Freeport-McMoRan Inc. (NYSE: FCX):
- Net loss attributable to common
stock totaled $479 million, $0.38 per share, for second-quarter
2016. After adjusting for net charges totaling $452 million, $0.36
per share, second-quarter 2016 adjusted net loss attributable to
common stock totaled $27 million, $0.02 per share.
- Consolidated sales (including
volumes from Tenke Fungurume (Tenke), which is being reported as a
discontinued operation) totaled 1.1 billion pounds of copper, 156
thousand ounces of gold, 19 million pounds of molybdenum and 12.4
million barrels of oil equivalents (MMBOE) for second-quarter 2016,
compared with 964 million pounds of copper, 352 thousand ounces of
gold, 23 million pounds of molybdenum and 13.1 MMBOE for
second-quarter 2015.
- Consolidated sales for the year
2016 (including volumes from Tenke through the anticipated closing
date) are expected to approximate 5.0 billion pounds of copper, 1.7
million ounces of gold, 76 million pounds of molybdenum and 47.4
MMBOE, including 1.3 billion pounds of copper, 410 thousand ounces
of gold, 20 million pounds of molybdenum and 11.4 MMBOE for
third-quarter 2016.
- Average realized prices were
$2.18 per pound of copper, $1,292 per ounce for gold and $41.10 per
barrel for oil for second-quarter 2016.
- Average unit net cash costs were
$1.33 per pound of copper for mining operations and $15.00 per
barrel of oil equivalents (BOE) for oil and gas operations for
second-quarter 2016. Unit net cash costs for the year 2016 are
expected to average $1.06 per pound of copper for mining operations
(including Tenke) and $15.50 per BOE for oil and gas
operations.
- Operating cash flows totaled
$874 million (including $278 million in working capital sources and
changes in other tax payments) for second-quarter 2016. Based on
current sales volume and cost estimates and assuming average prices
of $2.25 per pound for copper, $1,300 per ounce for gold, $6 per
pound for molybdenum and $48 per barrel for Brent crude oil for the
second half of 2016, operating cash flows for the year 2016 are
expected to approximate $4.5 billion (including $0.7 billion in
working capital sources and changes in other tax payments).
- Capital expenditures totaled
$833 million for second-quarter 2016, consisting of $441 million
for mining operations (including $350 million for major projects)
and $392 million for oil and gas operations. Capital expenditures
are expected to approximate $3.1 billion for the year 2016,
consisting of $1.7 billion for mining operations (including $1.3
billion for major projects) and $1.4 billion for oil and gas
operations.
- During second-quarter 2016, FCX
completed previously announced asset sales for aggregate
cash consideration of $1.3 billion, including the $1.0 billion sale
of an additional 13 percent undivided interest in Morenci. In May
2016, FCX entered into a definitive agreement to sell its
interest in TF Holdings Limited for $2.65 billion in cash and
contingent consideration of up to $120 million. In accordance with
accounting guidelines, the results of Tenke are reported as
discontinued operations for all periods presented.
- During second-quarter 2016, FCX entered
into agreements to terminate FM O&G's three drilling rig
contracts for a total of $755 million and potential contingent
consideration depending on future oil prices. The settlements
result in aggregate savings of approximately $350 million, compared
to the previously contracted commitments.
- Through July 25, 2016, FCX exchanged
$369 million in senior notes for approximately 28 million
shares of its common stock in a series of privately negotiated
transactions, including $268 million exchanged during
second-quarter 2016.
- At June 30, 2016, consolidated
debt totaled $19.3 billion and consolidated cash totaled
$352 million. At June 30, 2016, FCX had no borrowings and $3.5
billion available under its $3.5 billion revolving credit
facility.
Freeport-McMoRan Inc. (NYSE: FCX) reported net losses
attributable to common stock of $479 million, $0.38 per share, for
second-quarter 2016 and $4.7 billion, $3.70 per share, for the
first six months of 2016, compared with $1.85 billion, $1.78 per
share, for second-quarter 2015 and $4.3 billion, $4.16 per share,
for the first six months of 2015. FCX’s net losses attributable to
common stock include net charges totaling $452 million, $0.36 per
share, for second-quarter 2016 and $4.4 billion, $3.53 per share,
for the first six months of 2016, primarily for impairment of oil
and gas properties and drillship settlements/idle rig costs, partly
offset by net gains on the sales of assets. Second-quarter 2015
included net charges of $2.0 billion, $1.92 per share, and the
first six months of 2015 included net charges of $4.4 billion,
$4.24 per share, primarily for the impairment of oil and gas
properties. For further discussion of these net charges refer to
the supplemental schedule "Adjusted Net (Loss) Income," on page IX,
which is available on FCX's website, "fcx.com."
Richard C. Adkerson, President and Chief Executive Officer,
said, "We are pleased to report significant progress toward our
immediate objective of strengthening FCX’s balance sheet and
enhancing shareholder value in a challenging market environment.
Our global team continues to execute on our strategy to constrain
costs and capital spending in a manner that protects the long-term
values of our large resources. Our announced asset sale
transactions totaling over $4 billion year-to-date demonstrate the
attractiveness of our high-quality asset base. We are focused on
executing our operating plans, which position us for significant
free cash flow generation in the balance of 2016 and 2017, and on
building long-term values from our portfolio of low-cost,
long-lived reserves and resources for the benefit of our
shareholders."
SUMMARY FINANCIAL DATA
Three Months Ended Six Months Ended June
30, June 30, 2016 2015
2016 2015 (in millions, except per
share amounts) Revenuesa,b $ 3,334 $ 3,938 $ 6,576 $ 7,709
Operating income (loss)a $ 18 $ (2,421 ) $ (3,854 ) $ (5,451 ) Net
loss from continuing operations $ (229 ) $ (1,828 ) $ (4,326 ) $
(4,275 ) Net (loss) income from discontinued operationsc $ (181 ) $
29 $ (185 ) $ 70
Net loss attributable to common
stockd,e
$ (479 ) $ (1,851 ) $ (4,663 ) $ (4,325 ) Diluted net (loss) income
per share of common stock: Continuing operations $ (0.23 ) $ (1.78
) $ (3.54 ) $ (4.18 ) Discontinued operations (0.15 ) —
(0.16 ) 0.02 $ (0.38 ) $ (1.78 ) $ (3.70 ) $ (4.16 ) Diluted
weighted-average common shares outstanding 1,269 1,040 1,260 1,040
Operating cash flowsf
$ 874 $ 1,069 $ 1,614 $ 1,786 Capital expenditures $ 833 $ 1,661 $
1,815 $ 3,528 At June 30: Cash and cash equivalents $ 352 $ 318 $
352 $ 318 Total debt, including current portion $ 19,319 $ 20,902 $
19,319 $ 20,902
a.
For segment financial results, refer to
the supplemental schedules, "Business Segments," beginning on page
XII, which are available on FCX's website, "fcx.com."
b.
Includes (unfavorable) favorable
adjustments to provisionally priced concentrate and cathode copper
sales recognized in prior periods totaling $(28) million ($(15)
million to net loss attributable to common stock from continuing
operations or $(0.01) per share) in second-quarter 2016, $(22)
million ($(11) million to net loss attributable to common stock
from continuing operations or $(0.01) per share) in second-quarter
2015, $5 million ($2 million to net loss attributable to common
stock from continuing operations or less than $0.01 per share) for
the first six months of 2016 and $(99) million ($(47) million to
net loss attributable to common stock from continuing operations or
$(0.04) per share) for the first six months of 2015. For further
discussion, refer to the supplemental schedule, "Derivative
Instruments," on page XI, which is available on FCX's website,
"fcx.com."
c.
Net (loss) income from discontinued
operations includes charges for (i) allocated interest expense
totaling $11 million in second-quarter 2016, $7 million in
second-quarter 2015, $21 million for the first six months of 2016
and $14 million for the first six months of 2015 associated with
the portion of the term loan that is required to be repaid as a
result of the sale of FCX's interest in Tenke and (ii) income tax
(benefit) provision totaling $(16) million in second-quarter 2016,
$12 million in second-quarter 2015, $(23) million for the first six
months of 2016 and $31 million for the first six months of 2015. In
accordance with accounting guidelines, the second quarter and first
six months of 2016 are also net of an estimated loss on disposal,
which will be adjusted through closing of the transaction (refer to
the supplemental schedule, “Adjusted Net (Loss) Income,” on page
IX, which is available on FCX’s website, “fcx.com”).
d.
Includes net charges totaling $452 million
($0.36 per share) in second-quarter 2016, $2.0 billion ($1.92 per
share) in second-quarter 2015, $4.4 billion ($3.53 per share) for
the first six months of 2016 and $4.4 billion ($4.24 per share) for
the first six months of 2015, which are described in the
supplemental schedule, “Adjusted Net (Loss) Income,” on page IX,
which is available on FCX’s website, “fcx.com.”
e.
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."
f.
Includes net working capital sources
(uses) and changes in other tax payments of $278 million in
second-quarter 2016, $(104) million in second-quarter 2015, $466
million for the first six months of 2016 and $(190) million for the
first six months of 2015.
DEBT REDUCTION INITIATIVES
FCX previously announced plans to reduce debt and restore its
balance sheet strength through a combination of asset sale
transactions, cash flow from operations and potential capital
market transactions. To date, FCX has announced over $4 billion in
transactions and has received aggregate cash consideration of $1.4
billion, including $87 million in July 2016. The $2.65 billion
Tenke Fungurume (Tenke) transaction is expected to close in
fourth-quarter 2016. In addition, FCX continues to aggressively
manage production, exploration and administrative costs and capital
spending.
During second-quarter 2016, FCX restructured its oil and gas
business to reduce costs and align capital allocation for the
business with FCX’s corporate debt reduction initiatives. During
the quarter, FCX terminated contracts for Freeport-McMoRan Oil
& Gas LLC’s (FM O&G) deepwater drillships, and settled
aggregate commitments totaling $1.1 billion for $755 million, of
which $540 million was funded with shares of FCX common stock. In
addition to the drillship contract savings of approximately $350
million, FCX has identified annual operating and administrative
cost savings in excess of $150 million in connection with
restructuring efforts.
During 2016, FCX has retired $369 million of its senior notes
through a series of privately negotiated exchanges for 28 million
shares of its common stock (including $268 million during
second-quarter 2016, which resulted in a $39 million gain on early
extinguishment of debt). These transactions will reduce annual
interest expense by $17 million. FCX will continue to evaluate
opportunities for transactions, which may include open-market
purchases of its debt, debt for debt exchanges, and privately
negotiated exchanges of its debt for equity or equity-linked
securities. FCX may also issue additional debt or convertible
securities to repay or refinance existing debt. The completion and
amount of these transactions, if any, are subject to a number of
factors, including market conditions, FCX's financial position and
its ability to complete such transactions on economically
attractive terms.
With the successful completion of the Cerro Verde expansion and
access to higher grade ore from the Grasberg mine in future
quarters, FCX expects to generate substantial cash flows over the
next 18 months for debt reduction.
As part of its plan to reduce outstanding indebtedness, FCX
intends to commence, subject to market conditions, a registered
at-the-market offering of up to $1.5 billion of common stock and
use the proceeds to retire outstanding indebtedness. FCX believes
the proceeds of this offering, together with previously announced
asset sale transactions and anticipated cash flow from operations,
will enable it to achieve its near-term debt reduction
objectives.
While additional asset sales may be considered, FCX remains
focused on retaining a high-quality portfolio of long-lived copper
assets positioned to generate value as market conditions improve.
In addition to debt reduction plans, FCX is pursuing opportunities
to create additional value through mine designs that would increase
copper reserves, reduce costs and provide opportunities to enhance
net present values, and continues to advance studies for future
development of its copper resources, the timing of which will be
dependent on market conditions.
Following provides a summary of FCX’s completed
and pending asset sales (in billions):
Closing or Expected Cash Closing Date
Consideration
a
Morenci (13 percent interest) Second-quarter 2016 $ 1.00 Timok
exploration project in Serbia Second-quarter 2016 0.13 b Oil and
gas royalty interests Second-quarter 2016 0.10 Other land sales
Second-quarter 2016 0.06 Haynesville shale assets Third-quarter
2016 0.09 Tenke Fourth-quarter 2016 2.65 c Total, excluding
potential transactions and contingent consideration 4.03 Potential
Freeport Cobalt/Kinsanfu transactionsd 0.15 Contingent
considerationb,c 0.23 Total $ 4.41
a.
Reflects aggregate cash consideration.
b.
Excludes contingent consideration of up to
$107 million payable to FCX in stages based upon achievement of
defined development milestones.
c.
Excludes contingent consideration of up to
$120 million, consisting of $60 million if the average copper price
exceeds $3.50 per pound and $60 million if the average cobalt price
exceeds $20 per pound, for the 24-month period ending December 31,
2019.
d.
FCX has agreed to negotiate exclusively
with China Molybdenum Co., Ltd. (CMOC) until December 31, 2016, to
enter into a definitive agreement to sell its interests in Freeport
Cobalt for $100 million and the Kinsanfu exploration project in the
Democratic Republic of Congo (DRC) for $50 million in separate
transactions.
SUMMARY OPERATING DATA
Three Months Ended Six Months Ended June
30, June 30, 2016 2015
2016 2015 Copper (millions of
recoverable pounds) Productiona 1,133 977 2,230 1,892 Sales,
excluding purchasesa 1,111 964 2,234 1,924 Average realized price
per pounda $ 2.18 $ 2.71 $ 2.16 $ 2.70 Site production and delivery
costs per poundb $ 1.43 $ 1.85 $ 1.47 $ 1.89 Unit net cash costs
per poundb $ 1.33 $ 1.50 $ 1.35 $ 1.57
Gold (thousands of
recoverable ounces) Production 166 367 350 626 Sales, excluding
purchases 156 352 357 615 Average realized price per ounce $ 1,292
$ 1,174 $ 1,259 $ 1,183
Molybdenum (millions of recoverable
pounds) Production 19 25 39 49 Sales, excluding purchases 19 23 36
46 Average realized price per pound $ 8.34 $ 9.51 $ 7.99 $ 9.84
Oil Equivalents Sales volumes MMBOE 12.4 13.1 24.5 25.6
Thousand BOE (MBOE) per day 136 144 135 142 Cash operating margin
per BOEc Realized revenues $ 32.70 $ 50.04 d $ 28.29 $ 46.95 d Cash
production costs (15.00 ) (19.04 ) (15.42 ) (19.62 ) Cash operating
margin $ 17.70 $ 31.00 $ 12.87 $ 27.33
a.
Includes production and sales volumes from
the Tenke mine, which is reported as a discontinued operation.
Copper sales volumes from the Tenke mine totaled 124 million pounds
in second-quarter 2016, 104 million pounds in second-quarter 2015,
247 million pounds for the first six months of 2016 and 237 million
pounds for the first six months of 2015. For realized copper prices
(excluding Tenke), refer to the supplemental schedules, "Selected
Mining Operating Data," beginning on page I, which are available on
FCX's website, "fcx.com."
b.
Reflects per pound weighted-average
production and delivery costs and unit net cash costs (net of
by-product credits) for all copper mines (including Tenke), before
net noncash and other costs. Excluding the Tenke mine, mining unit
net cash costs averaged $1.33 per pound in second-quarter 2016,
$1.56 per pound in second-quarter 2015, $1.36 per pound for the
first six months of 2016 and $1.63 per pound for the first six
months of 2015. 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 XV, which are available on FCX's website,
"fcx.com."
c.
Cash operating margin for oil and gas
operations reflects realized revenues less cash production costs.
Cash production costs exclude accretion and other costs. For
reconciliations of realized revenues and cash production costs per
BOE to revenues and production and delivery costs reported in FCX's
consolidated financial statements, refer to the supplemental
schedules, “Product Revenues and Production Costs,” beginning on
page XV, which are available on FCX's website, “fcx.com.”
d.
Includes realized cash gains on crude oil
derivative contracts of $7.73 per BOE in second-quarter 2015 and
$7.87 per BOE for the first six months of 2015. FCX currently does
not have oil and gas derivative contracts in place for 2016 or
future years.
Consolidated Sales Volumes
Second-quarter 2016 consolidated copper sales (including
Tenke) totaled 1.1 billion pounds, approximately 5 percent below
the April 2016 estimate because of lower sales from Indonesia, and
were higher than second-quarter 2015 sales of 964 million pounds,
primarily reflecting higher volumes from Cerro Verde.
Second-quarter 2016 consolidated gold sales of 156
thousand ounces were lower than the April 2016 estimate of 195
thousand ounces primarily reflecting lower mining rates in
Indonesia, and were lower than second-quarter 2015 sales of 352
thousand ounces, primarily reflecting lower ore grades and lower
mining and milling rates.
Second-quarter 2016 consolidated molybdenum sales of 19
million pounds approximated the April 2016 estimate and were lower
than second-quarter 2015 sales of 23 million pounds, primarily
reflecting market-driven curtailed production volumes from the
primary molybdenum mines.
Second-quarter 2016 sales from oil and gas operations of 12.4
MMBOE, including 8.65 million barrels (MMBbls) of crude oil,
18.8 billion cubic feet (Bcf) of natural gas and 0.6 MMBbls
of natural gas liquids (NGLs), were lower than the April
2016 estimate of 13.5 MMBOE, primarily reflecting lower than
anticipated well performance and start-up delays at new wells, and
were lower than second-quarter 2015 sales of 13.1 MMBOE, primarily
reflecting lower natural gas volumes from Haynesville.
Sales volumes for the year 2016 are expected to approximate 5.0
billion pounds of copper (including 440 million pounds for Tenke
through the anticipated closing date), 1.7 million ounces of gold,
76 million pounds of molybdenum and 47.4 MMBOE, including 1.3
billion pounds of copper (including 115 million pounds for Tenke),
410 thousand ounces of gold, 20 million pounds of molybdenum and
11.4 MMBOE for third-quarter 2016. Anticipated higher grades from
the Grasberg mine are expected to result in approximately 30
percent of 2016 copper sales and 55 percent of 2016 gold sales to
occur in fourth-quarter 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 (including
Tenke) of $1.33 per pound of copper in second-quarter 2016 were
lower than unit net cash costs of $1.50 per pound in second-quarter
2015, primarily reflecting higher copper sales volumes and the
impact of ongoing cost reduction initiatives, partly offset by
lower gold and silver credits.
Assuming average prices of $1,300 per ounce of gold and $6 per
pound of molybdenum for the second half of 2016 and achievement of
current sales volume and cost estimates, consolidated unit net cash
costs (net of by-product credits) for copper mines (including
Tenke) are expected to average $1.06 per pound of copper for the
year 2016. The impact of price changes for the second half of 2016
on consolidated unit net cash costs would approximate $0.015 per
pound for each $50 per ounce change in the average price of gold
and $0.01 per pound for each $2 per pound change in the average
price of molybdenum. Quarterly unit net cash costs vary with
fluctuations in sales volumes and realized prices primarily for
gold and molybdenum.
Oil and Gas Cash Production Costs per BOE. Cash production costs
for oil and gas operations of $15.00 per BOE in second-quarter 2016
were lower than cash production costs of $19.04 per BOE in
second-quarter 2015, primarily reflecting higher production from
Gulf of Mexico (GOM) wells and ongoing cost reduction efforts.
Based on current sales volume and cost estimates, cash
production costs are expected to approximate $15.50 per BOE for the
year 2016.
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. In
addition to copper, molybdenum concentrate and silver are also
produced by certain of FCX's North America copper mines.
All of the North America mining operations are wholly owned,
except for Morenci. FCX records its undivided joint venture
interest in Morenci using the proportionate consolidation method.
On May 31, 2016, FCX completed the sale of an additional 13 percent
undivided interest in Morenci for $1.0 billion in cash. As a result
of the transaction, FCX's undivided interest in Morenci was
prospectively reduced from 85 percent to 72 percent.
Operating and Development Activities. FCX has significant
undeveloped reserves and resources in North America and a portfolio
of long-term development projects. In the near term, FCX is
deferring development of 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.
During 2015, FCX's revised plans for its North America copper
mines to incorporate reductions in mining rates to reduce operating
and capital costs. In addition, FCX curtailed operations at the
Miami and Tyrone mines and is operating its Sierrita mine at
reduced rates. 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 operating plans continue to be
reviewed and additional adjustments will be made as market
conditions warrant.
Operating Data. Following is a summary of consolidated operating
data for the North America copper mines for the second quarters and
first six months of 2016 and 2015:
Three Months Ended Six Months
Ended June 30, June 30, 2016
2015 2016 2015 Copper
(millions of recoverable pounds) Production 469 469 956 921 Sales
464 486 967 958 Average realized price per pound $ 2.18 $ 2.77 $
2.17 $ 2.73
Molybdenum (millions of recoverable
pounds) Productiona 8 10 16 19
Unit net cash costs per
pound of copperb Site production and delivery, excluding
adjustments $ 1.40 $ 1.78 $ 1.40 $ 1.79 By-product credits (0.11 )
(0.16 ) (0.10 ) (0.17 ) Treatment charges 0.11 0.12
0.11 0.13 Unit net cash costs $ 1.40 $ 1.74
$ 1.41 $ 1.75
a.
Refer to summary operating data on page 4
for FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at the North America copper mines.
b.
For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX's consolidated financial statements, refer to
the supplemental schedules, "Product Revenues and Production
Costs," beginning on page XV, which are available on FCX's website,
"fcx.com."
North America's consolidated copper sales volumes totaling 464
million pounds in second-quarter 2016 were lower than 486 million
pounds in second-quarter 2015 primarily because of timing of sales
in the 2015 period. North America copper sales are estimated to
approximate 1.8 billion pounds for the year 2016, compared with 2.0
billion pounds in 2015.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.40 per pound of copper in
second-quarter 2016 were lower than the unit net cash costs of
$1.74 per pound in second-quarter 2015, primarily reflecting cost
reduction initiatives and lower energy and other input costs.
Average unit net cash costs (net of by-product credits) for the
North America copper mines are expected to approximate $1.42 per
pound of copper for the year 2016, based on achievement of current
sales volume and cost estimates and assuming an average molybdenum
price of $6 per pound for the second half of 2016. North America's
average unit net cash costs would change by approximately $0.012
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 concentrate and silver.
Operating and Development Activities. In September 2015, the
Cerro Verde expansion project commenced operations, and achieved
capacity operating rates during first-quarter 2016. Cerro Verde's
expanded operations benefit from its large-scale, long-lived
reserves and cost efficiencies. The project expanded the
concentrator facilities from 120,000 metric tons of ore per day to
360,000 metric tons of ore per day and is on track to provide
incremental annual production of approximately 600 million pounds
of copper and 15 million pounds of molybdenum.
During 2015, FCX revised plans for its South America copper
mines, principally to reflect adjustments to the mine plan at El
Abra 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.
FCX continues to evaluate a potential large-scale milling
operation at El Abra to process additional sulfide material and to
achieve higher recoveries. Exploration results in recent years at
El Abra indicate a significant sulfide resource, which could
potentially support a major mill project. Future investments will
depend on technical studies, economic factors and global copper
market conditions.
Operating Data. Following is a summary of consolidated operating
data for the South America mining operations for the second
quarters and first six months of 2016 and 2015:
Three Months Ended Six Months
Ended June 30, June 30, 2016
2015 2016 2015 Copper
(millions of recoverable pounds) Production 334 188 669 381 Sales
327 178 650 378 Average realized price per pound $ 2.19 $ 2.69 $
2.18 $ 2.68
Molybdenum (millions of recoverable
pounds) Productiona 4 2 9 4
Unit net cash costs per pound
of copperb Site production and delivery, excluding
adjustments $ 1.20 $ 1.77 $ 1.22 $ 1.76 By-product credits (0.12 )
(0.04 ) (0.10 ) (0.06 ) Treatment charges 0.23 0.17 0.23 0.17
Royalty on metals — — 0.01 — Unit net
cash costs $ 1.31 $ 1.90 $ 1.36 $ 1.87
a.
Refer to summary operating data on page 4
for FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at Cerro Verde.
b.
For a reconciliation of unit net cash
costs per pound to production and delivery costs applicable to
sales reported in FCX's consolidated financial statements, refer to
the supplemental schedules, "Product Revenues and Production
Costs," beginning on page XV, which are available on FCX's website,
"fcx.com."
South America's consolidated copper sales volumes of 327 million
pounds in second-quarter 2016 were significantly higher than
second-quarter 2015 sales of 178 million pounds, primarily
reflecting Cerro Verde's expanded operations. Sales from South
America mining are expected to approximate 1.36 billion pounds of
copper for the year 2016, compared with 871 million pounds of
copper in 2015.
Average unit net cash costs (net of by-product credits) for
South America mining of $1.31 per pound of copper in second-quarter
2016 were significantly lower than unit net cash costs of $1.90 per
pound in second-quarter 2015, primarily reflecting higher copper
sales volumes and economies of scale associated with the Cerro
Verde expansion. Average unit net cash costs (net of by-product
credits) for South America mining are expected to approximate $1.40
per pound of copper for the year 2016, based on current sales
volume and cost estimates and assuming average prices of $6 per
pound of molybdenum for the second half of 2016.
Indonesia Mining. Through its 90.64 percent owned and
consolidated subsidiary PT Freeport Indonesia (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. In October 2015, the Indonesian government
provided a letter of assurance to PT-FI 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 Contract of Work (COW). PT-FI continues
to engage in discussions with the Indonesian government to obtain
extension of its long-term rights available under the COW.
In connection with its COW negotiations and subject to
concluding an agreement to extend PT-FI's operations beyond 2021 on
acceptable terms, PT-FI has agreed to construct new smelter
capacity in Indonesia and to divest an additional 20.64 percent
interest in PT-FI at fair market value.
PT-FI is required to apply for renewal of export permits at
six-month intervals. In February 2016, PT-FI's export permit was
renewed through August 8, 2016. PT-FI has applied for an extension
of this permit. The Indonesian government continues to impose a 5.0
percent export duty while it reviews PT-FI's smelter plans.
Operating and Development Activities. PT-FI's revised operating
plans incorporate improved operational efficiencies, reductions in
input costs, supplies and contractor costs, foreign exchange
impacts and an approximate 20 percent deferral of capital
expenditures that had been planned for 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 early 2018. From 2016 to 2020,
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 market conditions and Indonesian regulatory uncertainty, the
timing of these expenditures continues to be reviewed.
Operating Data. Following is a summary of consolidated operating
data for the Indonesia mining operations for the second quarters
and first six months of 2016 and 2015:
Three Months Ended Six Months
Ended June 30, June 30, 2016
2015 2016 2015 Copper
(millions of recoverable pounds) Production 208 205 373 359 Sales
196 196 370 351 Average realized price per pound $ 2.20 $ 2.61 $
2.17 $ 2.66
Gold (thousands of recoverable ounces)
Production 158 360 336 615 Sales 151 346 346 606 Average realized
price per ounce $ 1,292 $ 1,173 $ 1,260 $ 1,183
Unit net
cash costs per pound of coppera Site production and
delivery, excluding adjustments $ 1.77 $ 2.26 $ 1.99 $ 2.51 Gold
and silver credits (1.05 ) (2.13 ) (1.27 ) (2.11 ) Treatment
charges 0.29 0.32 0.30 0.31 Export duties 0.08 0.18 0.08 0.16
Royalty on metals 0.11 0.18 0.12 0.17
Unit net cash costs $ 1.20 $ 0.81 $ 1.22 $
1.04
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 XV, which are available on FCX's website,
"fcx.com."
Indonesia's consolidated copper sales totaled 196 million pounds
in both the second quarters of 2016 and 2015 as higher copper ore
grades in the 2016 period were offset by lower mining and milling
rates. Indonesia's second-quarter 2016 gold sales of 151 thousand
ounces were lower than second-quarter 2015 sales of 346 thousand
ounces, primarily reflecting lower gold ore grades and lower mining
and milling rates.
During second-quarter 2016, PT-FI completed repairs to its
large-scale concentrating facility, which required 23 days of
downtime to repair one of the milling circuits. PT-FI’s
second-quarter 2016 production was also impacted by lower than
expected mining rates and productivity in the Grasberg open pit,
which affects the timing of metal production. Productivity in the
Grasberg open pit has improved in July.
At the Grasberg mine, the sequencing of mining areas with
varying ore grades causes fluctuations in quarterly and annual
production of copper and gold. Consolidated sales volumes from
Indonesia mining operations are expected to approximate 1.3 billion
pounds of copper and 1.7 million ounces of gold for the year 2016,
compared with 744 million pounds of copper and 1.2 million ounces
of gold for the year 2015. PT-FI expects ore grades to improve
significantly, with approximately 40 percent of its 2016 copper
sales and 55 percent of its 2016 gold sales anticipated in
fourth-quarter 2016.
A significant portion of PT-FI's costs are fixed and unit costs
vary depending on volumes and other factors. Indonesia's unit net
cash costs (including gold and silver credits) of $1.20 per pound
of copper in second-quarter 2016 were higher than unit net cash
costs of $0.81 per pound in second-quarter 2015, primarily
reflecting lower gold credits, partly offset by lower royalties,
export duties and energy costs.
Based on current sales volume and cost estimates, and assuming
an average gold price of $1,300 per ounce for the second half of
2016, unit net cash costs (net of gold and silver credits) for
Indonesia mining are expected to approximate $0.12 per pound of
copper for the year 2016 and $0.43 per pound for third-quarter
2016. Indonesia mining's unit net cash costs for the year 2016
would change by approximately $0.05 per pound for each $50 per
ounce change in the average price of gold. Because of the fixed
nature of a large portion of Indonesia mining's costs, unit costs
vary from quarter to quarter depending on copper and gold volumes.
Anticipated higher ore grades from the Grasberg mine are expected
to result in lower unit net cash costs in the second half of
2016.
Africa Mining. Africa mining includes the Tenke Fungurume
Mining S.A. (TFM) minerals district, in which FCX holds an
effective 56 percent interest in the Tenke copper and cobalt mining
concessions in the Southeast region of the DRC. In May 2016, FCX
entered into a definitive agreement to sell its interest in TF
Holdings Limited. As a result and in accordance with accounting
guidelines, the operating results of Africa mining have been
separately reported as discontinued operations in FCX’s
consolidated statements of operations for all periods presented.
The transaction is expected to close in fourth-quarter 2016,
subject to regulatory approvals, CMOC shareholder approval and
other customary closing conditions.
Operating and Development Activities. Revised plans at Tenke
incorporate a 50 percent reduction in capital spending for 2016 and
various initiatives to reduce operating, administrative and
exploration costs. TFM successfully commissioned a sulphuric acid
plant in first-quarter 2016, which will reduce requirements for
third-party acid purchases.
Operating Data. Following is a summary of operating data for the
Africa mining operations for the second quarters and first six
months of 2016 and 2015:
Three Months Ended Six Months
Ended June 30, June 30, 2016
2015 2016 2015 Copper
(millions of recoverable pounds) Production 122 115 232 231 Sales
124 104 247 237 Average realized price per pounda $ 2.07 $ 2.63 $
2.08 $ 2.66
Cobalt (millions of contained pounds)
Production 10 9 19 16 Sales 10 8 20 16 Average realized price per
pound $ 6.58 $ 9.27 $ 6.52 $ 9.23
Unit net cash costs per
pound of copperb Site production and delivery, excluding
adjustments $ 1.62 $ 1.54 $ 1.63 $ 1.56 Cobalt creditsc (0.33 )
(0.53 ) (0.35 ) (0.44 ) Royalty on metals 0.05 0.06
0.05 0.06 Unit net cash costs $ 1.34 $ 1.07
$ 1.33 $ 1.18
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 net (loss) income from discontinued operations in
FCX's consolidated financial statements, refer to the supplemental
schedules, "Product Revenues and Production Costs," beginning on
page XV, which are available on FCX's website, "fcx.com."
c.
Net of cobalt downstream processing and
freight costs.
Africa mining's copper sales of 124 million pounds in
second-quarter 2016 were higher than second-quarter 2015 copper
sales of 104 million pounds, primarily reflecting higher mining
rates and timing of sales in the 2015 period. Africa mining's sales
for 2016 (through the anticipated closing date) are expected to
approximate 440 million pounds of copper and 35 million pounds of
cobalt, compared with 467 million pounds of copper and 35 million
pounds of cobalt for the year 2015.
Africa mining's unit net cash costs (net of cobalt credits) of
$1.34 per pound of copper in second-quarter 2016 were higher than
unit net cash costs of $1.07 per pound of copper in second-quarter
2015, primarily reflecting lower cobalt credits. Unit net cash
costs (net of cobalt credits) for Africa mining are expected to
approximate $1.28 per pound of copper for the year 2016, based on
current sales volume and cost estimates and assuming an average
cobalt price of $11 per pound for the second half of 2016. Africa
mining's unit net cash costs for the year 2016 would change by
approximately $0.045 per pound for each $2 per pound change in the
average price of cobalt.
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 concentrate,
which is typically further processed into value-added molybdenum
chemical products. The majority of molybdenum concentrate produced
at the Henderson and Climax mines, as well as from FCX's North and
South America copper mines, is processed at FCX's conversion
facilities.
Operating and Development Activities. In response to market
conditions, the revised plans for the Henderson molybdenum mine
incorporate lower operating rates, resulting in an approximate 65
percent reduction in Henderson's annual production volumes. FCX
also adjusted production plans at its by-product mines, including
reduced production at its Sierrita mine. Additionally, FCX
incorporated changes in the commercial pricing structure for its
chemicals products to promote continuation of chemical-grade
production.
Production from the Molybdenum mines totaled 7 million pounds of
molybdenum in second-quarter 2016 and 13 million pounds in
second-quarter 2015. Refer to summary operating data on page 4 for
FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at the Molybdenum mines, and from FCX's North
and South America copper mines.
Average unit net cash costs for the Molybdenum mines of $7.80
per pound of molybdenum in second-quarter 2016 were higher than
average unit net cash costs of $7.19 per pound in second-quarter
2015, primarily reflecting lower volumes. Based on current sales
volume and cost estimates, unit net cash costs for the Molybdenum
mines are expected to average approximately $8.60 per pound of
molybdenum for the year 2016.
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 XV, which are available on FCX's website, "fcx.com."
Mining Exploration Activities. FCX's mining exploration
activities are generally associated with its existing mines
focusing on opportunities to expand reserves and resources to
support development of additional future production capacity.
Exploration results continue to indicate opportunities for
significant future potential reserve additions in North and South
America. Exploration spending continues to be constrained by market
conditions and is expected to approximate $45 million for the year
2016.
OIL AND GAS OPERATIONS
Through its wholly owned oil and gas subsidiary, FM O&G,
FCX's principal oil and gas assets include significant oil
production facilities and growth potential in the Deepwater GOM and
established oil production facilities in California. For the first
six months of 2016, approximately 90 percent of FCX's oil and gas
revenues were from oil and NGLs.
During second-quarter 2016, FM O&G completed the sale of
certain oil and gas royalty interests for cash consideration of
$102 million (before closing adjustments), and in July 2016,
completed the sale of its Haynesville shale assets in North
Louisiana for cash consideration of $87 million (before closing
adjustments). Under full cost accounting rules, the proceeds from
these transactions are recorded as a reduction of capitalized oil
and gas properties, with no gain or loss recognition.
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 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 full cost accounting rules, a "ceiling test" is conducted
each quarter to review the carrying value of oil and gas properties
for impairment. The U.S. Securities and Exchange Commission (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 $43.12 per barrel at
June 30, 2016, compared with $46.26 per barrel at March 31,
2016. As a result of the impact of the reduction in twelve-month
historical prices, net capitalized costs exceeded the ceiling test
limitation under full cost accounting rules, which resulted in the
recognition of a second-quarter 2016 impairment charge of $291
million.
If the twelve-month historical average price remains below the
June 30, 2016, twelve-month average of $43.12 per barrel, the
ceiling test limitation will decrease, potentially resulting in
additional ceiling test impairments of FCX's oil and gas
properties. The WTI spot oil price was $43.13 per barrel at
July 25, 2016. 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 gas reserve additions,
negative reserve revisions and the capitalization of future
exploration and development costs. At June 30, 2016, carrying
costs for unevaluated properties excluded from amortization totaled
$1.7 billion. These costs will be transferred into the full cost
pool as the properties are evaluated and proved reserves are
established or if impairment is determined. If these activities do
not result in additions to discounted future net cash flows from
proved oil and gas reserves at least equal to the related costs
transferred (net of related tax effects), additional ceiling test
impairments may occur.
Financial and Operating Data. Following is a summary of
financial and operating data for the U.S. oil and gas operations
for the second quarters and first six months of 2016 and 2015:
Three Months Ended Six Months
Ended June 30, June 30, 2016
2015 2016 2015 Financial
Summary (in millions) Realized revenuesa $ 405 $ 656 b $ 694 $
1,203 Cash production costsa (186 ) (249 )
(378 ) (503 ) Cash operating margin $ 219 $ 407 $ 316 $ 700 Capital
expendituresc $ 388 $ 777 $ 868 $ 1,795
Sales Volumes Oil
(MMBbls) 8.7 8.6 17.0 17.0 Natural gas (Bcf) 18.8 23.5 38.4 45.3
NGLs (MMBbls) 0.6 0.6 1.2 1.1 MMBOE 12.4 13.1 24.5 25.6
Average
Realized Pricesa Oil (per barrel) $ 41.10 $ 67.61 b $
35.21 $ 62.13 b Natural gas (per million British thermal units, or
MMBtu) $ 2.04 $ 2.66 $ 2.02 $ 2.75 NGLs (per barrel) $ 18.00 $
20.50 $ 16.44 $ 21.71
Cash Operating Margin per BOEa
Realized revenues $ 32.70 $ 50.04 b $ 28.29 $ 46.95 b Cash
production costs (15.00 ) (19.04 ) (15.42 ) (19.62 ) Cash operating
margin $ 17.70 $ 31.00 $ 12.87 $ 27.33
a.
Cash operating margin for oil and gas
operations reflects realized revenues less cash production costs.
Cash production costs exclude accretion and other costs. 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 XV, which are available on FCX's website, “fcx.com.”
b.
Includes realized cash gains on crude oil
derivative contracts of $101 million ($11.79 per barrel of oil and
$7.73 per BOE) in second-quarter 2015 and $201 million ($11.88 per
barrel of oil and $7.87 per BOE) for the first six months of 2015.
FCX currently does not have oil and gas derivative contracts in
place for 2016 or future years.
c.
Excludes international oil and gas
expenditures totaling $4 million in second-quarter 2016, $29
million in second-quarter 2015, $47 million for the first six
months of 2016 and $44 million for the first six months of 2015,
primarily related to the Morocco oil and gas properties.
FM O&G's average realized price for crude oil was $41.10 per
barrel in second-quarter 2016 (87 percent of the average Brent
crude oil price of $47.03 per barrel). FM O&G's average
realized price for natural gas was $2.04 per MMBtu in
second-quarter 2016, compared to the New York Mercantile Exchange
natural gas price average of $1.95 per MMBtu for the April through
June 2016 contracts.
Lower realized revenues for oil and gas operations of $32.70 per
BOE in second-quarter 2016, compared to $50.04 per BOE in
second-quarter 2015, primarily reflects lower oil prices and the
impact of realized cash gains on derivative contracts of $7.73 per
BOE in second-quarter 2015.
Cash production costs for oil and gas operations of $15.00 per
BOE in second-quarter 2016 were lower than cash production costs of
$19.04 per BOE in second-quarter 2015, primarily reflecting higher
production from GOM wells and ongoing cost reduction efforts.
Following is a summary of average oil and gas sales volumes per
day by region for the second quarters and first six months of 2016
and 2015:
Three Months Ended Six Months
Ended June 30, June 30, Sales Volumes (MBOE
per day) 2016 2015 2016
2015 GOMa 88 80 85 77 California 32 38 32 39
Haynesville/Madden/Otherb 16 26 18 26 Total
oil and gas operations 136 144 135 142
a.
Includes sales from properties on the GOM
Shelf and in the Deepwater GOM, and the Inboard Lower
Tertiary/Cretaceous natural gas trend.
b.
In July 2016, FM O&G completed the
sale of the Haynesville shale assets.
Daily sales volumes averaged 136 MBOE for second-quarter 2016,
including 95 thousand barrels (MBbls) of crude oil, 207 million
cubic feet (MMcf) of natural gas and 6 MBbls of NGLs. Since
year-end 2015, FM O&G has commenced production from six
100-percent-owned Deepwater GOM wells. Oil and gas sales volumes
are expected to average 130 MBOE per day for the year 2016,
comprised of 73 percent oil, 5 percent natural gas and 22 percent
NGLs. These estimates are below the April 2016 estimates of 149
MBOE per day, reflecting revised estimates for three Holstein Deep
wells that commenced production in second-quarter 2016, the sale of
the Haynesville shale assets and production constraints following a
fire at a third-party natural gas processing plant.
In late June 2016, a fire at a third-party natural gas
processing plant in Pascagoula, Mississippi resulted in the
shutdown of the plant and the pipeline that transports gas supply
from several offshore platforms, including FM O&G’s Horn
Mountain and Marlin facilities (representing approximately 45
percent of FM O&G's GOM BOE production). As a result,
production has been temporarily constrained and FM O&G is
currently accessing an alternative pipeline as an interim solution.
FM O&G is working with third parties on alternative routes to
resume normal production and does not expect long-term impacts from
this event.
Based on current sales volume and cost estimates, cash
production costs are expected to approximate $15.50 per BOE for the
year 2016.
Oil and Gas Exploration, Operating and Development
Activities. In second-quarter 2016, FM O&G remained focused
on managing costs and enhancing asset values in response to the
current market environment. FM O&G achieved a number of
important operational milestones during the quarter, including the
commencement of production from five 100-percent-owned Deepwater
GOM tieback wells, including three at Holstein Deep and two in the
Horn Mountain area. At Lucius and Heidelberg, the operator drilled
development wells with favorable results that we believe will
further benefit future oil production.
During second-quarter 2016, FCX negotiated the termination and
settlement of FM O&G's drilling rig contracts with Noble
Drilling (U.S.) LLC (Noble) and Rowan Companies plc (Rowan). As a
result of the settlements, FM O&G was released from a total of
$1.1 billion in payment obligations under its three drilling rig
contracts. In aggregate, reductions in previously contracted
commitments for deepwater drillships approximate $350 million.
During second-quarter 2016, FCX issued 48 million shares of its
common stock (representing a value of $540 million) and paid $85
million cash in connection with the settlements. FCX will fund the
remaining $130 million in cash during third-quarter 2016. FCX also
agreed to provide contingent payments of up to $105 million,
depending on the average price of crude oil over the 12-month
period ending June 30, 2017. A net charge of $0.6 billion was
recorded in second-quarter 2016 associated with the termination of
these contracts.
Assuming an average oil price of $49 per barrel, combined with
these actions, operating cash flows from the oil and gas business
are expected to exceed its capital expenditures in the second half
of 2016 and 2017.
Since commencing development activities in 2014 at its three
100-percent-owned production platforms in the Deepwater GOM, FM
O&G has drilled 14 wells in producing fields with positive
results; 10 of these wells have been brought on production,
including five wells during second-quarter 2016.
Oil and Gas Capital Expenditures. Capital expenditures for oil
and gas operations in second-quarter 2016 totaled $388 million in
the U.S. (including $205 million incurred for GOM and approximately
$150 million associated with the change in capital expenditure
accruals) and $4 million associated with international oil and gas
properties.
Capital expenditures for oil and gas operations for the year
2016 are estimated to total $1.4 billion, with approximately 90
percent of the capital budget expected to be directed to the
GOM.
Deepwater GOM. FM O&G operates and owns 100-percent working
interests in the Holstein, Marlin and Horn Mountain deepwater
production platforms, which in total have processing capacity of
250 MBbls of oil per day. In addition, FM O&G has interests in
the Lucius, Heidelberg, Ram Powell and Hoover producing oil fields
and the Atwater Valley undeveloped area.
During second-quarter 2016, production from six wells in the
Lucius field in the Keathley Canyon area averaged 20
MBOE per day, net to FM O&G’s 25-percent working
interest. The field has performed well since initial
production commenced in first-quarter 2015. In second-quarter
2016, the operator completed the seventh well in the
field. Approximately 80 percent of FM O&G’s working
interest is held through its consolidated subsidiary Plains
Offshore Operations Inc. (POI). Third parties hold a preferred
interest in POI and are entitled to a liquidation preference and to
receive preferred distributions.
In January 2016, first oil production commenced from three
initial subsea wells in the Heidelberg oil field in the
Green Canyon area. Heidelberg is a subsea oil development
consisting of five subsea wells tied back to a truss spar hull
located in 5,300 feet of water. In second-quarter 2016, the
operator commenced drilling a fourth well in the field, and in July
2016, logging results confirmed oil pay with similar
characteristics to a good offset producing well. The fifth and
final well of the initial development phase commenced drilling in
third-quarter 2016. Heidelberg field was discovered in February
2009, and the subsequent development project was sanctioned in
early 2013. FM O&G has a 12.5 percent working interest in
Heidelberg.
At the 100-percent-owned Holstein Deep, three wells
commenced production in second-quarter 2016 and are currently
producing at a gross rate of approximately 9 MBOE per day. The
rates are below previous estimates, reflecting lower than expected
crude oil quality and lower permeability. 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 Horn Mountain field is
located in the Mississippi Canyon area and has production
facilities capable of processing 75 MBbls of oil per day. The
Quebec/Victory and Kilo/Oscar wells commenced
production in second-quarter 2016. To enhance recovery of remaining
oil in place, future development plans will target subsea tieback
from multiple stacked sands in the area.
FM O&G’s well inventory also includes the Horn Mountain
Deep discovery well, where successful drilling results in 2015
indicated the presence of sand sections deeper than known pay
sections in the field. These positive results and geophysical data
support the existence of Middle Miocene reservoir potential for
additional development opportunities in the Horn Mountain Deep
area, including five 100-percent-owned exploration prospects with
significant future potential. FM O&G controls rights to over
55,000 acres associated with these prospects.
FM O&G’s 100-percent-owned Marlin Hub is located in
the Mississippi Canyon area and has production facilities capable
of processing 60 MBbls of oil per day. FM O&G has drilled five
successful tieback opportunities in the area since 2014. The
King D-12 and Dorado wells commenced production in 2015, and the
King D-13 well commenced production in first-quarter 2016.
CASH FLOWS, CASH and DEBT TRANSACTIONS
Operating Cash Flows. FCX generated operating cash flows of $874
million (including $278 million in working capital sources and
changes in other tax payments) for second-quarter 2016 and $1.6
billion (including $466 million in working capital sources and
changes in other tax payments) for the first six months of
2016.
Based on current sales volume and cost estimates and assuming
average prices of $2.25 per pound of copper, $1,300 per ounce of
gold, $6 per pound of molybdenum and $48 per barrel of Brent crude
oil for the second half of 2016, FCX's consolidated operating cash
flows are estimated to approximate $4.5 billion for the year 2016
(including $0.7 billion in working capital sources and other tax
payments). The impact of price changes for the second half of 2016
on operating cash flows would approximate $260 million for each
$0.10 per pound change in the average price of copper, $40 million
for each $50 per ounce change in the average price of gold, $35
million for each $2 per pound change in the average price of
molybdenum and $55 million for each $5 per barrel change in the
average Brent crude oil price.
Capital Expenditures. Capital expenditures totaled $833 million
for second-quarter 2016, consisting of $441 million for mining
operations (including $350 million for major projects) and $392
million for oil and gas operations. Capital expenditures for the
first six months of 2016 totaled $1.8 billion, consisting of $900
million for mining operations (including $0.7 billion for major
projects) and $915 million for oil and gas operations.
Capital expenditures are expected to approximate $3.1 billion
for the year 2016, consisting of $1.7 billion for mining operations
(including $1.3 billion for major projects, primarily for
underground development activities at Grasberg and remaining costs
for the Cerro Verde expansion) and $1.4 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 (excluding cash and cash equivalents of $78
million in assets held for sale), net of noncontrolling interests'
share, taxes and other costs at June 30, 2016 (in
millions):
Cash at domestic companies $ 20 Cash at international
operations 332 Total consolidated cash and cash equivalents
352 Noncontrolling interests' share (102 ) Cash, net of
noncontrolling interests' share 250 Withholding taxes and other (23
)
Net cash available $ 227
Debt. FCX continues to focus on cost and capital management and
cash flow generation from its operations and is taking actions to
reduce debt through asset sales, available cash flows and other
transactions. Following is a summary of total debt and the related
weighted-average interest rates at June 30, 2016 (in billions,
except percentages):
Weighted- Average Interest Rate FCX Senior Notes $ 11.6 3.8%
FCX Term Loan 2.5 a 3.2% FM O&G Senior Notes 2.5 6.6% Cerro
Verde Credit Facility 1.8 2.8% Other debt 0.9 4.7% $ 19.3
4.0%
a.
In accordance with the mandatory
prepayment provision of the amended Term Loan, 50 percent of the
proceeds associated with the Tenke sale must be applied toward
repaying the Term Loan.
At June 30, 2016, FCX had $40 million in letters of credit
issued and availability of $3.5 billion under its $3.5 billion
revolving credit facility.
Through July 25, 2016, FCX exchanged $369 million in senior
notes (including exchanges totaling $268 million in second-quarter
2016) maturing in 2022, 2023, 2034 and 2043 for 28 million shares
of FCX common stock in a series of privately negotiated
transactions at a cost of $311 million. FCX has approximately 1.33
billion common shares outstanding, which includes shares issued
through July 25, 2016, in connection with the settlement of these
privately negotiated transactions.
FINANCIAL POLICY
FCX intends to continue to seek to strengthen its financial
position, with a focus on significant debt reduction. In December
2015, FCX's common stock dividend was suspended. FCX's Board of
Directors will continue to review its financial policy on an
ongoing basis.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX's
second-quarter 2016 results is scheduled for today at 10:00 a.m.
Eastern Time. The conference call will be broadcast on the Internet
along with slides. Interested parties may listen to the conference
call live and view the slides by accessing "fcx.com." A replay of
the webcast will be available through Friday, August 26,
2016.
------------------------------------------------------------------------------
FCX is a premier U.S.-based natural resources company with an
industry-leading global portfolio of mineral assets and significant
oil and gas resources. 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, principally in the Deepwater GOM and in California.
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, debt reduction initiatives, including FCX's ability
to complete pending asset sales and to sell additional assets,
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 deferred intercompany profits on earnings, reserve
estimates, future dividend payments, 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. Under its term loan and revolving credit facility, as
amended, FCX is not permitted to pay dividends on common stock on
or prior to March 31, 2017. The declaration of dividends is at the
discretion of the Board, subject to restrictions under FCX's credit
agreements, 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 debt reduction initiatives, FCX's ability to secure
regulatory approvals, satisfy closing conditions and consummate
pending asset sales, 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
August 8, 2016, the potential effects of violence in Indonesia
generally and in the province of Papua, 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, 2015, filed with the U.S. Securities and Exchange
Commission (SEC) as updated by FCX's subsequent filings with the
SEC.
Investors are cautioned that many of the assumptions upon which
FCX's forward-looking statements are based are likely to change
after the forward-looking statements are made, including for
example commodity prices, which FCX cannot control, and production
volumes and costs, some aspects of which FCX may not be able to
control. Further, FCX may make changes to its business plans that
could affect its results. FCX cautions investors that it does not
intend to update forward-looking statements more frequently than
quarterly notwithstanding any changes in its assumptions, changes
in business plans, actual experience or other changes, and FCX
undertakes no obligation to update any forward-looking
statements.
This press release also contains certain financial measures such
as unit net cash costs per pound of copper and molybdenum, oil and
gas realized revenues, cash production costs and cash operating
margin, which are not recognized under U.S. generally accepted
accounting principles. As required by SEC Regulation G,
reconciliations of these measures to amounts reported in FCX's
consolidated financial statements are in the supplemental schedules
of this press release, which are also available on FCX's website,
"fcx.com."
FREEPORT-McMoRan INC.
SELECTED MINING OPERATING DATA Three Months Ended
June 30, Production Sales
COPPER (millions of
recoverable pounds)
2016 2015 2016 2015 (FCX's net interest in %)
North
America
Morenci (72%)a 224 219 221 225 Bagdad (100%) 44 51 45 56 Safford
(100%) 53 39 52 40 Sierrita (100%) 41 48 40 51 Miami (100%) 6 12 7
12 Chino (100%) 80 76 78 78 Tyrone (100%) 19 23 19 23 Other (100%)
2 1 2 1 Total North America 469
469 464 486
South
America
Cerro Verde (53.56%) 278 104 270 97 El Abra (51%) 56 84
57 81 Total South America 334 188
327 178
Indonesia
Grasberg (90.64%)b 208 205 196 196
Consolidated - continuing operations 1,011 862
987
c
860 c Discontinued operation - Tenke Fungurume (Tenke) (56%)
122 115 124 104
Total
1,133 977 1,111 964 Less noncontrolling
interests 229 160 226 149
Net
904 817 885 815
Average realized price per pound $ 2.19 $ 2.72
Average realized price per pound (including Tenke) $ 2.18 $ 2.71
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 8 7 5 6 Indonesia
(90.64%)b 158 360 151 346
Consolidated 166 367 156
352 Less noncontrolling interests 14 34
14 33
Net 152 333
142 319 Average realized
price per ounce $ 1,292 $ 1,174
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 3 7 N/A N/A Climax
(100%) 4 6 N/A N/A North America copper mines (100%)a 8 10 N/A N/A
Cerro Verde (53.56%) 4 2 N/A N/A
Consolidated
19 25 19 23
Less noncontrolling interests 2 1 2 1
Net 17 24 17
22 Average realized price per pound $ 8.34 $
9.51
COBALT
(millions of contained pounds)
(FCX's net interest in %)
Discontinued operation - Tenke
(56%)
10 9 10 8 Less noncontrolling
interests 4 4 5 4
Net 6
5 5 4
Average realized price per pound $ 6.58 $ 9.27
a. Amounts are net of Morenci's undivided
joint venture partner's interest; effective May 31, 2016, FCX's
undivided interest in Morenci was prospectively reduced from 85
percent to 72 percent.
b. Amounts are net of Grasberg's joint
venture partner's interest, which varies in accordance with the
terms of the joint venture agreement.
c. Consolidated sales volumes exclude
purchased copper of 43 million pounds in second-quarter 2016 and 24
million pounds in second-quarter 2015.
FREEPORT-McMoRan INC. SELECTED MINING OPERATING DATA
(continued) Six Months Ended June 30, Production Sales
COPPER (millions of recoverable pounds) 2016
2015 2016 2015 (FCX's net interest in %)
North
America
Morenci (72%)a 456 424 459 436 Bagdad (100%) 92 104 95 114 Safford
(100%) 109 79 111 81 Sierrita (100%) 82 95 83 100 Miami (100%) 14
23 16 25 Chino (100%) 161 149 161 153 Tyrone (100%) 39 45 39 47
Other (100%) 3 2 3 2 Total North
America 956 921 967 958
South
America
Cerro Verde (53.56%) 550 211 526 207 El Abra (51%) 119 170
124 171 Total South America 669 381
650 378
Indonesia
Grasberg (90.64%)b 373 359 370 351
Consolidated - continuing operations 1,998
1,661 1,987 c
1,687 c Discontinued operation -
Tenke (56%) 232 231 247 237
Total 2,230 1,892 2,234 1,924
Less noncontrolling interests 450 317 448 317
Net 1,780 1,575
1,786 1,607 Average
realized price per pound $ 2.17 $ 2.71 Average realized price per
pound (including Tenke) $ 2.16 $ 2.70
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 14 11 11 9 Indonesia
(90.64%)b 336 615 346 606
Consolidated 350 626 357
615 Less noncontrolling interests 31 58
32 57
Net 319 568
325 558 Average realized
price per ounce $ 1,259 $ 1,183
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 5 14 N/A N/A Climax
(100%) 9 12 N/A N/A North America copper mines (100%)a 16 19 N/A
N/A Cerro Verde (53.56%) 9 4 N/A N/A
Consolidated 39 49 36
46 Less noncontrolling interests 4 2
3 2
Net 35 47
33 44 Average realized
price per pound $ 7.99 $ 9.84
COBALT
(millions of contained pounds)
(FCX's net interest in %)
Discontinued operation - Tenke
(56%)
19 16 20 16 Less noncontrolling
interests 8 7 9 7
Net 11
9 11 9
Average realized price per pound $ 6.52 $ 9.23
a. Amounts are net of Morenci's undivided
joint venture partner's interest; effective May 31, 2016, FCX's
undivided interest in Morenci was prospectively reduced from 85
percent to 72 percent.
b. Amounts are net of Grasberg's joint
venture partner's interest, which varies in accordance with the
terms of the joint venture agreement.
c. Consolidated sales volumes exclude
purchased copper of 70 million pounds for the first six months of
2016 and 64 million pounds for the first six months of 2015.
FREEPORT-McMoRan INC. SELECTED MINING OPERATING DATA
(continued) Three Months Ended June 30, Six Months Ended
June 30, 2016 2015 2016 2015
100% North America Copper Mines
Solution
Extraction/Electrowinning (SX/EW) Operations
Leach ore placed in stockpiles (metric tons per day) 780,700
890,000 807,100 902,500 Average copper ore grade (percent) 0.33
0.26 0.32 0.25 Copper production (millions of recoverable pounds)
303 261 605 508
Mill
Operations
Ore milled (metric tons per day) 300,400 316,000 299,500 308,800
Average ore grades (percent): Copper 0.48 0.47 0.49 0.48 Molybdenum
0.03 0.03 0.03 0.03 Copper recovery rate (percent) 86.6 85.8 85.6
85.6 Production (millions of recoverable pounds): Copper 219 247
445 488 Molybdenum 8 10 16 19
100% South America
Mining
SX/EW
Operations
Leach ore placed in stockpiles (metric tons per day) 170,400
237,000 155,500 235,300 Average copper ore grade (percent) 0.39
0.41 0.40 0.41 Copper production (millions of recoverable pounds)
82 109 172 223
Mill
Operations
Ore milled (metric tons per day) 352,000 116,500 345,700 117,900
Average ore grades: Copper (percent) 0.42 0.46 0.43 0.45 Molybdenum
(percent) 0.02 0.01 0.02 0.02 Copper recovery rate (percent) 88.0
78.2 87.1 78.9 Production (recoverable): Copper (millions of
pounds) 252 79 497 158 Molybdenum (millions of pounds) 4 2 9 4
100% Indonesia Mining Ore milled (metric tons per
day)a Grasberg open pit 110,200 134,200 108,000 121,200 Deep Ore
Zone underground mine 36,700 42,700 40,500 45,800 Deep Mill Level
Zone (DMLZ) underground mineb 4,900 — 4,500 — Grasberg Block Cave
underground mineb 2,600 — 2,400 — Big Gossan underground mineb
1,000 — 600 — Total 155,400 176,900
156,000 167,000 Average ore grades: Copper (percent)
0.84 0.67 0.77 0.63 Gold (grams per metric ton) 0.48 0.86 0.50 0.78
Recovery rates (percent): Copper 90.4 90.6 89.9 90.6 Gold 80.0 83.5
80.3 83.9 Production (recoverable): Copper (millions of pounds) 226
205 409 359 Gold (thousands of ounces) 174 360 364 615
100% Africa Mining (Discontinued Operation) Ore milled
(metric tons per day) 15,900 15,300 15,500 14,900 Average ore
grades (percent): Copper 4.05 4.02 4.01 4.18 Cobalt 0.43 0.44 0.46
0.40 Copper recovery rate (percent) 94.5 93.9 93.7 93.9 Production
(millions of pounds): Copper (recoverable) 122 115 232 231 Cobalt
(contained) 10 9 19 16
100% Molybdenum Mines Ore
milled (metric tons per day) 18,600 35,900 18,500 38,200 Average
molybdenum ore grade (percent) 0.19 0.20 0.21 0.19 Molybdenum
production (millions of recoverable pounds) 7 13 14 26
a. Amounts represent the approximate
average daily throughput processed at PT-FI's mill facilities from
each producing mine and from development activities that result in
metal production.
b. Targeted production rates once the DMLZ
underground mine reaches full capacity are expected to approximate
80,000 metric tons of ore per day in 2021; production from the
Grasberg Block Cave underground mine is expected to commence in
2018 and production from the Big Gossan underground mine is
expected to restart in the first half of 2017.
FREEPORT-McMoRan INC.
SELECTED U.S. OIL AND GAS OPERATING DATA Three Months
Ended June 30, Sales Volumes Sales per Day 2016 2015 2016 2015
Gulf of Mexico (GOM)a Oil (thousand barrels or MBbls)
5,825 5,234 64 58 Natural gas (million cubic feet or MMcf) 9,814
9,279 108 102 Natural gas liquids (NGLs, in MBbls) 559 529 6 5
Thousand barrels of oil equivalents (MBOE) 8,019 7,309 88 80
Average realized price per BOEb $ 35.02 $ 47.82 Cash production
costs per BOEb $ 12.43 $ 16.98 Capital expenditures (in millions) $
205 $ 676
CALIFORNIA Oil (MBbls) 2,792 3,326 31 37
Natural gas (MMcf) 405 562 5 6 NGLs (MBbls) 30 42 — c — c MBOE
2,890 3,462 32 38 Average realized price per BOEb $ 36.70 $ 48.30
Cash production costs per BOEb $ 23.62 $ 27.13 Capital expenditures
(in millions) $ 7 $ 24
HAYNESVILLE/MADDEN/OTHERd Oil (MBbls) 37 39 — c — c
Natural gas (MMcf) 8,576 13,693 94 151 NGLs (MBbls) 7 15 — c — c
MBOE 1,473 2,336 16 26 Average realized price per BOEb $ 12.09 $
16.15 Cash production costs per BOEb $ 12.07 $ 13.55 Capital
expenditures (in millions) $ 2 $ 6
TOTAL U.S. OIL AND GAS
OPERATIONS Oil (MBbls) 8,654 8,599 95 95 Natural gas (MMcf)
18,795 23,534 207 259 NGLs (MBbls) 596 586 6 5 MBOE 12,382 13,107
136 144 Cash operating margin per BOE:b Realized revenues $ 32.70 $
50.04 e Less: cash production costs 15.00 19.04 Cash
operating margin $ 17.70 $ 31.00 Depreciation, depletion and
amortization per BOE $ 17.61 $ 36.99 Capital expenditures (in
millions) $ 388 f $ 777 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.
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 XV, which are available on FCX's website,
“fcx.com.”
c.
Rounds to less than 1 MBbl per day.
d.
In July 2016, FM O&G completed the sale of the Haynesville
shale assets.
e.
Includes realized cash gains on crude oil
derivative contracts of $7.73 per BOE. These contracts were managed
on a consolidated basis; accordingly, the average realized price
per BOE by region did not reflect adjustments for crude oil
derivative contracts. FM O&G currently does not have oil and
gas derivative contracts in place for 2016 or future years.
f.
Consolidated capital expenditures for U.S.
oil and gas operations reflect total spending, which includes
changes in capital expenditure accruals and other adjustments
totaling $174 million for second-quarter 2016 and $71 million for
second-quarter 2015 that are not specifically allocated to the
above regions. Excludes international oil and gas capital
expenditures totaling $4 million in second-quarter 2016 and $29
million for second-quarter 2015, primarily related to the Morocco
oil and gas properties.
FREEPORT-McMoRan
INC. SELECTED U.S. OIL AND GAS OPERATING DATA
(continued) Six Months Ended June 30, Sales Volumes
Sales per Day 2016 2015 2016 2015
GOMa Oil (MBbls)
11,198 10,197 62 56 Natural gas (MMcf) 18,712 16,634 103 92 NGLs
(MBbls) 1,084 1,001 6 6 MBOE 15,401 13,970 85 77 Average realized
price per BOEb $ 30.55 $ 44.40 Cash production costs per BOEb $
12.26 $ 17.17 Capital expenditures (in millions) $ 482 $ 1,381
CALIFORNIA Oil (MBbls) 5,673 6,700 31 37 Natural gas
(MMcf) 885 1,146 5 6 NGLs (MBbls) 66 84 — c — c MBOE 5,887 6,975 32
39 Average realized price per BOEb $ 31.24 $ 43.49 Cash production
costs per BOEb $ 25.98 $ 29.43 Capital expenditures (in millions) $
16 $ 53
HAYNESVILLE/MADDEN/OTHERd Oil (MBbls)
81 74 — c 1 Natural gas (MMcf) 18,837 27,521 103 152 NGLs (MBbls)
20 25 — c — c MBOE 3,240 4,686 18 26 Average realized price per
BOEb $ 12.18 $ 16.66 Cash production costs per BOEb $ 11.21 $ 12.42
Capital expenditures (in millions) $ 2 $ 27
TOTAL U.S.
OIL AND GAS OPERATIONS Oil (MBbls) 16,952 16,971 93 94 Natural
gas (MMcf) 38,434 45,301 211 250 NGLs (MBbls) 1,170 1,110 6 6 MBOE
24,528 25,631 135 142 Cash operating margin per BOE:b Realized
revenue $ 28.29 $ 46.95 e Less: cash production costs 15.42
19.62 Cash operating margin $ 12.87 $ 27.33 Depreciation,
depletion and amortization per BOE $ 19.27 $ 39.59 Capital
expenditures (in millions) $ 868 f $ 1,795 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.
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 XV, which are available on FCX's website,
“fcx.com.”
c.
Rounds to less than 1 MBbl per day.
d.
In July 2016, FM O&G completed the
sale of the Haynesville shale assets.
e.
Includes realized cash gains on crude oil
derivative contracts of $7.87 per BOE. These contracts were managed
on a consolidated basis; accordingly, the average realized price
per BOE by region did not reflect adjustments for crude oil
derivative contracts. FM O&G currently does not have oil and
gas derivative contracts in place for 2016 or future years.
f.
Consolidated capital expenditures for U.S.
oil and gas operations reflect total spending, which includes
changes in capital expenditure accruals and other adjustments
totaling $368 million for the first six months of 2016 and $334
million for the first six months of 2015 that are not specifically
allocated to the above regions. Excludes international oil and gas
capital expenditures totaling $47 million for the first six months
of 2016 and $44 million for the first six months of 2015, primarily
related to the Morocco oil and gas properties.
FREEPORT-McMoRan INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended June 30, June 30,
2016 2015 2016 2015 (In millions, except per share amounts)
Revenuesa $ 3,334 $ 3,938 $ 6,576 $ 7,709 Cost of sales: Production
and deliveryb 2,956 2,651 5,455 5,330 Depreciation, depletion and
amortization 632 833 1,294 1,699 Impairment of oil and gas
properties 291 2,686 4,078 5,790 Total
cost of sales 3,879 6,170 10,827 12,819 Selling, general and
administrative expenses 160 c 148 298 c 299 Mining exploration and
research expenses 15 30 33 57 Environmental obligations and
shutdown costs 11 11 21 24 Net gain on sales of assets (749 ) —
(749 ) (39 ) Total costs and expenses 3,316 6,359
10,430 13,160 Operating income (loss) 18
(2,421 ) (3,854 ) (5,451 ) Interest expense, netd (196 ) (142 )
(387 ) (281 ) Net gain on early extinguishment of debt 39 — 36 —
Other income, net 25 36 e 64 43 e Loss
from continuing operations before income taxes and equity in
affiliated companies' net earnings (114 ) (2,527 ) (4,141 ) (5,689
) (Provision for) benefit from income taxesf (116 ) 699 (193 )
1,413 Equity in affiliated companies' net earnings 1 —
8 1 Net loss from continuing operations (229 )
(1,828 ) (4,326 ) (4,275 ) Net (loss) income from discontinued
operationsg (181 ) 29 (185 ) 70 Net loss (410 )
(1,799 ) (4,511 ) (4,205 ) Net income attributable to
noncontrolling interests: Continuing operations (47 ) (16 ) (109 )
(48 ) Discontinued operations (12 ) (26 ) (22 ) (52 ) Preferred
dividends attributable to redeemable noncontrolling interest (10 )
(10 ) (21 ) (20 ) Net loss attributable to common stockholdersh $
(479 ) $ (1,851 ) $ (4,663 ) $ (4,325 ) Basic and diluted
net (loss) income per share attributable to common stockholders:
Continuing operations $ (0.23 ) $ (1.78 ) $ (3.54 ) $ (4.18 )
Discontinued operations (0.15 ) — (0.16 ) 0.02 $
(0.38 ) $ (1.78 ) $ (3.70 ) $ (4.16 ) Basic and diluted
weighted-average common shares outstanding 1,269 1,040
1,260 1,040 Dividends declared per
share of common stock $ — $ 0.1605 $ — $
0.2105
a.
Revenues include favorable (unfavorable)
adjustments to provisionally priced concentrate and cathode copper
sales recognized in prior periods (refer to the supplemental
schedule, "Derivative Instruments," on page XI for a summary of
these amounts). Revenues for the 2015 periods also include net
noncash mark-to-market losses associated with crude oil derivative
contracts (refer to the supplemental schedule, "Adjusted Net (Loss)
Income," on Page IX for a summary of these amounts).
b.
Refer to the supplemental schedule,
"Adjusted Net (Loss) Income," on page IX for a summary of amounts
included in production and delivery costs for net charges at (i)
oil and gas operations primarily associated with drillship contract
settlements/idle rig costs and inventory write downs and (ii)
mining operations for adjustments to inventories.
c.
Includes net restructuring charges at oil
and gas operations. Refer to the supplemental schedule, "Adjusted
Net (Loss) Income," on page IX.
d.
Consolidated interest expense, excluding
capitalized interest, totaled $218 million in second-quarter 2016,
$208 million in second-quarter 2015, $436 million for the first six
months of 2016 and $411 million for the first six months of
2015.
e.
Includes a gain for the proceeds received
from insurance carriers and other third parties related to a
shareholder derivative litigation settlement. Refer to the
supplemental schedule, "Adjusted Net (Loss) Income," on page
IX.
f.
Refer to the supplemental schedule,
"Income Taxes," on page X for a summary of income taxes from
continuing operations.
g.
Net of charges for (i) allocated interest
expense associated with FCX's term loan that is required to be
repaid as a result of the sale of FCX's interest in Tenke Fungurume
(Tenke) totaling $11 million in second-quarter 2016, $7 million in
second-quarter 2015, $21 million for the first six months of 2016
and $14 million for the first six months of 2015 and (ii) income
tax (benefit) provision totaling $(16) million in second-quarter
2016, $12 million in second-quarter 2015, $(23) million for the
first six months of 2016 and $31 million for the first six months
of 2015. In accordance with accounting guidelines, the second
quarter and first six months of 2016 are also net of $177 million
for the estimated loss on disposal, which will be adjusted through
closing of the transaction.
h.
FCX defers recognizing profits on
intercompany sales until final sales to third parties occur. Refer
to the supplemental schedule, "Deferred Profits," on page XI for a
summary of net impacts from changes in these deferrals.
FREEPORT-McMoRan INC. CONSOLIDATED BALANCE
SHEETS (Unaudited) June 30,
December 31, 2016 2015 (In millions) ASSETS Current assets: Cash
and cash equivalents $ 352 $ 195 Trade accounts receivable 694 660
Income and other tax receivables 916 1,341 Other accounts
receivable 102 154 Inventories: Mill and leach stockpiles 1,348
1,539 Materials and supplies, net 1,338 1,594 Product 1,058 1,071
Other current assets 226 164 Held for sale 4,666 744
Total current assets 10,700 7,462 Property, plant, equipment and
mining development costs, net 23,609 24,248 Oil and gas properties,
net - full cost method: Subject to amortization, less accumulated
amortization and impairment 1,381 2,262 Not subject to amortization
1,656 4,831 Long-term mill and leach stockpiles 1,742 1,663 Other
assets 2,208 2,001 Held for sale — 4,110 Total assets
$ 41,296 $ 46,577 LIABILITIES AND EQUITY
Current liabilities: Accounts payable and accrued liabilities $
2,569 $ 3,255 Current portion of debt 770 649 Current portion of
environmental and asset retirement obligations 322 272 Accrued
income taxes 55 23 Held for sale 824 108 Total
current liabilities 4,540 4,307 Long-term debt, less current
portion 18,549 19,779 Deferred income taxes 3,758 3,607
Environmental and asset retirement obligations, less current
portion 3,697 3,717 Other liabilities 1,662 1,641 Held for sale —
718 Total liabilities 32,206 33,769 Redeemable
noncontrolling interest 771 764 Equity: Stockholders'
equity: Common stock 145 137 Capital in excess of par value 25,105
24,283 Accumulated deficit (17,049 ) (12,387 ) Accumulated other
comprehensive loss (488 ) (503 ) Common stock held in treasury
(3,710 ) (3,702 ) Total stockholders' equity 4,003 7,828
Noncontrolling interestsa 4,316 4,216 Total equity
8,319 12,044 Total liabilities and equity $ 41,296
$ 46,577
a.
Includes noncontrolling interests of $1.2
billion at June 30, 2016, and December 31, 2015, associated with
Tenke.
FREEPORT-McMoRan INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) Six Months
Ended June 30, 2016 2015 (In millions) Cash flow from
operating activities: Net loss $ (4,511 ) $ (4,205 ) Adjustments to
reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization 1,374 1,829 Impairment of
oil and gas properties 4,078 5,790 Non-cash oil and gas drillship
settlements/idle rig costs 612 — Oil and gas inventory adjustments
and write downs 82 23 Mining inventory adjustments 7 63 Net gain on
sales of assets (749 ) (39 ) Net charges for environmental and
asset retirement obligations, including accretion 107 109 Payments
for environmental and asset retirement obligations (116 ) (81 ) Net
gain on early extinguishment of debt (36 ) — Deferred income taxes
169 (1,432 ) Estimated loss on disposal of discontinued operations
177 — Increase in long-term mill and leach stockpiles (99 ) (104 )
Net gains on crude oil derivative contracts — (58 ) Other, net 53
81 Changes in working capital and other tax payments, excluding
amounts from dispositions: Accounts receivable 259 493 Inventories
190 8 Other current assets (53 ) (1 ) Accounts payable and accrued
liabilities 44 (205 ) Accrued income taxes and changes in other tax
payments 26 (485 ) Net cash provided by operating activities
1,614 1,786 Cash flow from investing
activities: Capital expenditures: North America copper mines (76 )
(214 ) South America (293 ) (902 ) Indonesia (459 ) (438 )
Molybdenum mines (1 ) (7 ) U.S. oil and gas operations (868 )
(1,795 ) Other (118 ) (172 ) Net proceeds from sale of additional
interest in Morenci 996 — Net proceeds from sale of other assets
290 150 Other, net (6 ) (14 ) Net cash used in investing activities
(535 ) (3,392 ) Cash flow from financing activities:
Proceeds from debt 2,811 4,422 Repayments of debt (3,649 ) (2,360 )
Net proceeds from sale of common stock 32 — Cash dividends and
distributions paid: Common stock (5 ) (380 ) Noncontrolling
interests (39 ) (60 ) Stock-based awards net payments, including
excess tax benefit (5 ) (7 ) Debt financing costs and other, net
(18 ) (7 ) Net cash (used in) provided by financing activities (873
) 1,608 Net increase in cash and cash equivalents 206
2 Increase in cash and cash equivalents in assets held for sale (49
) (1 ) Cash and cash equivalents at beginning of year 195
317 Cash and cash equivalents at end of period $ 352
$ 318
FREEPORT-McMoRan INC.ADJUSTED NET
(LOSS) INCOME
Adjusted net (loss) income is intended to provide investors and
others with information about FCX's recurring operating
performance. This information differs from net loss attributable to
common stockholders determined in accordance with U.S. generally
accepted accounting principles (GAAP) and should not be considered
in isolation or as a substitute for measures of performance
determined in accordance with U.S. GAAP. Adjusted net (loss) income
may not be comparable to similarly titled measures reported by
other companies.
Three Months Ended June 30, 2016 2015 Pre-tax
After-tax Per Share Pre-tax
After-tax Per Share
Net loss attributable to common
stockholders N/A $ (479 ) $
(0.38 ) N/A $ (1,851 )
$ (1.78 ) Net noncash mark-to-market losses on
crude oil derivative contracts $ — $ — $ — $ (95 ) $ (59 ) $ (0.06
) Impairment of oil and gas properties (291 ) (291 ) a (0.23 )
(2,686 ) (1,975 ) a (1.90 ) Other net charges for oil and gas
operations: Drillship settlements/idle rig costs (639 ) (639 )
(0.50 ) (3 ) (2 ) — Inventory write downs (53 ) (53 ) (0.04 ) (19 )
(12 ) (0.01 ) Restructuring charges (37 ) (37 ) (0.03 ) — — —
Mining inventory adjustments (2 ) (2 ) — (59 ) (38 ) (0.04 ) Net
gain on sales of assetsb 749 744 0.59 — — — Net gain on early
extinguishment of debt 39 39 0.03 — — — Gain on shareholder
derivative litigation settlement — — — 92 92 0.09 Net tax chargesc
N/A (36 ) (0.03 ) N/A — — Estimated loss on discontinued operations
(177 ) (177 ) (0.14 ) — — — $ (411 ) $ (452 )
$ (0.36 ) d $ (2,770 ) $ (1,994 ) $ (1.92 )
Adjusted net
(loss) income attributable to common stockholders N/A
$ (27 ) $ (0.02 )
N/A $ 143 $ 0.14 Six
Months Ended June 30, 2016 2015 Pre-tax After-tax Per Share Pre-tax
After-tax Per Share
Net loss attributable to common
stockholders N/A $ (4,663 )
$ (3.70 ) N/A $ (4,325
) $ (4.16 ) Net noncash mark-to-market
losses on crude oil derivative contracts $ — $ — $ — $ (143 ) $ (89
) $ (0.09 ) Impairment of oil and gas properties (4,078 ) (4,078 )
a (3.24 ) (5,790 ) (4,374 ) a (4.20 ) Other net charges for oil and
gas operations: Drillship settlements/idle rig costs (804 ) (804 )
(0.64 ) (16 ) (10 ) (0.01 ) Inventory write downs (88 ) (88 ) (0.07
) (23 ) (14 ) (0.01 ) Restructuring charges (39 ) (39 ) (0.03 ) — —
— Mining inventory adjustments (7 ) (7 ) (0.01 ) (63 ) (41 ) (0.04
) Net gain on sales of assetsb 749 744 0.59 39 25 0.02 Net gain on
early extinguishment of debt 36 36 0.03 — — — Gain on shareholder
derivative litigation settlement — — — 92 92 0.09 Net tax chargesc
N/A (36 ) (0.03 ) N/A — — Estimated loss on discontinued operations
(177 ) (177 ) (0.14 ) — — — $ (4,408 ) $
(4,449 ) $ (3.53 ) d $ (5,904 ) $ (4,411 ) $ (4.24 )
Adjusted net (loss) income attributable to common
stockholders N/A $ (214 ) $
(0.17 ) N/A $ 86 $
0.08
a.
As a result of the impairment to oil and
gas properties, FCX recorded tax charges of $108 million in
second-quarter 2016, $305 million in second-quarter 2015, $1.5
billion for the first six months of 2016 and $763 million for the
first six months of 2015 to establish a valuation allowance against
deferred tax assets that will not generate a future benefit. These
tax charges have been reflected in the above after-tax impacts for
the impairment of oil and gas properties.
b.
Net gain on sales of assets primarily
reflects the sales of a 13 percent undivided interest in the
Morenci unincorporated joint venture and an interest in the Timok
exploration project in Serbia for the second quarter and first six
months of 2016, and the sale of FCX's one-third interest in the
Luna Energy power facility in New Mexico for the first six months
of 2015.
c.
For further discussion of net tax charges
impacting the second quarter and first six months of 2016, refer to
"Income Taxes," on page X.
d.
Per share amounts do not foot down because
of rounding.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160726005812/en/
Freeport-McMoRan Inc.Financial
Contacts:Kathleen L. Quirk,
602-366-8016orDavid P. Joint,
504-582-4203orMedia Contact:Eric E. Kinneberg,
602-366-7994
Freeport McMoRan (NYSE:FCX)
Historical Stock Chart
From Mar 2024 to Apr 2024
Freeport McMoRan (NYSE:FCX)
Historical Stock Chart
From Apr 2023 to Apr 2024