Freeport-McMoRan Inc. (NYSE: FCX):
- Net loss attributable to common
stock totaled $2.5 billion, $2.38 per share, for first-quarter
2015, compared with net income attributable to common stock of $510
million, $0.49 per share, for first-quarter 2014. After adjusting
for net charges totaling $2.4 billion, $2.32 per share, primarily
for the reduction of the carrying value of oil and gas properties
and the related tax charge to establish a deferred tax valuation
allowance, adjusted net loss attributable to common stock totaled
$60 million, $0.06 per share, for first-quarter 2015.
- Consolidated sales totaled 960
million pounds of copper, 263 thousand ounces of gold, 23 million
pounds of molybdenum and 12.5 million barrels of oil equivalents
(MMBOE) for first-quarter 2015, compared with 871 million pounds of
copper, 187 thousand ounces of gold, 27 million pounds of
molybdenum and 16.1 MMBOE for first-quarter 2014.
- Consolidated sales for the year
2015 are expected to approximate 4.2 billion pounds of copper, 1.3
million ounces of gold, 95 million pounds of molybdenum and 52.3
MMBOE, including 960 million pounds of copper, 300 thousand ounces
of gold, 25 million pounds of molybdenum and 12.9 MMBOE for
second-quarter 2015.
- Average realized prices were
$2.72 per pound for copper, $1,186 per ounce for gold and $56.51
per barrel for oil (including $11.97 per barrel for realized cash
gains on derivative contracts) for first-quarter 2015.
- Consolidated unit net cash costs
for first-quarter 2015 averaged $1.64 per pound of copper for
mining operations and $20.26 per barrel of oil equivalents (BOE)
for oil and gas operations.
- Operating cash flows totaled
$717 million (net of $86 million in working capital uses and
changes in other tax payments) for first-quarter 2015. Based on
current sales volume and cost estimates and assuming average prices
of $2.75 per pound for copper, $1,200 per ounce for gold, $8 per
pound for molybdenum and $65 per barrel for Brent crude oil for the
remainder of 2015, operating cash flows for the year 2015 are
expected to approximate $4.4 billion.
- Capital expenditures totaled
$1.9 billion for first-quarter 2015, including $0.6 billion for
major projects at mining operations and $1.0 billion for oil and
gas operations. Capital expenditures are expected to approximate
$6.5 billion for the year 2015, including $2.5 billion for major
projects at mining operations and $2.8 billion for oil and gas
operations.
- FCX has taken actions to reduce or
defer capital expenditures and other costs and is evaluating
funding alternatives to advance growth projects in its oil and gas
business, including consideration of a sale of public equity for a
minority interest in its oil and gas subsidiary. Additional capital
cost reductions, potential additional divestitures or monetizations
and other actions will be pursued as required to maintain a strong
balance sheet while preserving a strong resource position and
portfolio of assets with attractive long-term growth prospects. FCX
has a broad set of natural resource assets that provides many
alternatives for future actions to enhance its financial
flexibility.
- At March 31, 2015, consolidated
debt totaled $20.3 billion and consolidated cash totaled
$549 million.
Freeport-McMoRan Inc. (NYSE: FCX) reported a net loss
attributable to common stock of $2.5 billion, $2.38 per share, for
first-quarter 2015, compared with net income attributable to common
stock of $510 million, $0.49 per share, for first-quarter 2014.
FCX’s net loss attributable to common stock for first-quarter 2015
included net charges totaling $2.4 billion, $2.32 per share,
primarily for the reduction of the carrying value of oil and gas
properties and the related tax charge to establish a deferred tax
valuation allowance. The first quarters of 2015 and 2014 were also
impacted by net noncash mark-to-market (losses) gains on oil and
gas derivative contracts and other items described below.
James R. Moffett, Chairman of the Board; Richard C. Adkerson,
Vice Chairman, and FCX President and Chief Executive Officer; and
James C. Flores, Vice Chairman, and FM O&G President and Chief
Executive Officer, said, "During the first quarter, we continued to
focus on effective execution of our operating and capital plans and
on our cost management initiatives. We are pleased to report
important progress on our mining development projects and ongoing
success in our oil and gas exploration and development activities
that will provide future growth. We have taken actions to maintain
financial strength and flexibility during this period of weak and
uncertain commodity prices. We remain optimistic about our
business, the long-term commodity markets for the commodities
we produce and the significant values embedded in our large-scale,
long-lived assets.”
SUMMARY FINANCIAL DATA
Three Months Ended March 31,
2015 2014 (in millions, except per
share amounts) Revenuesa $ 4,153 b,c $ 4,985 b,c Operating (loss)
incomea $ (2,963 ) d,e $ 1,111 f Net (loss) income attributable to
common stockg $ (2,474 ) b,c,d,e,h $ 510 b,c,f Diluted net (loss)
income per share of common stock $ (2.38 ) b,c,d,e,h $ 0.49 b,c,f
Diluted weighted-average common shares outstanding 1,040 1,044
Operating cash flowsi $ 717 $ 1,201 Capital expenditures $ 1,867 $
1,612 At March 31: Cash and cash equivalents $ 549 $ 1,342 Total
debt, including current portion $ 20,312 $ 20,739 a. For segment
financial results, refer to the supplemental schedule, "Business
Segments," beginning on page VIII, which is available on FCX's
website, "fcx.com." b. Includes unfavorable adjustments to
provisionally priced concentrate and cathode copper sales
recognized in prior periods totaling $106 million ($59 million to
net loss attributable to common stock or $0.06 per share) for
first-quarter 2015 and $124 million ($66 million to net income
attributable to common stock or $0.06 per share) for first-quarter
2014. For further discussion, refer to the supplemental schedule,
"Derivative Instruments," beginning on page VII, which is available
on FCX's website, "fcx.com." c. Includes net noncash mark-to-market
(losses) gains associated with crude oil and natural gas derivative
contracts totaling $(48) million ($(30) million to net loss
attributable to common stock or $(0.03) per share) for
first-quarter 2015 and $15 million ($9 million to net income
attributable to common stock or $0.01 per share) for first-quarter
2014. For further discussion, refer to the supplemental schedule,
"Derivative Instruments," beginning on page VII, which is available
on FCX's website, "fcx.com." d. Includes a charge of $3.1 billion
($1.9 billion to net loss attributable to common stock or $1.87 per
share) to reduce the carrying value of oil and gas properties
pursuant to full cost accounting rules. e. Includes (i) a gain of
$39 million ($25 million to net loss attributable to common stock
or $0.02 per share) associated with the $140 million sale of FCX's
one-third interest in the Luna Energy power facility in New Mexico
and (ii) charges totaling $17 million ($10 million to net loss
attributable to common stock or $0.01 per share) associated with
idle/terminated rig costs and inventory write offs at oil and gas
operations. f. Includes $53 million ($28 million to net income
attributable to common stock or $0.03 per share) of fixed costs
charged directly to cost of sales as a result of the impact of
export restrictions on PT Freeport Indonesia's (PT-FI)
first-quarter 2014 operating rates. g.
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 VIII, which
is available on FCX's website, "fcx.com."
h. As a result of the impairment to oil and gas properties, FCX
recorded a tax charge of $458 million ($0.44 per share) to
establish a valuation allowance primarily against United States
(U.S.) federal alternative minimum tax credits. i. Includes net
working capital uses and changes in other tax payments of $86
million for first-quarter 2015 and $413 million for first-quarter
2014.
SUMMARY OPERATING DATA
Three Months Ended March 31,
2015 2014a Copper
(millions of recoverable pounds) Production 915 948 Sales,
excluding purchases 960 871 Average realized price per pound $ 2.72
$ 3.14
Site production and delivery costs per
poundb
$ 1.93 $ 1.89
c
Unit net cash costs per poundb $ 1.64 $ 1.54 c
Gold
(thousands of recoverable ounces) Production 259 231 Sales,
excluding purchases 263 187 Average realized price per ounce $
1,186 $ 1,300
Molybdenum (millions of recoverable pounds)
Production 24 24 Sales, excluding purchases 23 27 Average realized
price per pound $ 10.17 $ 11.21
Oil Equivalents Sales
volumes MMBOE 12.5 16.1 Thousand BOE (MBOE) per day 139 179 Cash
operating margin per BOEd Realized revenues $ 43.71 $ 77.22 Cash
production costs 20.26 18.51 Cash operating margin $
23.45 $ 58.71 a. Includes the results of the
Candelaria and Ojos del Salado mines that were sold in November
2014, and the Eagle Ford properties that were sold in June 2014.
First-quarter 2014 sales volumes included 94 million pounds of
copper and 23 thousand ounces of gold from the Candelaria and Ojos
del Salado mines and 4.7 MMBOE (53 MBOE per day) from Eagle Ford.
Excluding Candelaria and Ojos del Salado, first-quarter 2014 mining
unit net cash costs averaged $1.57 per pound of copper; excluding
Eagle Ford, first-quarter 2014 oil and gas cash production costs
were $20.89 per BOE. b. Reflects per pound weighted-average
production and delivery costs and unit net cash costs (net of
by-product credits) for all copper mines. For reconciliations of
per pound unit costs by operating division to production and
delivery costs applicable to sales reported in FCX's consolidated
financial statements, refer to the supplemental schedules, "Product
Revenues and Production Costs," beginning on page X, which is
available on FCX's website, "fcx.com." c. Excludes $0.06 per pound
of copper for fixed costs charged directly to cost of sales as a
result of the impact of export restrictions on PT-FI's operating
rates. d. Cash operating margin for oil and gas operations reflects
realized revenues less cash production costs. Realized revenues
exclude noncash mark-to-market adjustments on derivative contracts.
For reconciliations of realized revenues and cash production costs
per BOE to revenues and production and delivery costs reported in
FCX's consolidated financial statements, refer to the supplemental
schedules, “Product Revenues and Production Costs,” beginning on
page X, which is available on FCX's website, “fcx.com.”
Consolidated Sales Volumes
First-quarter 2015 consolidated copper sales of 960
million pounds were slightly higher than the January 2015 estimate
of 950 million pounds reflecting timing of shipments, and were
higher than first-quarter 2014 sales of 871 million pounds
reflecting higher volumes in North America, Indonesia and Africa,
partly offset by lower volumes in South America primarily
associated with the sale of the Candelaria and Ojos del Salado
mines.
First-quarter 2015 consolidated gold sales of 263
thousand ounces were higher than the January 2015 estimate of 225
thousand ounces and first-quarter 2014 sales of 187 thousand ounces
reflecting higher operating rates at PT-FI, partly offset by the
impact of the sale of the Candelaria and Ojos del Salado mines.
First-quarter 2015 consolidated molybdenum sales of 23
million pounds approximated the January 2015 estimate of 23 million
pounds, but were lower than first-quarter 2014 sales of 27 million
pounds.
First-quarter 2015 sales from oil and gas operations of 12.5
MMBOE, including 8.4 million barrels (MMBbls) of crude oil,
21.8 billion cubic feet (Bcf) of natural gas and 0.5 MMBbls
of natural gas liquids (NGLs), were lower than first-quarter
2014 sales of 16.1 MMBOE primarily reflecting the sale of the Eagle
Ford properties, and were lower than the January 2015 estimate of
13.1 MMBOE reflecting a delay in initial production and ramp-up of
Lucius and planned recompletions.
Consolidated sales for the year 2015 are expected to approximate
4.2 billion pounds of copper, 1.3 million ounces of gold, 95
million pounds of molybdenum and 52.3 MMBOE, including 960 million
pounds of copper, 300 thousand ounces of gold, 25 million pounds of
molybdenum and 12.9 MMBOE for second-quarter 2015. Projected 2015
copper sales are approximately 60 million pounds less than January
2015 estimates primarily reflecting reduced mining rates in
Indonesia; projected 2015 oil and gas sales are 3.2 MMBOE less than
January 2015 estimates primarily reflecting the timing of the
Lucius ramp-up and the timing of maintenance activities in the
Deepwater Gulf of Mexico (GOM).
Consolidated Unit Costs
Mining Unit Net Cash Costs. Consolidated average unit net cash
costs (net of by-product credits) for FCX's copper mines of $1.64
per pound of copper in first-quarter 2015 were higher than unit net
cash costs of $1.54 per pound in first-quarter 2014, reflecting
higher costs and lower sales volumes in South America and lower
by-product credits.
Assuming average prices of $1,200 per ounce of gold and $8 per
pound of molybdenum for the remainder of 2015 and achievement of
current sales volume and cost estimates, consolidated unit net cash
costs (net of by-product credits) for copper mines are expected to
be lower in the second half of 2015 and average $1.53 per pound of
copper for the year 2015. Quarterly unit net cash costs vary with
fluctuations in sales volumes and average realized prices
(primarily gold and molybdenum prices). The impact of price changes
for the remainder of 2015 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 $0.015 per pound for each $2 per pound
change in the average price of molybdenum.
Oil and Gas Cash Production Costs per BOE. Cash production costs
for oil and gas operations of $20.26 per BOE in first-quarter 2015
were higher than cash production costs of $18.51 per BOE in
first-quarter 2014, primarily reflecting the sale of lower-cost
Eagle Ford properties.
Based on current sales volume and cost estimates for the
remainder of 2015, cash production costs are expected to
approximate $19 per BOE for the year 2015.
MINING OPERATIONS
North America Copper Mines. FCX operates seven open-pit
copper mines in North America - Morenci, Bagdad, Safford, Sierrita
and Miami in Arizona, and Chino and Tyrone in New Mexico. All of
the North America mining operations are wholly owned, except for
Morenci. FCX records its 85 percent joint venture interest in
Morenci using the proportionate consolidation method. In addition
to copper, molybdenum concentrate and silver are also produced by
certain of FCX's North America copper mines.
Operating and Development Activities. FCX has increased
production from its North America copper mines in recent years and
continues to evaluate a number of opportunities to add production
capacity following positive exploration results. Future investments
will be undertaken based on the results of economic and technical
feasibility studies and market conditions.
The Morenci mill expansion project commenced operations in May
2014 and approached full rates in first-quarter 2015. The project
expanded mill capacity from 50,000 metric tons of ore per day to
approximately 115,000 metric tons of ore per day and is expected to
add incremental annual production of approximately 225 million
pounds of copper. Morenci's copper production is expected to
average over 900 million pounds per year over the next five years.
Additionally, the molybdenum circuit began production in
first-quarter 2015 and is expected to reach design capacity of
approximately 9 million pounds of molybdenum per year in
second-quarter 2015. Remaining items associated with the project
include construction of the expanded tailings storage facility,
which is expected to be completed in third-quarter 2015.
Operating Data. Following is summary consolidated operating data
for the North America copper mines for the first quarters of 2015
and 2014:
Three Months Ended March 31,
2015 2014 Copper (millions of
recoverable pounds) Production 452 385 Sales 472 371 Average
realized price per pound $ 2.73 $ 3.24
Molybdenum
(millions of recoverable pounds) Productiona 9 8
Unit net
cash costs per pound of copperb Site production and
delivery, excluding adjustments $ 1.81 $ 1.88 By-product credits
(0.18 ) (0.22 ) Treatment charges 0.13 0.13 Unit net
cash costs $ 1.76 $ 1.79 a. Refer to summary
operating data on page 3 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 X, which is available on FCX's website,
"fcx.com."
North America's consolidated copper sales volumes of 472 million
pounds in first-quarter 2015 were higher than first-quarter 2014
sales of 371 million pounds, primarily reflecting higher milling
rates and ore grades at Morenci and higher ore grades at Chino.
North America sales are estimated to approximate 1.94 billion
pounds for the year 2015, compared with 1.66 billion pounds of
copper in 2014.
Average unit net cash costs (net of by-product credits) for the
North America copper mines of $1.76 per pound of copper in
first-quarter 2015 were lower than unit net cash costs of $1.79 per
pound in first-quarter 2014, primarily reflecting higher sales
volumes. Average unit net cash costs (net of by-product credits)
for the North America copper mines are expected to approximate
$1.71 per pound of copper for the year 2015, based on current sales
volume and cost estimates and assuming an average molybdenum price
of $8 per pound for the remainder of 2015. North America's average
unit net cash costs for the remainder of 2015 would change by
approximately $0.03 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.
Development Activities. Construction activities associated with
a large-scale expansion at Cerro Verde are advancing toward
completion in late 2015. Detailed engineering and major procurement
activities are complete and construction is approximately 70
percent complete. The project will expand the concentrator
facilities from 120,000 metric tons of ore per day to 360,000
metric tons of ore per day and provide incremental annual
production of approximately 600 million pounds of copper and 15
million pounds of molybdenum beginning in 2016. As of
March 31, 2015, $3.5 billion had been incurred for this
project, with approximately $1.1 billion remaining to be
incurred.
FCX continues to evaluate a potential large-scale milling
operation at El Abra to process additional sulfide material and to
achieve higher recoveries. Exploration results in recent years at
El Abra indicate a significant sulfide resource, which could
potentially support a major mill project. Future investments will
depend on technical studies, economic factors and global copper
market conditions.
Operating Data. Following is summary consolidated operating data
for the South America mining operations for the first quarters of
2015 and 2014:
Three Months Ended March 31,
2015 2014a Copper
(millions of recoverable pounds) Production 193 314 Sales 200 307
Average realized price per pound $ 2.71 $ 3.07
Gold
(thousands of recoverable ounces) Production — 21 Sales — 23
Average realized price per ounce $ — $
1,307
Molybdenum (millions of recoverable pounds)
Productionb 2 3
Unit net cash costs per pound of
copperc Site production and delivery, excluding
adjustments $ 1.75 $ 1.50 By-product credits (0.08 ) (0.25 )
Treatment charges 0.17 0.17 Unit net cash costs $
1.84 $ 1.42 a. Includes the results of the Candelaria
and Ojos del Salado mines, which had sales totaling 94 million
pounds of copper and 23 thousand ounces of gold in first-quarter
2014. Excluding Candelaria and Ojos del Salado, South America
mining's first-quarter 2014 unit net cash costs averaged $1.47 per
pound of copper. b. Refer to summary operating data on page 3 for
FCX's consolidated molybdenum sales, which includes sales of
molybdenum produced at Cerro Verde. c. For a reconciliation of unit
net cash costs per pound to production and delivery costs
applicable to sales reported in FCX's consolidated financial
statements, refer to the supplemental schedules, "Product Revenues
and Production Costs," beginning on page X, which is available on
FCX's website, "fcx.com."
South America's consolidated copper sales volumes of 200 million
pounds in first-quarter 2015 were lower than first-quarter 2014
sales of 307 million pounds, reflecting the sale of the Candelaria
and Ojos del Salado mines and lower production from Cerro Verde
associated with lower ore grades and recovery rates from stockpile
material. Sales from South America mining are expected to
approximate 935 million pounds of copper for the year 2015,
compared with 1.14 billion pounds of copper in 2014 (the year 2014
included copper sales volumes of 268 million pounds from the
Candelaria and Ojos del Salado mines).
Average unit net cash costs (net of by-product credits) for
South America mining of $1.84 per pound of copper in first-quarter
2015 were higher than unit net cash costs of $1.42 per pound in
first-quarter 2014, primarily reflecting lower sales volumes and
higher mining costs at Cerro Verde mostly associated with increased
repair and maintenance expense. In addition, first-quarter 2015
reflected lower by-product credits primarily because of the sale of
the Candelaria mine. Average unit net cash costs (net of by-product
credits) for South America mining are expected to approximate $1.72
per pound of copper for the year 2015, based on current sales
volume and cost estimates and assuming average prices of $8 per
pound of molybdenum for the remainder of 2015.
Indonesia Mining. Through its 90.64 percent owned and
consolidated subsidiary PT-FI, FCX's assets include one of the
world's largest copper and gold deposits at the Grasberg minerals
district in Papua, Indonesia. PT-FI operates a proportionately
consolidated joint venture, which produces copper concentrates that
contain significant quantities of gold and silver.
Regulatory Matters. PT-FI is engaged in active discussions with
the Indonesian government regarding its Contract of Work (COW) and
long-term operating rights. The parties entered into a Memorandum
of Understanding (MOU) related to an amended COW in July 2014,
which was extended to July 25, 2015. Negotiations are taking into
consideration PT-FI's requirement for assurance of legal and fiscal
terms post-2021 for PT-FI to continue with its large-scale
investment program in Papua, Indonesia.
PT-FI is advancing plans for the construction of new smelter
capacity in parallel with completing negotiations on its COW and
long-term operating rights. PT-FI has identified a site adjacent to
the existing PT Smelting site in Gresik, Indonesia, for the
construction of additional smelter capacity and is in discussions
with potential partners for the project.
Under the MOU, no terms of the COW other than those relating to
export duties, a smelter bond and increased royalties will be
changed until the completion of an amended COW.
PT-FI is required to apply for renewal of export permits at
six-month intervals and the next renewal date is July 25, 2015.
Development Activities. PT-FI has several projects in progress
in the Grasberg minerals district related to the development of
large-scale, long-lived, high-grade underground ore bodies. In
aggregate, these underground ore bodies are expected to ramp up
over several years to process approximately 240,000 metric tons of
ore per day following the transition from the Grasberg open pit,
currently anticipated to occur in late 2017. Development of the
Grasberg Block Cave and Deep Mill Level Zone (DMLZ) underground
mines is advancing to enable DMLZ to commence production in late
2015 and the Grasberg Block Cave mine to commence production in
2018. Over the next five years, estimated aggregate capital
spending on these projects is currently expected to average $0.8
billion per year ($0.6 billion per year net to PT-FI).
Additionally, over the next five years, estimated aggregate capital
spending for processing and power facilities to optimize the
handling of underground ore is expected to average $0.3 billion per
year. Considering the long-term nature and size of these projects,
actual costs could vary from these estimates. PT-FI may reduce or
defer these activities pending resolution of negotiations for an
amended COW.
Operating Data. Following is summary consolidated operating data
for the Indonesia mining operations for the first quarters of 2015
and 2014:
Three Months Ended March 31,
2015 2014 Copper (millions of
recoverable pounds) Production 154 140 Sales 155 109 Average
realized price per pound $ 2.74 $ 3.04
Gold
(thousands of recoverable ounces) Production 255 208 Sales 260 162
Average realized price per ounce $ 1,186 $ 1,299
Unit net
cash costs per pound of coppera Site production and
delivery, excluding adjustments $ 2.84 $ 3.33 b Gold and silver
credits (2.09 ) (2.15 ) Treatment charges 0.29 0.24 Export duties
0.14 — Royalty on metals 0.16 c 0.11 Unit net cash
costs $ 1.34 $ 1.53 a. For a reconciliation of unit
net cash costs per pound to production and delivery costs
applicable to sales reported in FCX's consolidated financial
statements, refer to the supplemental schedule, "Product Revenues
and Production Costs," beginning on page X, which is available on
FCX's website, "fcx.com." b. Excludes fixed costs totaling $0.49
per pound of copper charged directly to cost of sales as a result
of the impact of export restrictions on PT-FI's first-quarter 2014
operating rates. c. Includes $0.07 per pound of copper associated
with PT-FI's increased royalty rates pursuant to the MOU.
Indonesia's first-quarter 2015 sales of 155 million pounds of
copper and 260 thousand ounces of gold were higher than
first-quarter 2014 sales of 109 million pounds of copper and 162
thousand ounces of gold reflecting higher operating rates, partly
offset by lower ore grades. Indonesia's first-quarter 2015 copper
production was approximately 20 percent below January 2015
estimates primarily because of lower mining rates, which improved
throughout the quarter. Indonesia's gold production was above
January 2015 estimates because of higher ore grades.
At the Grasberg mine, the sequencing of mining areas with
varying ore grades causes fluctuations in quarterly and annual
production of copper and gold. Sales from Indonesia mining are
expected to approximate 885 million pounds of copper and 1.3
million ounces of gold for the year 2015, compared with 664 million
pounds of copper and 1.2 million ounces of gold for the year
2014.
A significant portion of PT-FI's costs are fixed and unit costs
vary depending on production volumes. Indonesia's unit net cash
costs (including gold and silver credits) of $1.34 per pound of
copper in first-quarter 2015 were lower than unit net cash costs of
$1.53 per pound in first-quarter 2014, primarily reflecting higher
volumes, partly offset by the impact of export duties and increased
royalty rates.
Unit net cash costs (net of gold and silver credits) for
Indonesia mining are expected to approximate $1.09 per pound of
copper for the year 2015, based on current sales volume and cost
estimates, and assuming an average gold price of $1,200 per ounce
for the remainder of 2015. Indonesia mining's projected unit net
cash costs would change by approximately $0.06 per pound for each
$50 per ounce change in the average price of gold for the remainder
of 2015. Because of the fixed nature of a large portion of
Indonesia's costs, unit costs vary from quarter to quarter
depending on copper and gold volumes.
Africa Mining. Through its 56 percent owned and
consolidated subsidiary Tenke Fungurume Mining S.A. (TFM), FCX
operates in the Tenke Fungurume (Tenke) minerals district in the
Katanga province of the Democratic Republic of Congo (DRC). In
addition to copper, the Tenke mine produces cobalt hydroxide.
Operating and Development Activities. TFM completed its second
phase expansion project in early 2013, which included increasing
mine, mill and processing capacity. Construction of a second
sulphuric acid plant is under way, with completion expected in
2016. FCX continues to engage in exploration activities and
metallurgical testing to evaluate the potential of the highly
prospective minerals district at Tenke. These analyses are being
incorporated in future plans for potential expansions of production
capacity. Future expansions are subject to a number of factors,
including power availability, economic and market conditions, and
the business and investment climate in the DRC.
Operating Data. Following is summary consolidated operating data
for the Africa mining operations for the first quarters of 2015 and
2014:
Three Months Ended March 31,
2015 2014 Copper (millions of
recoverable pounds) Production 116 109 Sales 133 84 Average
realized price per pounda $ 2.66 $ 3.07
Cobalt
(millions of contained pounds) Production 7 7 Sales 8 8 Average
realized price per pound $ 8.72 $ 9.21
Unit net cash
costs per pound of copperb Site production and delivery,
excluding adjustments $ 1.57 $ 1.48 Cobalt creditsc (0.37 ) (0.66 )
Royalty on metals 0.06 0.07 Unit net cash costs $
1.26 $ 0.89 a. Includes point-of-sale transportation
costs as negotiated in customer contracts. b. For a reconciliation
of unit net cash costs per pound to production and delivery costs
applicable to sales reported in FCX's consolidated financial
statements, refer to the supplemental schedules, "Product Revenues
and Production Costs," beginning on page X, which is available on
FCX's website, "fcx.com." c. Net of cobalt downstream processing
and freight costs.
TFM's copper sales of 133 million pounds in first-quarter 2015
were higher than first-quarter 2014 copper sales of 84 million
pounds primarily because of timing of shipments and higher ore
grades. TFM's sales are expected to approximate 455 million pounds
of copper and 34 million pounds of cobalt for the year 2015,
compared with 425 million pounds of copper and 30 million pounds of
cobalt for the year 2014.
Africa mining's unit net cash costs (net of cobalt credits) of
$1.26 per pound of copper in first-quarter 2015 were higher than
unit net cash costs of $0.89 per pound of copper in first-quarter
2014, primarily reflecting lower cobalt credits. Unit net cash
costs (net of cobalt credits) for Africa mining are expected to
approximate $1.26 per pound of copper for the year 2015, based on
current sales volume and cost estimates and assuming an average
cobalt price of $13 per pound for the remainder of 2015. Africa
mining's projected unit net cash costs would change by
approximately $0.07 per pound for each $2 per pound change in the
average price of cobalt for the remainder of 2015.
Molybdenum Mines. FCX has two wholly owned molybdenum
mines in North America - the Henderson underground mine and the
Climax open-pit mine, both in Colorado. The Henderson and Climax
mines produce high-purity, chemical-grade molybdenum concentrates,
which are typically further processed into value-added molybdenum
chemical products. The majority of molybdenum concentrates produced
at the Henderson and Climax mines, as well as from FCX's North and
South America copper mines, are processed at FCX's conversion
facilities.
Production from the Molybdenum mines totaled 13 million pounds
of molybdenum in the first quarters of 2015 and 2014. Refer to
summary operating data on page 3 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 were $7.17
per pound of molybdenum in first-quarter 2015, compared with $6.71
per pound in first-quarter 2014. Based on current sales volume and
cost estimates, unit net cash costs for the Molybdenum mines are
expected to average approximately $7.50 per pound of molybdenum for
the year 2015.
FCX continues to monitor market conditions and may make
adjustments to its primary molybdenum production as market
conditions warrant. For a reconciliation of unit net cash costs per
pound to production and delivery costs applicable to sales reported
in FCX's consolidated financial statements, refer to the
supplemental schedules, "Product Revenues and Production Costs,"
beginning on page X, which is available on FCX's website,
"fcx.com."
Mining Exploration Activities. FCX's mining exploration
activities are generally near its existing mines with a focus on
opportunities to expand reserves and resources to support
development of additional future production capacity in the large
minerals districts where it currently operates. Exploration results
continue to indicate opportunities for significant future potential
reserve additions in North and South America, and in the Tenke
minerals district. The drilling data in North America also
indicates the potential for significantly expanded sulfide
production. Drilling results and exploration modeling in North
America have identified large-scale potential sulfide resources in
the Morenci and Safford/Lone Star districts, providing a long-term
pipeline for future growth in reserves and production capacity in
an established minerals district. Exploration spending associated
with mining operations is expected to approximate $100 million for
the year 2015, compared to $96 million in 2014.
OIL AND GAS OPERATIONS
Through its oil and gas subsidiary, FCX Oil & Gas Inc. (FM
O&G), FCX's portfolio of oil and gas assets includes
significant oil production facilities and growth potential in the
Deepwater GOM, established oil production facilities onshore and
offshore California, large onshore natural gas resources in the
Haynesville shale play in Louisiana, natural gas production from
the Madden area in Central Wyoming, and an industry-leading
position in the emerging Inboard Lower Tertiary/Cretaceous natural
gas trend located in the shallow waters of the GOM and onshore in
South Louisiana. During first-quarter 2015, 86 percent of FCX's oil
and gas revenues, excluding the impact of derivative contracts,
were from oil and NGLs.
FM O&G follows the full cost method of accounting whereby
all costs associated with oil and gas property acquisition,
exploration and development activities are capitalized and
amortized to expense under the unit-of-production method on a
country-by-country basis using estimates of proved oil and natural
gas reserves relating to each country where such activities are
conducted. The costs of unproved oil and gas properties are
excluded from amortization until the properties are evaluated.
Under the full cost accounting rules, a "ceiling test" is conducted
each quarter to review the carrying value of the oil and gas
properties for impairment.
At March 31, 2015, net capitalized costs with respect to FM
O&G's proved U.S. oil and gas properties exceeded the ceiling
amount specified by the U.S. Securities and Exchange Commission
(SEC) full cost accounting rules, which resulted in the recognition
of an impairment charge totaling $3.1 billion ($1.9 billion to net
loss attributable to common stock) for first-quarter 2015. The
twelve-month average of the first-day-of-the-month historical
reference oil price required to be used under SEC full cost
accounting rules in determining the March 31, 2015, ceiling amount
was $82.72 per barrel (the twelve-month average was $94.99 per
barrel at December 31, 2014).
FM O&G's reference price is West Texas Intermediate (WTI)
for oil. Because the ceiling test limitation uses a twelve-month
historical average price, if WTI oil prices remain below the
twelve-month average of $82.72 per barrel, the ceiling limitation
will decrease resulting in potentially significant additional
ceiling test impairments of FCX's oil and gas properties during the
remainder of 2015. Other factors that would also contribute to such
impairments include costs transferred from unevaluated properties
to the full cost pool without corresponding proved oil and natural
gas reserve additions, negative reserve revisions and increased
future development or production costs. The WTI oil price was
$56.16 per barrel at April 22, 2015.
Financial and Operating Data. Following is summary financial and
operating data for the U.S. oil and gas operations for the first
quarters of 2015 and 2014:
Three Months Ended March 31, 2015
2014a
Financial Summary (in millions) Realized
revenuesb $ 547 $ 1,245 Less: cash production costsb 254 298
Cash operating margin $ 293 $ 947 Capital expenditures $ 1,018 $
579
Sales Volumes Oil (MMBbls) 8.4 11.8 Natural gas (Bcf)
21.8 19.5 NGLs (MMBbls) 0.5 1.1 MMBOE 12.5 16.1
Average
Realizationsb Oil (per barrel) $ 56.51 $ 93.76 Natural
gas (per million British thermal units, or MMBtu) $ 2.86 $ 4.67
NGLs (per barrel) $ 23.06 $ 45.47
Cash Operating Margin per
BOEb Realized revenues $ 43.71 $ 77.22 Less: cash
production costs 20.26 18.51 Cash operating margin $ 23.45
$ 58.71 a. Includes results from Eagle Ford, which had sales
volumes totaling 4.7 MMBOE in first-quarter 2014. Excluding the
Eagle Ford properties, first-quarter 2014 oil and gas cash
production costs were $20.89 per BOE. b. Cash operating margin for
oil and gas operations reflects realized revenues less cash
production costs. Realized revenues exclude noncash mark-to-market
adjustments on derivative contracts. For reconciliations of
realized revenues (including average realizations for oil, natural
gas and NGLs) and cash production costs to revenues and production
and delivery costs reported in FCX's consolidated financial
statements, refer to the supplemental schedules, “Product Revenues
and Production Costs,” beginning on page X, which is available on
FCX's website, “fcx.com.”
In first-quarter 2015, FM O&G's average realized price for
crude oil was $56.51 per barrel, including $11.97 per barrel of
realized cash gains on derivative contracts. Excluding the impact
of derivative contracts, the first-quarter 2015 average realized
price for crude oil was $44.54 per barrel (81 percent of the
average Brent crude oil price of $55.19 per barrel).
FM O&G has derivative contracts that provide price
protection averaging between approximately $70 and $90 per barrel
of Brent crude oil for more than 80 percent of estimated 2015 oil
production. Assuming an average price of $65 per barrel for Brent
crude oil, FCX would receive a benefit of $20 per barrel on
remaining 2015 derivative contract volumes of 23.1 million barrels,
before taking into account weighted-average premiums of $6.89 per
barrel.
In first-quarter 2015, FM O&G's average realized price for
natural gas was $2.86 per MMBtu, compared to the New York
Mercantile Exchange natural gas price average of $2.98 per MMBtu
for the January through March 2015 contracts.
Realized revenues for oil and gas operations of $43.71 per BOE
in first-quarter 2015 were lower than realized revenues of $77.22
per BOE in first-quarter 2014, primarily reflecting lower oil
prices, partly offset by the impact of higher realized cash gains
on derivative contracts (realized cash gains were $100 million or
$8.00 per BOE in first-quarter 2015, compared with losses of $65
million or $4.01 per BOE in first-quarter 2014).
Cash production costs for oil and gas operations of $20.26 per
BOE in first-quarter 2015 were higher than cash production costs of
$18.51 per BOE in first-quarter 2014, primarily reflecting the sale
of lower-cost Eagle Ford properties.
Following is a summary of average oil and gas sales volumes per
day by region for the first quarters of 2015 and 2014:
Three Months Ended March 31, Sales
Volumes (MBOE per day) 2015 2014 GOMa 74 70
California 39 39 Haynesville/Madden/Other 26 17 Eagle Fordb —
53 Total oil and gas operations 139 179 a. Includes sales
from properties on the GOM Shelf and in the Deepwater GOM. b. FM
O&G completed the sale of Eagle Ford in June 2014.
Daily sales volumes averaged 139 MBOE for first-quarter 2015,
including 93 MBbls of crude oil, 242 million cubic feet (MMcf) of
natural gas and 6 MBbls of NGLs. Oil and gas sales volumes are
expected to average 143 MBOE per day for the year 2015, comprised
of 67 percent oil, 29 percent natural gas and 4 percent NGLs.
Based on current sales volume and cost estimates, cash
production costs are expected to approximate $19 per BOE for the
year 2015.
Oil and Gas Exploration, Operating and Development
Activities. FCX's oil and gas business has significant proved,
probable and possible reserves, a broad range of development
opportunities and high-potential exploration prospects. The
business is managed to reinvest its cash flows in projects with
attractive rates of return and risk profiles. Following the recent
sharp decline in oil prices, FCX has taken steps to significantly
reduce capital spending plans and near-term oil and gas growth
initiatives and is evaluating funding opportunities for capital
expenditures for its oil and gas business, including consideration
of a sale of public equity for a minority interest in FM
O&G.
FM O&G has a large strategic position in the Deepwater GOM
with significant current oil production, strong cash margins and
existing infrastructure and facilities with excess capacity. These
assets, combined with FM O&G’s large leasehold interests in an
established geologic basin, provide financially attractive
investment opportunities for high-impact growth in oil production
and cash margins. FM O&G’s capital allocation strategy is
principally focused on drilling and development opportunities that
can be tied back to existing facilities.
U.S. Oil and Gas Capital Expenditures. First-quarter 2015
capital expenditures for U.S. oil and gas operations totaled $1.0
billion (including $0.6 billion incurred for the Deepwater GOM,
$0.1 billion for the Inboard Lower Tertiary/Cretaceous natural gas
trend and $0.3 billion primarily associated with prior period
costs).
Capital expenditures for oil and gas operations are estimated to
total $2.8 billion for the year 2015. Approximately 85 percent
of the 2015 capital budget is expected to be directed to the
highest return focus areas in the GOM. Capital expenditures
for 2015 have been revised from the previous estimate of $2.3
billion, reflecting increased development drilling and activities
following success from first-quarter 2015 exploration results.
Deepwater GOM. Multiple development and exploration
opportunities have been identified in the Deepwater GOM that
benefit from tieback opportunities to significant available
production capacity at the FM O&G operated large-scale
Holstein, Marlin and Horn Mountain deepwater production platforms.
In addition, FM O&G has interests in the Lucius and Heidelberg
oil fields, and in the Vito basin area.
During first-quarter 2015, FM O&G achieved several important
accomplishments. Positive drilling results were achieved at the
Holstein Deep and King tie-back projects and the
Power Nap prospect in the Vito area. Production commenced at
the Lucius facility, the Dorado development well and
Highlander, with aggregate rates of approximately 25 MBOE
per day by the end of March 2015. Development progressed at the
Heidelberg field.
Initial production was successfully established in January 2015
at the Lucius oil facility in Keathley
Canyon. The facility has a capacity of 80 MBbls of oil per
day and is scheduled to ramp up to full capacity in second-quarter
2015. Lucius consists of six subsea wells tied back to a truss spar
hull located in 7,200 feet of water. FM O&G has a 25.1 percent
working interest in Lucius.
During first-quarter 2015, development activities advanced at
Heidelberg, which is a large, high-quality oil development
project located in 5,300 feet of water in the Green Canyon area.
Fabrication of the main topsides module is more than 85 percent
complete, and the operator plans to install the hull in
second-quarter 2015. The Heidelberg truss spar was designed as a
Lucius-look-alike facility with capacity of 80 MBbls of oil per
day. Development drilling continues, and the project remains on
track for first production in 2016. FM O&G has a 12.5 percent
working interest in Heidelberg.
Following successful drilling results at the 100-percent-owned
Holstein Deep delineation well in the Green Canyon area in
late 2014 that logged 444 feet of net oil pay, FM O&G achieved
positive results at the second delineation well in first-quarter
2015. Wireline logs indicated that the well encountered
approximately 482 feet of net oil pay and established sand
continuity across the primary reservoir encountered in the first
delineation well. The second well, which is updip to the discovery
well, was drilled to 32,260 feet in February 2015. In April
2015, FM O&G commenced drilling the third delineation well,
which is the most updip in the reservoir and is currently drilling
below 7,200 feet towards a proposed total depth of approximately
30,800 feet. Production from the planned three-well subsea
tieback development program is expected to reach approximately 15
MBOE per day in the first half of 2016.
Drilling results, logs and accompanying other data received to
date continues to support the potential for additional development
opportunities at Holstein Deep to achieve production of up to 75
MBOE per day by 2020. The Holstein Deep development is located in
Green Canyon Block 643, west of the Holstein platform in 3,890 feet
of water. FM O&G has identified multiple additional development
opportunities in the Green Canyon area that could be tied back to
the Holstein facility.
Marlin, in which FM O&G has a 100 percent working
interest, is located in Viosca Knoll and has production
facilities capable of producing 60 MBbls of oil per day. Several
tieback opportunities in the area have been identified, including
the Dorado and King development projects.
In March 2015, FM O&G performed a successful production test
in excess of 8 MBOE per day and established production on the first
of three planned subsea tieback wells from the 100-percent-owned
Dorado development project. Drilling operations for the
second and third wells, which are targeting similar undrained fault
blocks and updip resource potential south of the Marlin facility,
are expected to begin in 2016. The Dorado development is located on
Viosca Knoll Block 915 in 3,860 feet of water.
In first-quarter 2015, sidetrack drilling at the
100-percent-owned King prospect encountered the optimum oil
take point in the M66 reservoir, and completion operations are
under way. The well is expected to commence production in late
2015, and additional drilling is planned in the area starting in
the second-half of 2015. King is located in Mississippi Canyon
south of the Marlin facility in 5,200 feet of water.
Horn Mountain, in which FM O&G has a 100 percent working
interest, is located in Mississippi Canyon and has
production facilities capable of producing 75 MBbls of oil per day.
Several tieback opportunities in the area have been identified
including Kilo/Oscar/Quebec/Victory (KOQV), which are
expected to commence drilling in mid-2015. This infill drilling
program will target undrained fault blocks and updip resource
potential just east of the Horn Mountain facility. KOQV is located
in approximately 5,500 feet of water.
In first-quarter 2015, sidetrack drilling at the Power
Nap exploration well in the Vito area successfully extended the
known oil reservoir downdip. A second sidetrack well was drilled to
a favorable position to acquire core data from the primary pay
sand. The operator is preparing to drill the Deep Sleep
exploration well, which is a key offset to the Vito and Power Nap
discoveries. Deep Sleep is located in 4,200 feet of water
approximately 5 miles south of Power Nap. FM O&G owns a 50
percent working interest in Power Nap and Deep Sleep.
FM O&G has an 18.67 percent working interest in the Vito oil
discovery in the Mississippi Canyon area and a significant lease
position in the Vito basin in the Mississippi Canyon and
Atwater Valley areas. Vito, a large, deep subsalt Miocene
oil discovery made in 2009, is located in approximately 4,000 feet
of water. Exploration and appraisal drilling in recent years
confirmed a significant resource in high-quality, subsalt Miocene
sands. Development options are under evaluation.
Inboard Lower Tertiary/Cretaceous. FM O&G has an
industry-leading position in the emerging Inboard Lower
Tertiary/Cretaceous natural gas trend, located on the Shelf of the
GOM and onshore in South Louisiana.
The Highlander discovery, which is located onshore in
South Louisiana, began production on February 25, 2015, following
production testing that indicated a flow rate of 75 MMcf per day
(approximately 37 MMcf per day net to FM O&G). The well has
been restricted to approximately 24 MMcf per day because of limited
processing facilities. FM O&G is currently developing
additional processing facilities to accommodate the higher flow
rates, and installation is expected by year-end 2015. A second well
location has been identified and future plans are being considered.
FM O&G is the operator and has a 72 percent working interest
and an approximate 49 percent net revenue interest in Highlander.
FM O&G has identified multiple prospects in the Highlander area
where it controls rights to more than 50,000 gross acres.
The Farthest Gate West onshore exploration prospect was
drilled to a total depth of approximately 22,000 feet in March
2015, and wireline logs indicated the well encountered hydrocarbon
bearing sands in the Eocene section. FM O&G plans to complete
and flow test the well in second-quarter 2015. FM O&G is the
operator and has a 90 percent working interest in Farthest Gate
West, which is located onshore in Cameron Parish, Louisiana.
California. FM O&G's California assets benefit from an
established oil production base with a stable production profile
and access to favorably priced crude markets. Development plans are
principally focused on maintaining stable production levels through
continued drilling in the long-established producing fields onshore
in California. FM O&G’s position in California is located
onshore in the San Joaquin Valley and Los Angeles Basin and
offshore in the Point Arguello and Point Pedernales fields.
Haynesville. FM O&G has rights to a substantial natural gas
resource, located in the Haynesville shale play in North Louisiana.
Drilling activities in recent years have been reduced to maximize
cash flows in a low natural gas price environment and to benefit
from potentially higher future natural gas prices.
International Exploration (Morocco). FM O&G has a farm-in
arrangement to earn interests in exploration blocks located in the
Mazagan permit area offshore Morocco. The exploration area covers
2.2 million gross acres in water depths of 4,500 to 9,900 feet. FM
O&G expects to commence drilling the MZ-1 well
associated with the Ouanoukrim prospect in May 2015. First-quarter
2015 capital expenditures for international oil and gas exploration
activities in Morocco totaled $15 million.
CASH FLOWS, CASH and DEBT
Operating Cash Flows. FCX generated operating cash flows of $717
million (net of $86 million in working capital uses and changes in
other tax payments) for first-quarter 2015.
Based on current sales volume and cost estimates and assuming
average prices of $2.75 per pound of copper, $1,200 per ounce of
gold, $8 per pound of molybdenum and $65 per barrel of Brent crude
oil for the remainder of 2015, FCX's consolidated operating cash
flows are estimated to approximate $4.4 billion for the year 2015.
The impact of price changes for the remainder of 2015 on operating
cash flows would approximate $250 million for each $0.10 per pound
change in the average price of copper, $30 million for each $50 per
ounce change in the average price of gold, $95 million for each $2
per pound change in the average price of molybdenum and $80 million
for each $5 per barrel change in the average Brent crude oil
price.
Capital Expenditures. Capital expenditures totaled $1.9 billion
for first-quarter 2015, including $0.6 billion for major projects
at mining operations and $1.0 billion for oil and gas
operations.
Capital expenditures are currently expected to approximate $6.5
billion for the year 2015, including $2.5 billion for major
projects at mining operations (primarily for the Cerro Verde
expansion and underground development activities at Grasberg) and
$2.8 billion for oil and gas operations. FCX has taken actions to
reduce or defer capital expenditures and other costs and is
evaluating funding alternatives to advance growth projects in its
oil and gas business, including consideration of a sale of public
equity for a minority interest in its oil and gas subsidiary.
Additional capital cost reductions, potential additional
divestitures or monetizations and other actions will be pursued as
required to maintain a strong balance sheet while preserving a
strong resource position and portfolio of assets with attractive
long-term growth prospects. FCX has a broad set of natural resource
assets that provide many alternatives for future actions to enhance
its financial flexibility.
Cash. Following is a summary of cash available to the parent
company, net of noncontrolling interests' share, taxes and other
costs at March 31, 2015 (in millions):
Cash at domestic companies $
53 Cash at international operations 496 Total
consolidated cash and cash equivalents 549 Less: noncontrolling
interests' share (143 ) Cash, net of noncontrolling interests'
share 406 Less: withholding taxes and other (18 )
Net cash
available $ 388
Debt. FCX remains committed to a strong balance sheet and will
take prudent actions in response to market conditions. FCX has
taken steps to sell assets, defer capital spending and reduce
dividends on its common stock. FCX will continue to evaluate its
portfolio for potential future actions. Following is a summary
of total debt and related weighted-average interest rates at
March 31, 2015 (in billions, except percentages):
Weighted- Average Interest Rate
FCX Senior Notes $ 11.9 3.8% FCX Term Loan 3.0
1.9% FM O&G Senior Notes 2.6 6.6% Other FCX debt 2.8
2.6% $ 20.3 3.7%
At March 31, 2015, FCX had $985 million of borrowings
outstanding and $44 million in letters of credit issued under its
$4 billion revolving credit facility. FCX also has uncommitted and
short-term lines of credit with certain financial institutions that
are unsecured, which have terms and pricing that are generally more
favorable than our revolving credit facility. At March 31, 2015,
there was $350 million of borrowings drawn under these lines of
credit.
In addition, Cerro Verde has a $1.8 billion facility to fund a
portion of its expansion project and for its general corporate
purposes. At March 31, 2015, there was $847 million of
borrowings and no letters of credit issued under Cerro Verde's
credit facility.
FINANCIAL POLICY
FCX has a long-standing tradition of seeking to build
shareholder value through investing in projects with attractive
rates of return and returning cash to shareholders through common
stock dividends and share purchases. FCX paid common stock
dividends of $327 million in first-quarter 2015.
In response to the impact of lower commodity prices, in March
2015, the annual dividend rate for FCX's common stock was reduced
to $0.20 per share from the previous rate of $1.25 per share. On
March 24, 2015, FCX's Board of Directors (the Board) declared a
regular quarterly dividend of $0.05 per share, which will be paid
on May 1, 2015. The declaration of dividends is at the discretion
of the Board and will depend upon FCX's financial results, cash
requirements, future prospects and other factors deemed relevant by
the Board.
FCX intends to continue to maintain a strong financial position,
with a focus on reducing debt while continuing to invest in
attractive growth projects and providing cash returns to
shareholders. The Board will continue to review FCX's financial
policy on an ongoing basis and anticipates increasing cash returns
to shareholders as market and business conditions warrant.
OTHER MATTERS
On April 7, 2015, the Delaware Court of Chancery approved the
settlement of FCX’s stockholder derivative litigation and awarded
the plaintiffs’ legal fees and expenses. In accordance with the
settlement terms, FCX expects the net proceeds to be released from
escrow in May 2015. As a result, FCX expects the Board to declare a
special dividend of approximately $115 million ($0.11 per share)
that would be payable in early August 2015, corresponding with the
timing of FCX’s next regular quarterly dividend.
WEBCAST INFORMATION
A conference call with securities analysts to discuss FCX's
first-quarter 2015 results is scheduled for today at 10:00 a.m.
Eastern Time. The conference call will be broadcast on the Internet
along with slides. Interested parties may listen to the conference
call live and view the slides by accessing "fcx.com." A replay of
the webcast will be available through Friday, May 22,
2015.
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FCX is a premier U.S.-based natural resources company with an
industry-leading global portfolio of mineral assets, significant
oil and gas resources and a growing production profile. FCX is the
world's largest publicly traded copper producer.
FCX's portfolio of assets includes the Grasberg minerals
district in Indonesia, one of the world's largest copper and gold
deposits; significant mining operations in the Americas, including
the large-scale Morenci minerals district in North America and the
Cerro Verde operation in South America; the Tenke Fungurume
minerals district in the DRC; and significant U.S. oil and natural
gas assets, including reserves in the Deepwater GOM, onshore and
offshore California and in the Haynesville natural gas shale, and
an industry-leading position in the emerging shallow water Inboard
Lower Tertiary/Cretaceous natural gas trend on the Shelf of the GOM
and onshore in South Louisiana. Additional information about FCX is
available on FCX's website at "fcx.com."
Cautionary Statement and Regulation G Disclosure: This
press release contains forward-looking statements in which FCX
discusses its potential future performance. Forward-looking
statements are all statements other than statements of historical
facts, such as projections or expectations relating to ore grades
and milling rates, production and sales volumes, unit net cash
costs, cash production costs per BOE, operating cash flows, capital
expenditures, exploration efforts and results, development and
production activities and costs, liquidity, tax rates, the impact
of copper, gold, molybdenum, cobalt, crude oil and natural gas
price changes, the impact of derivative positions, the impact of
deferred intercompany profits on earnings, reserve estimates,
future dividend payments, debt reduction and share purchases. The
words “anticipates,” “may,” “can,” “plans,” “believes,”
“estimates,” “expects,” “projects,” "targets," “intends,” “likely,”
“will,” “should,” “to be,” ”potential" and any similar expressions
are intended to identify those assertions as forward-looking
statements. The declaration of dividends is at the discretion of
the Board and will depend on FCX's financial results, cash
requirements, future prospects, and other factors deemed relevant
by the Board.
FCX cautions readers that forward-looking statements are not
guarantees of future performance and its actual results may differ
materially from those anticipated, projected or assumed in the
forward-looking statements. Important factors that can cause FCX's
actual results to differ materially from those anticipated in the
forward-looking statements include supply of and demand for, and
prices of, copper, gold, molybdenum, cobalt, crude oil and natural
gas, mine sequencing, production rates, industry risks, regulatory
changes, political risks, drilling results, the outcome of ongoing
discussions with the Indonesian government regarding an amendment
to PT-FI's COW, PT-FI's ability to obtain renewal of its export
license after July 25, 2015, the potential effects of violence in
Indonesia, the resolution of administrative disputes in the DRC,
labor relations, weather- and climate-related risks, environmental
risks, litigation results and other factors described in more
detail under the heading “Risk Factors” in FCX's Annual Report on
Form 10-K for the year ended December 31, 2014, filed with the
U.S. Securities and Exchange Commission (SEC) as updated by FCX's
subsequent filings with the SEC.
Investors are cautioned that many of the assumptions on which
FCX's forward-looking statements are based are likely to change
after its forward-looking statements are made, including for
example commodity prices, which FCX cannot control, and production
volumes and costs, some aspects of which FCX may or may not be able
to control. Further, FCX may make changes to its business plans
that could or will affect its results. FCX cautions investors that
it does not intend to update forward-looking statements more
frequently than quarterly notwithstanding any changes in 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 March 31, Production Sales
COPPER
(millions of recoverable pounds)
2015 2014 2015 2014 (FCX's net interest in %)
North
America
Morenci (85%)a 205 148 211 144 Bagdad (100%) 53 58 58 56 Safford
(100%) 40 37 41 36 Sierrita (100%) 47 50 49 46 Miami (100%) 11 14
13 15 Chino (100%) 73 53 75 49 Tyrone (100%) 22 23 24 23 Other
(100%) 1 2 1 2 Total North America 452
385 472 371
South
America
Cerro Verde (53.56%) 107 135 110 123 El Abra (51%) 86 92 90 90
Candelaria/Ojos del Salado (80%)b — 87 — 94
Total South America 193 314 200 307
Indonesia
Grasberg (90.64%)c 154 140 155 109
Africa
Tenke Fungurume (56%) 116 109 133 84
Consolidated 915 948 960
871 Less noncontrolling interests 157 186
168 167
Net 758 762
792 704 Consolidated sales from
mines 960 871 Purchased copper 40 32 Total copper sales,
including purchases 1,000 903 Average realized price
per pound $ 2.72 $ 3.14
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 4 2 3 2 South
America (80%)b — 21 — 23 Indonesia (90.64%)c 255 208
260 162
Consolidated 259 231
263 187 Less noncontrolling interests
24 24 24 20
Net 235
207 239 167 Average
realized price per ounce $ 1,186 $ 1,300
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 7 8 N/A N/A Climax
(100%) 6 5 N/A N/A North America copper mines (100%)a 9 8 N/A N/A
Cerro Verde (53.56%) 2 3 N/A N/A
Consolidated
24 24 23 27 Less
noncontrolling interests 1 2 1 2
Net
23 22 22 25
Average realized price per pound $ 10.17 $ 11.21
COBALT
(millions of contained pounds)
(FCX's net interest in %)
Consolidated - Tenke Fungurume
(56%)
7 7 8 8 Less
noncontrolling interests 3 3 3 4
Net
4 4 5 4
Average realized price per pound $ 8.72 $ 9.21
a.
Amounts are net of Morenci's 15 percent
joint venture partner's interest.
b.
On November 3, 2014, FCX completed the
sale of its 80 percent interests in the Candelaria and Ojos del
Salado mines.
c.
Amounts are net of Grasberg's joint
venture partner's interest, which varies in accordance with the
terms of the joint venture agreement.
FREEPORT-McMoRan INC. SELECTED MINING
OPERATING DATA (continued) Three
Months Ended March 31, 2015 2014
100% North America Copper
Mines
Solution
Extraction/Electrowinning (SX/EW) Operations
Leach ore placed in stockpiles (metric tons per day) 915,100
983,100 Average copper ore grade (percent) 0.25 0.24 Copper
production (millions of recoverable pounds) 247 229
Mill
Operations
Ore milled (metric tons per day) 301,500 255,300 Average ore grades
(percent): Copper 0.48 0.42 Molybdenum 0.03 0.03 Copper recovery
rate (percent) 85.4 86.1 Production (millions of recoverable
pounds): Copper 241 182 Molybdenum 9 8
100% South America
Mininga
SX/EW
Operations
Leach ore placed in stockpiles (metric tons per day) 233,600
286,700 Average copper ore grade (percent) 0.41 0.50 Copper
production (millions of recoverable pounds) 114 123
Mill
Operations
Ore milled (metric tons per day) 119,300 188,700 Average ore
grades: Copper (percent) 0.44 0.59 Molybdenum (percent) 0.02 0.02
Gold (grams per metric ton) — 0.10 Copper recovery rate (percent)
79.6 90.0 Production (recoverable): Copper (millions of pounds) 79
191 Molybdenum (millions of pounds) 2 3 Gold (thousands of ounces)
— 21
100% Indonesia Mining Ore milled (metric tons
per day)b Grasberg open pit 107,900 65,800 DOZ underground mine
49,000 50,300 Big Gossan underground mine — 1,900 Total
156,900 118,000 Average ore grades: Copper (percent) 0.57
0.73 Gold (grams per metric ton) 0.68 0.79 Recovery rates
(percent): Copper 90.5 88.5 Gold 84.5 79.4 Production
(recoverable): Copper (millions of pounds) 154 144 Gold (thousands
of ounces) 255 209
100% Africa Mining Ore milled
(metric tons per day) 14,500 14,500 Average ore grades (percent):
Copper 4.36 4.05 Cobalt 0.35 0.33 Copper recovery rate (percent)
94.0 94.7 Production (millions of pounds): Copper (recoverable) 116
109 Cobalt (contained) 7 7
100% Molybdenum Mines Ore
milled (metric tons per day) 40,600 39,500 Average molybdenum ore
grade (percent) 0.19 0.19 Molybdenum production (millions of
recoverable pounds) 13 13
a.
On November 3, 2014, FCX completed the
sale of its 80 percent interests in the Candelaria and Ojos del
Salado mines.
b.
Amounts represent the approximate average
daily throughput processed at PT-FI's mill facilities from each
producing mine.
FREEPORT-McMoRan INC. SELECTED U.S. OIL AND
GAS OPERATING DATA
Three Months Ended March 31, Sales Volumes Sales per Day 2015 2014
2015 2014
Gulf of Mexico (GOM)a Oil
(thousand barrels or MBbls) 4,963 4,801 55 53 Natural gas (million
cubic feet or MMcf) 7,355 5,907 82 65 Natural gas liquids (NGLs, in
MBbls) 472 515 5 6 Thousand barrels of oil equivalents (MBOE) 6,661
6,301 74 70 Average realized price per BOEb $ 40.65 $ 87.35 Cash
production costs per BOEb $ 17.39 $ 14.42 Capital expenditures (in
millions) $ 705 c $ 403 c
CALIFORNIA Oil (MBbls)
3,374 3,419 38 38 Natural gas (MMcf) 584 548 6 6 NGLs (MBbls) 42 41
1 — d MBOE 3,513 3,551 39 39 Average realized price per BOEb $
38.74 $ 91.76 Cash production costs per BOEb $ 31.70 $ 36.53
Capital expenditures (in millions) $ 29 $ 53
HAYNESVILLE/MADDEN/OTHER Oil (MBbls) 35 28 — d — d Natural
gas (MMcf) 13,828 9,066 154 101 NGLs (MBbls) 10 6 — d — d MBOE
2,350 1,545 26 17 Average realized price per BOEb $ 17.18 $ 30.35
Cash production costs per BOEb $ 11.29 $ 11.34 Capital expenditures
(in millions) $ 21 $ 27
EAGLE FORDe Oil
(MBbls) — 3,531 — 40 Natural gas (MMcf) — 3,958 — 44 NGLs (MBbls) —
545 — 6 MBOE — 4,735 — 53 Average realized price per BOEb $ — $
81.78 Cash production costs per BOEb $ — $ 12.75 Capital
expenditures (in millions) $ — $ 127
TOTAL U.S. OIL AND
GAS OPERATIONS Oil (MBbls) 8,372 11,779 93 131 Natural gas
(MMcf) 21,767 19,479 242 216 NGLs (MBbls) 524 1,107 6 12 MBOE
12,524 16,132 139 179 Cash operating margin per BOE:b Realized
revenues $ 43.71 $ 77.22 Cash production costs 20.26 18.51
Cash operating margin $ 23.45 $ 58.71 Depreciation,
depletion and amortization per BOE $ 42.30 $ 38.21 Capital
expenditures (in millions) $ 1,018 f $ 579 f a. Reflects
properties in the Deepwater GOM and on the Shelf, including the
Inboard Lower Tertiary/Cretaceous natural gas trend. b. Cash
operating margin for oil and gas operations reflects realized
revenues less cash production costs. Realized revenues exclude
noncash mark-to-market adjustments on derivative contracts which
are managed on a consolidated basis; accordingly, the average
realized price per BOE by region does not reflect adjustments for
derivative contracts. For reconciliations of average realized price
and cash production costs per BOE to revenues and production and
delivery costs reported in FCX's consolidated financial statements,
refer to the supplemental schedules, “Product Revenues and
Production Costs,” beginning on page X, which is available on FCX's
website, “fcx.com.” c. Includes $84 million in first-quarter 2015
and $126 million in first-quarter 2014 for the Inboard Lower
Tertiary/Cretaceous natural gas trend. d. Rounds to less than 1
MBbl per day. e. FCX completed the sale of its Eagle Ford shale
assets on June 20, 2014. f. Consolidated capital expenditures for
U.S. oil and gas operations reflect total spending, which include
accrual and other adjustments totaling $263 million for
first-quarter 2015 and $(31) million for first-quarter 2014 that
are not specifically allocated to the above regions.
FREEPORT-McMoRan INC. CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited) Three Months
Ended March 31, 2015 2014 (In millions, except per share amounts)
Revenues $ 4,153 a,b $ 4,985 a,b Cost of sales: Production and
delivery 2,912 c 2,737 c Depreciation, depletion and amortization:
939 966 Impairment of oil and gas properties 3,104 —
Total cost of sales 6,955 3,703 Selling, general and administrative
expenses 154 135 Mining exploration and research expenses 33 30
Environmental obligations and shutdown costs 13 6 Gain on sale of
assets (39 ) — Total costs and expenses 7,116 3,874
Operating (loss) income (2,963 ) 1,111 Interest expense, net
(146 ) d (161 ) d Other income, net 7 33 (Loss)
income before income taxes and equity in affiliated companies' net
earnings (3,102 ) 983 Benefit from (provision for) income taxes 695
e (357 ) e Equity in affiliated companies' net earnings 1 —
Net (loss) income (2,406 ) 626 Net income attributable to
noncontrolling interests (58 ) (106 ) Preferred dividends
attributable to redeemable noncontrolling interest (10 ) (10 ) Net
(loss) income attributable to FCX common stock $ (2,474 ) f $ 510
f Net (loss) income per share attributable to FCX
common stock: Basic $ (2.38 ) $ 0.49 Diluted $ (2.38 ) $
0.49 Weighted-average common shares outstanding:
Basic 1,040 1,038 Diluted 1,040 1,044
Dividends declared per share of common stock $ 0.05 $
0.3125 a. Includes unfavorable adjustments to
provisionally priced concentrate and cathode copper sales
recognized in prior periods totaling $106 million ($59 million to
net loss attributable to common stock) in first-quarter 2015 and
$124 million ($66 million to net income attributable to common
stock) in first-quarter 2014. For further discussion, refer to the
supplemental schedule, "Derivative Instruments," beginning on page
VII. b. Includes net noncash mark-to-market (losses) gains
associated with oil and gas derivative contracts totaling $(48)
million ($(30) million to net loss attributable to common stock) in
first-quarter 2015 and $15 million ($9 million to net income
attributable to common stock) in first-quarter 2014. For further
discussion, refer to the supplemental schedule, "Derivative
Instruments," beginning on page VII. c. First-quarter 2015 includes
charges totaling $17 million ($10 million to net loss attributable
to common stock) associated with idle/terminated rig costs and
inventory write offs at oil and gas operations. First-quarter 2014
includes $53 million ($28 million to net income attributable to
common stock) of fixed costs charged directly to cost of sales as a
result of the impact of export restrictions on PT-FI's operating
rates. d. Consolidated interest expense, excluding capitalized
interest, totaled $210 million in first-quarter 2015 and $224
million in first-quarter 2014. e. As a result of the impairment of
oil and gas properties, FCX recorded a tax charge of $458 million
to establish a valuation allowance primarily against U.S. federal
alternative minimum credits. For a summary of the benefit from
(provision for) for income taxes for the first quarters of 2015 and
2014, refer to the supplementary schedule, "Income Taxes" on page
VII. f. FCX defers recognizing profits on intercompany sales until
final sales to third parties occur. Changes in these deferrals
attributable to variability in intercompany volumes resulted in net
additions to net income attributable to common stock of $24 million
in first-quarter 2015 and $16 million in first-quarter 2014. For
further discussion, refer to the supplemental schedule, "Deferred
Profits" on page VIII.
FREEPORT-McMoRan INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 2015 2014 (In millions) ASSETS
Current assets: Cash and cash equivalents $ 549 $ 464 Trade
accounts receivable 995 953 Other accounts receivables 1,401 1,610
Inventories: Materials and supplies, net 1,919 1,886 Mill and leach
stockpiles 1,877 1,914 Product 1,442 1,561 Other current assets 671
657 Total current assets 8,854 9,045 Property, plant,
equipment and mining development costs, net 26,595 26,220 Oil and
gas properties, net - full cost method: Subject to amortization,
less accumulated amortization 6,713 9,187 Not subject to
amortization 9,665 10,087 Long-term mill and leach stockpiles 2,261
2,179 Other assets 1,977 1,956 Total assets $ 56,065
$ 58,674 LIABILITIES AND EQUITY Current
liabilities: Accounts payable and accrued liabilities $ 3,111 $
3,653 Current portion of debt 558 478 Accrued income taxes 364 410
Current portion of environmental and asset retirement obligations
317 296 Dividends payable 60 335 Total current
liabilities 4,410 5,172 Long-term debt, less current portion 19,754
18,371 Deferred income taxes 5,625 6,398 Environmental and asset
retirement obligations, less current portion 3,678 3,647 Other
liabilities 1,812 1,861 Total liabilities 35,279
35,449 Redeemable noncontrolling interest 755 751
Equity: Stockholders' equity: Common stock 117 117 Capital in
excess of par value 22,307 22,281 (Accumulated deficit) retained
earnings (2,398 ) 128 Accumulated other comprehensive loss (532 )
(544 ) Common stock held in treasury (3,701 ) (3,695 ) Total
stockholders' equity 15,793 18,287 Noncontrolling interests 4,238
4,187 Total equity 20,031 22,474 Total
liabilities and equity $ 56,065 $ 58,674
FREEPORT-McMoRan INC. CONSOLIDATED STATEMENTS OF
CASH FLOWS (Unaudited) Three Months Ended March
31, 2015 2014 (In millions) Cash flow from operating
activities: Net (loss) income $ (2,406 ) $ 626 Adjustments to
reconcile net (loss) income to net cash provided by operating
activities: Depreciation, depletion and amortization 939 966
Impairment of oil and gas properties 3,104 — Gain on sale of assets
(39 ) — Net (gains) losses on crude oil and natural gas derivative
contracts (52 ) 50 Net charges for environmental and asset
retirement obligations, including accretion 53 46 Payments for
environmental and asset retirement obligations (42 ) (45 ) Deferred
income taxes (709 ) 90 Increase in long-term mill and leach
stockpiles (82 ) (86 ) Other, net 37 (33 ) Decreases (increases) in
working capital and changes in other tax payments: Accounts
receivable 316 179 Inventories 165 (180 ) Other current assets (42
) (34 ) Accounts payable and accrued liabilities (402 ) (362 )
Accrued income taxes and changes in other tax payments (123 ) (16 )
Net cash provided by operating activities 717 1,201
Cash flow from investing activities: Capital expenditures:
North America copper mines (107 ) (303 ) South America (445 ) (423
) Indonesia (225 ) (236 ) Africa (39 ) (31 ) Molybdenum mines (3 )
(19 ) United States oil and gas operations (1,018 ) (579 ) Other
(30 ) (21 ) Other, net 127 7 Net cash used in
investing activities (1,740 ) (1,605 ) Cash flow from
financing activities: Proceeds from debt 2,273 1,149 Repayments of
debt (802 ) (987 ) Cash dividends and distributions paid: Common
stock (327 ) (326 ) Noncontrolling interests (23 ) (77 )
Stock-based awards net (payments) proceeds, including excess tax
benefit (6 ) 3 Debt financing costs and other, net (7 ) (1 ) Net
cash provided by (used in) financing activities 1,108 (239 )
Net increase (decrease) in cash and cash equivalents 85 (643
) Cash and cash equivalents at beginning of year 464 1,985
Cash and cash equivalents at end of period $ 549 $
1,342
Freeport-McMoRan Inc.Financial
Contacts:Kathleen L. Quirk,
602-366-8016orDavid P. Joint,
504-582-4203orMedia Contact:Eric E. Kinneberg,
602-366-7994
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