitable enterprise, considered less prone to oversupply
than iron ore, aluminum or coal.
The company is bullish on copper "based on the global demand and
supply fundamentals." The copper market has suffered due to waning
demand from China's the world's biggest consumer of the metal. But
Freeport said it believes it is well positioned to cash in on
copper's recovery due to "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."
Meanwhile, Freeport will continue to scale back operations,
cutting 2015 copper production forecasts to 4.2 billion tons from
4.1 billion, and won't make any new investments, "until the market
dictates," Chief Executive Richard Adkerson said on a call with
analysts.
Write to John W. Miller at john.miller@wsj.com and Tess Stynes
at tess.stynes@wsj.com
(END) Dow Jones Newswires
October 22, 2015 16:05 ET (20:05 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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