Freeport-McMoRan Inc. (NYSE: FCX):
- Net loss attributable to common
stock totaled $4.2 billion, $3.35 per share, for first-quarter
2016. After adjusting for net charges totaling $4.0 billion, $3.19
per share, first-quarter 2016 adjusted net loss attributable to
common stock totaled $197 million, $0.16 per share.
- Consolidated sales totaled 1.1
billion pounds of copper, 201 thousand ounces of gold, 17 million
pounds of molybdenum and 12.1 million barrels of oil equivalents
(MMBOE) for first-quarter 2016, compared with 960 million pounds of
copper, 263 thousand ounces of gold, 23 million pounds of
molybdenum and 12.5 MMBOE for first-quarter 2015.
- The Cerro Verde expansion
project reached full production capacity in first-quarter 2016,
and Cerro Verde is on track to produce over 1 billion pounds of
copper for the year 2016.
- Consolidated sales for the year
2016 (adjusted for the anticipated closing of the Morenci
transaction in second-quarter 2016) are expected to approximate 5.0
billion pounds of copper, 1.85 million ounces of gold, 71 million
pounds of molybdenum and 54.4 MMBOE, including 1.15 billion pounds
of copper, 195 thousand ounces of gold, 19 million pounds of
molybdenum and 13.5 MMBOE for second-quarter 2016.
- Average realized prices were
$2.17 per pound for copper, $1,227 per ounce for gold and $29.06
per barrel for oil for first-quarter 2016.
- Consolidated unit net cash costs
averaged $1.38 per pound of copper for mining operations and $15.85
per barrel of oil equivalents (BOE) for oil and gas operations for
first-quarter 2016. Consolidated unit net cash costs for the year
2016 are expected to average $1.05 per pound of copper for mining
operations and $15 per BOE for oil and gas operations.
- Operating cash flows totaled
$740 million (including $188 million in working capital sources and
changes in other tax payments) for first-quarter 2016. Based on
current sales volume and cost estimates and assuming average prices
of $2.25 per pound for copper, $1,250 per ounce for gold, $5 per
pound for molybdenum and $45 per barrel for Brent crude oil for the
remainder of 2016, operating cash flows for the year 2016 are
expected to approximate $4.8 billion (including $0.8 billion in
working capital sources and changes in other tax payments).
- Capital expenditures totaled
$982 million for first-quarter 2016, consisting of $459 million for
mining operations (including $350 million for major projects) and
$523 million for oil and gas operations. Capital expenditures are
expected to approximate $3.3 billion for the year 2016, consisting
of $1.8 billion for mining operations (including $1.4 billion for
major projects) and $1.5 billion for oil and gas operations.
- At March 31, 2016, consolidated
debt totaled $20.8 billion and consolidated cash totaled
$331 million. At March 31, 2016, FCX had $3.0 billion
available under its $3.5 billion credit facility.
- During first-quarter 2016, FCX entered
into agreements to sell an additional 13 percent ownership in
Morenci and to sell an interest in the Timok exploration
project in Serbia for aggregate consideration of $1.3 billion.
In addition, in April 2016, FCX entered into an agreement to
sell certain oil and gas royalty interests for $0.1 billion.
These transactions are expected to close in second-quarter
2016.
- FCX continues to advance discussions
for the sale of certain interests in its mining and oil and gas
assets to accelerate its debt reduction initiatives. FCX
expects to achieve additional progress during second-quarter
2016.
Freeport-McMoRan Inc. (NYSE: FCX) reported net losses
attributable to common stock of $4.2 billion, $3.35 per share, for
first-quarter 2016, compared with $2.5 billion, $2.38 per share,
for first-quarter 2015. FCX’s net losses attributable to common
stock include net charges totaling $4.0 billion, $3.19 per share,
for first-quarter 2016 and $2.4 billion, $2.32 per share, for
first-quarter 2015, primarily for the reduction of the carrying
value of oil and gas properties, idle rig costs and other items
described below.
Richard C. Adkerson, President and Chief Executive Officer,
said, "During the first quarter, we remained focused on executing
our plans to strengthen FCX’s balance sheet and to position the
Company to enhance shareholder value in a challenging market
environment. Our global team is successfully executing our plans,
managing production efficiently and reducing costs and capital
spending. We also achieved progress on our asset divestment program
with $1.4 billion in announced transactions since the beginning of
the year and expect to report additional progress in the second
quarter. We believe the quality and scale of our assets
provide opportunities for significant debt reduction while
retaining a substantial business with attractive low-cost,
long-lived reserves and resources that will enable our shareholders
to benefit from improved conditions in the future."
SUMMARY FINANCIAL DATA
Three Months Ended March 31, 2016
2015 (in millions, except per share amounts)
Revenuesa,b $ 3,527 $ 4,153 c
Operating lossa,b,d,e
$ (3,876 ) $ (2,963 )
c,f
Net loss attributable to common stockb,d,e,g $ (4,184 ) $ (2,474 )
c,f Diluted net loss per share of common stockb,d,e,g $ (3.35 ) $
(2.38 ) c,f
Diluted weighted-average common shares
outstanding
1,251 1,040 Operating cash flowsh $ 740 $ 717 Capital expenditures
$ 982 $ 1,867 At March 31: Cash and cash equivalents $ 331 $ 549
Total debt, including current portion $ 20,777 $ 20,312
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 favorable (unfavorable)
adjustments to provisionally priced concentrate and cathode copper
sales recognized in prior periods totaling $5 million ($3 million
to net loss attributable to common stock or less than $0.01 per
share) in first-quarter 2016 and $(106) million ($(59) million to
net loss attributable to common stock or $(0.06) per share) in
first-quarter 2015. 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
associated with crude oil derivative contracts totaling $48 million
($30 million to net loss attributable to common stock or $0.03 per
share). FCX currently does not have any oil and gas derivative
contracts in place for 2016 or future years.
d.
Includes charges to reduce the carrying
value of oil and gas properties pursuant to full cost accounting
rules of $3.8 billion ($3.8 billion to net loss attributable to
common stock or $3.03 per share) in first-quarter 2016 and $3.1
billion ($2.4 billion to net loss attributable to common stock or
$2.31 per share) in first-quarter 2015. As a result of the
impairments to oil and gas properties, FCX recorded tax charges of
$1.4 billion in first-quarter 2016 and $458 million in
first-quarter 2015 to establish valuation allowances against United
States (U.S.) federal and state deferred tax assets that will not
generate a future benefit. These tax charges have been reflected in
the after-tax impacts for the impairments of oil and gas
properties.
e.
Includes charges at oil and gas operations
totaling (i) $165 million ($165 million to net loss attributable to
common stock or $0.13 per share) in first-quarter 2016 and $13
million ($8 million to net loss attributable to common stock or
$0.01 per share) in first-quarter 2015 for idle rig costs and (ii)
$35 million ($35 million to net loss attributable to common stock
or $0.03 per share) in first-quarter 2016 and $4 million ($2
million to net loss attributable to common stock or less than $0.01
per share) in first-quarter 2015 primarily for inventory write
downs.
f.
Includes a gain of $39 million ($25
million to net loss attributable to common stock or $0.02 per
share) associated with the sale of FCX's one-third interest in the
Luna Energy power facility.
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.
Includes net working capital sources
(uses) and changes in other tax payments of $188 million in
first-quarter 2016 and $(86) million in first-quarter 2015.
DEBT REDUCTION INITIATIVES
During first-quarter 2016, FCX announced plans to strengthen its
balance sheet and accelerate its debt reduction initiatives. In
addition to reducing costs and capital expenditures to maximize
cash flows from its global business, FCX announced plans to sell
assets to repay debt. FCX’s large portfolio of mining and oil
and gas assets provide opportunities to generate significant
proceeds while retaining a strong competitive position within the
global copper industry and a high-quality portfolio of long-lived
assets positioned to generate value as market conditions improve.
FCX is advancing discussions on additional transactions and expects
to achieve additional progress during second-quarter 2016.
Asset Sale Transactions To Date Date of
Agreement Consideration Expected Closing Morenci (13 percent
interest) February 15, 2016 $1.0 billion Second-quarter 2016 Timok
exploration project March 3, 2016 0.3 billion (1) Second-quarter
2016 Oil and gas royalty interests April 21, 2016 0.1 billion
Second-quarter 2016 $1.4 billion
(1) Includes $135 million payable at
closing and $127.5 million payable to FCX in stages upon the
achievement of defined milestones.
During first-quarter 2016, FCX conducted a formal process
involving multiple third-party oil and gas industry and financial
participants to evaluate alternatives for the oil and gas
business. Further weakening in oil and gas prices and negative
credit and financing market conditions during first-quarter 2016
had a significant unfavorable impact on the process. While the
process did not identify a buyer for the entire oil and gas
business, a number of parties have interest in select assets, and
FCX continues to engage in discussions with parties interested in
potential asset or joint venture transactions.
In the interim, FCX is taking immediate steps to reduce oil and
gas costs further. In April 2016, FCX announced a new
management structure and is instituting an approximate 25 percent
oil and gas workforce reduction. The newly structured oil and gas
management team is actively engaged in managing costs and
developing plans to preserve and enhance asset values. FCX
expects to record a charge of approximately $40 million in
second-quarter 2016 associated with workforce reductions and other
restructuring costs.
SUMMARY OPERATING DATA
Three Months Ended March 31, 2016
2015 Copper (millions of recoverable pounds)
Production 1,097 915 Sales, excluding purchases 1,123 960 Average
realized price per pound $ 2.17 $ 2.72 Site production and delivery
costs per pounda $ 1.51 $ 1.93 Unit net cash costs per pounda $
1.38 $ 1.64
Gold (thousands of recoverable ounces)
Production 184 259 Sales, excluding purchases 201 263 Average
realized price per ounce $ 1,227 $ 1,186
Molybdenum
(millions of recoverable pounds) Production 20 24 Sales, excluding
purchases 17 23 Average realized price per pound $ 7.61 $ 10.17
Oil Equivalents Sales volumes MMBOE 12.1 12.5 Thousand BOE
(MBOE) per day 133 139 Cash operating margin per BOEb Realized
revenues $ 23.79 $ 43.71 c Cash production costs (15.85 ) (20.26 )
Cash operating margin $ 7.94 $ 23.45
a.
Reflects per pound weighted-average
production and delivery costs and unit net cash costs (net of
by-product credits) for all copper mines, excluding net noncash and
other costs. 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 are available on FCX's website,
"fcx.com."
b.
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 X, which are available on FCX's website, “fcx.com.”
c.
Includes realized cash gains on crude oil
derivative contracts of $8.00 per BOE. FCX currently does not have
any oil and gas derivative contracts in place for 2016 or future
years.
Consolidated Sales Volumes
First-quarter 2016 consolidated copper sales of 1.1
billion pounds approximated the January 2016 estimate and were
higher than first-quarter 2015 sales of 960 million pounds,
primarily reflecting higher volumes from Cerro Verde.
First-quarter 2016 consolidated gold sales of 201
thousand ounces approximated the January 2016 estimate, but were
lower than first-quarter 2015 sales of 263 thousand ounces,
primarily reflecting lower ore grades and recoveries.
First-quarter 2016 consolidated molybdenum sales of 17
million pounds were lower than the January 2016 estimate of 19
million pounds and first-quarter 2015 sales of 23 million pounds,
primarily reflecting lower demand and reduced volumes from the
Henderson molybdenum mine.
First-quarter 2016 sales from oil and gas operations of 12.1
MMBOE, including 8.3 million barrels (MMBbls) of crude oil,
19.6 billion cubic feet (Bcf) of natural gas and 0.6 MMBbls
of natural gas liquids (NGLs), were slightly lower than
first-quarter 2015 sales of 12.5 MMBOE and the January 2016
estimate of 12.4 MMBOE.
Consolidated sales for the year 2016 are expected to approximate
5.0 billion pounds of copper, 1.85 million ounces of gold, 71
million pounds of molybdenum and 54.4 MMBOE, including 1.15 billion
pounds of copper, 195 thousand ounces of gold, 19 million pounds of
molybdenum and 13.5 MMBOE for second-quarter 2016. Projected
consolidated copper sales have been adjusted for the anticipated
closing of the Morenci transaction in second-quarter 2016.
Anticipated higher grades from Grasberg in the second half of 2016
are expected to result in approximately 55 percent of consolidated
copper sales and 80 percent of consolidated gold sales to occur in
the second half of the year.
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 $1.38
per pound of copper in first-quarter 2016 were lower than unit net
cash costs of $1.64 per pound in first-quarter 2015, primarily
reflecting higher copper sales volumes in South America and the
impact of ongoing cost reduction initiatives.
Assuming average prices of $1,250 per ounce of gold and $5 per
pound of molybdenum for the remainder of 2016 and achievement of
current sales volume and cost estimates, consolidated unit net cash
costs (net of by-product credits) for copper mines are expected to
average $1.05 per pound of copper for the year 2016. The impact of
price changes for the remainder 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 $15.85 per BOE in first-quarter 2016
were lower than cash production costs of $20.26 per BOE in
first-quarter 2015, primarily reflecting increased production from
the Deepwater Gulf of Mexico (GOM) and ongoing cost reduction
efforts.
Based on current sales volume and cost estimates, cash
production costs are expected to approximate $15 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 85 percent joint venture
interest in Morenci using the proportionate consolidation method.
In February 2016, FCX entered into a definitive agreement to sell
an additional 13 percent joint venture interest in Morenci, which
is expected to close in second-quarter 2016.
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, including the suspension of mining operations at
the Miami mine, a transitioned suspension of production at the
Sierrita mine, a 50 percent reduction in mining rates at the Tyrone
mine and adjustments to mining rates at other North America mines.
The revised plans at each of the operations incorporate the impacts
of lower energy, acid and other consumables, reduced labor costs
and a significant reduction in capital spending plans. These plans
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 first quarters of
2016 and 2015:
Three Months Ended March 31, 2016
2015 Copper (millions of recoverable pounds)
Production 487 452 Sales 503 472 Average realized price per pound $
2.16 $ 2.73
Molybdenum (millions of recoverable
pounds) Productiona 8 9
Unit net cash costs per pound of
copperb Site production and delivery, excluding
adjustments $ 1.40 $ 1.81 By-product credits (0.08 ) (0.18 )
Treatment charges 0.10 0.13 Unit net cash costs $
1.42 $ 1.76
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 X, which are available on FCX's website,
"fcx.com."
North America's consolidated copper sales volumes of 503 million
pounds in first-quarter 2016 were higher than first-quarter 2015
sales of 472 million pounds, primarily reflecting higher ore grades
at Morenci and Safford. North America copper sales (adjusted for
the anticipated closing of the Morenci transaction) are estimated
to approximate 1.75 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 $1.42 per pound of copper in
first-quarter 2016 were lower than the unit net cash costs of $1.76
per pound in first-quarter 2015, primarily reflecting the impact of
cost reduction initiatives and higher sales volumes, partly offset
by lower by-product credits.
Average unit net cash costs (net of by-product credits) for the
North America copper mines are expected to approximate $1.45 per
pound of copper for the year 2016, based on current sales volume
and cost estimates and assuming an average molybdenum price of $5
per pound for the remainder of 2016. North America's average unit
net cash costs would change by approximately $0.013 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.
Operating Data. Following is a summary of consolidated operating
data for the South America mining operations for the first quarters
of 2016 and 2015:
Three Months Ended March 31,
2016 2015 Copper (millions of
recoverable pounds) Production 335 193 Sales 323 200 Average
realized price per pound $ 2.19 $ 2.71
Molybdenum
(millions of recoverable pounds) Productiona 5 2
Unit net
cash costs per pound of copperb Site production and
delivery, excluding adjustments $ 1.23 $ 1.75 By-product credits
(0.07 ) (0.08 ) Treatment charges 0.23 0.17 Royalty on metals 0.01
— Unit net cash costs $ 1.40 $ 1.84
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 X, which are available on FCX's website,
"fcx.com."
South America's consolidated copper sales volumes of 323 million
pounds in first-quarter 2016 were higher than first-quarter 2015
sales of 200 million pounds, primarily reflecting higher mining and
milling rates at Cerro Verde. Sales from South America mining are
expected to approximate 1.37 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 $1.40 per pound of copper in first-quarter
2016 were lower than unit net cash costs of $1.84 per pound in
first-quarter 2015, primarily reflecting higher copper sales
volumes associated with the Cerro Verde expansion. Average unit net
cash costs (net of by-product credits) for South America mining are
expected to approximate $1.43 per pound of copper for the year
2016, based on current sales volume and cost estimates and assuming
average prices of $5 per pound of molybdenum for the remainder of
2016.
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. 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 upon completion of
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. On February 9, 2016, PT-FI's export permit was
renewed through August 8, 2016. 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 has further revised
its plans to 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 late 2017. Production from the
Deep Mill Level Zone commenced during September 2015, and the
Grasberg Block Cave mine is anticipated to commence production in
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 first quarters of
2016 and 2015:
Three Months Ended March 31,
2016 2015 Copper (millions of
recoverable pounds) Production 165 154 Sales 174 155 Average
realized price per pound $ 2.20 $ 2.74
Gold
(thousands of recoverable ounces) Production 178 255 Sales 195 260
Average realized price per ounce $ 1,228 $ 1,186
Unit net
cash costs per pound of coppera Site production and
delivery, excluding adjustments $ 2.24 $ 2.84 Gold and silver
credits (1.52 ) (2.09 ) Treatment charges 0.31 0.29 Export duties
0.08 0.14 Royalty on metals 0.13 0.16 Unit net cash
costs $ 1.24 $ 1.34
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 X, which are available on FCX's website,
"fcx.com."
Indonesia's first-quarter 2016 consolidated copper sales of 174
million pounds were higher than first-quarter 2015 sales of 155
million pounds, primarily reflecting higher copper ore grades.
Indonesia's first-quarter 2016 gold sales of 195 thousand ounces
were lower than first-quarter 2015 sales of 260 thousand ounces,
primarily reflecting lower gold ore grades and recoveries.
During first-quarter 2016, copper production was impacted by
reduced mill operating rates associated with unplanned equipment
failures. Temporary repairs to the mill were performed and a
permanent repair is scheduled in second-quarter 2016. As a result,
second-quarter 2016 mill rates are expected to approximate
first-quarter 2016 mill rates. The impact of the equipment failure
and repairs is a reduction of 65 million pounds of copper for the
year 2016, compared with January 2016 estimates.
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 are expected to approximate 1.4 billion pounds of
copper and 1.85 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 beginning in the second half of 2016, with
approximately 70 percent of copper sales and 80 percent of gold
sales anticipated in the second half of the year.
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 $1.24 per pound
of copper in first-quarter 2016 were lower than unit net cash costs
of $1.34 per pound in first-quarter 2015, primarily reflecting
higher copper sales volumes and lower export duties, partly offset
by lower gold and silver credits.
Based on current sales volume and cost estimates, and assuming
an average gold price of $1,250 per ounce for the remainder of
2016, unit net cash costs (net of gold and silver credits) for
Indonesia mining are expected to approximate $0.07 per pound of
copper for the year 2016 and $0.96 per pound for second-quarter
2016. Indonesia mining's unit net cash costs for the year 2016
would change by approximately $0.06 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.
Higher anticipated ore grades from Grasberg in the second half of
2016 are expected to result in lower unit net cash costs in the
second half of the year.
Africa Mining. Through its 56 percent owned and
consolidated subsidiary Tenke Fungurume Mining S.A. (TFM), FCX
operates in the Tenke minerals district in the Southeast region of
the Democratic Republic of Congo (DRC). In addition to copper, the
Tenke mine produces cobalt hydroxide.
Operating and Development Activities. During 2015, FCX revised
plans at Tenke to incorporate a 50 percent reduction in capital
spending for 2016 and various initiatives to reduce operating,
administrative and exploration costs.
TFM successfully commissioned a sulphuric acid plant in
first-quarter 2016, which will reduce requirements for third-party
acid purchases. FCX continues to engage in exploration activities
and metallurgical testing to evaluate the potential of the highly
prospective minerals district at Tenke. Future development and
expansion opportunities are being deferred pending improved market
conditions.
Operating Data. Following is a summary of consolidated operating
data for the Africa mining operations for the first quarters of
2016 and 2015:
Three Months Ended March 31,
2016 2015 Copper (millions of
recoverable pounds) Production 110 116 Sales 123 133 Average
realized price per pounda $ 2.10 $ 2.66
Cobalt
(millions of contained pounds) Production 9 7 Sales 10 8 Average
realized price per pound $ 6.32 $ 8.72
Unit net cash
costs per pound of copperb Site production and delivery,
excluding adjustments $ 1.64 $ 1.57 Cobalt creditsc (0.38 ) (0.37 )
Royalty on metals 0.05 0.06 Unit net cash costs $
1.31 $ 1.26
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 are available on FCX's website,
"fcx.com."
c.
Net of cobalt downstream processing and
freight costs.
TFM's copper sales of 123 million pounds in first-quarter 2016
were lower than first-quarter 2015 copper sales of 133 million
pounds, primarily reflecting lower copper ore grades. TFM's sales
are expected to approximate 485 million pounds of copper and 35
million pounds of cobalt for the year 2016, 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
$1.31 per pound of copper in first-quarter 2016 were higher than
unit net cash costs of $1.26 per pound of copper in first-quarter
2015, primarily reflecting lower sales volumes. Unit net cash costs
(net of cobalt credits) for Africa mining are expected to
approximate $1.32 per pound of copper for the year 2016, based on
current sales volume and cost estimates and assuming an average
cobalt price of $10 per pound for the remainder of 2016. Africa
mining's unit net cash costs for the year 2016 would change by
approximately $0.065 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. 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 first-quarter 2016 and 13 million pounds in
first-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 $7.43
per pound of molybdenum in first-quarter 2016 were higher than
average unit net cash costs of $7.17 per pound in first-quarter
2015, primarily reflecting lower volumes from the Henderson mine.
Based on current sales volume and cost estimates, unit net cash
costs for the Molybdenum mines are expected to average
approximately $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 X, 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, and in the Tenke minerals district. Exploration spending
continues to be constrained by market conditions and is expected to
approximate $50 million for the year 2016, compared to $102 million
in 2015.
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. During
first-quarter 2016, 86 percent of FCX's oil and gas revenues were
from oil and NGLs.
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 $46.26 per barrel at
March 31, 2016, compared with $50.28 per barrel at December
31, 2015. In addition, following a review of alternatives for its
oil and gas business and the current limitations and cost of
capital available for future drilling, FM O&G determined that
the carrying values of certain of its unevaluated properties were
impaired as of March 31, 2016. As a result, FM O&G transferred
$3.1 billion of costs associated with unevaluated properties to the
full cost pool, mostly reflecting impairment of the carrying values
of unevaluated properties. Combined with 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 first-quarter 2016
impairment charge of $3.8 billion.
If the twelve-month historical average price remains below the
March 31, 2016, twelve-month average of $46.26 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 $42.64 per barrel at
April 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 future capitalization of
exploration, development and production costs. At March 31,
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 first quarters of 2016 and 2015:
Three Months Ended March 31, 2016 2015
Financial Summary (in millions) Realized revenuesa $ 289 $
547 Cash production costsa (192 ) (254 ) Cash operating margin $ 97
$ 293 Capital expendituresb $ 480 $ 1,018
Sales Volumes Oil
(MMBbls) 8.3 8.4 Natural gas (Bcf) 19.6 21.8 NGLs (MMBbls) 0.6 0.5
MMBOE 12.1 12.5
Average Realized Pricesa Oil (per
barrel) $ 29.06 $ 56.51 c Natural gas (per million British thermal
units, or MMBtu) $ 2.00 $ 2.86 NGLs (per barrel) $ 14.83 $ 23.06
Cash Operating Margin per BOEa Realized revenues $
23.79 $ 43.71 c Cash production costs (15.85 ) (20.26 ) Cash
operating margin $ 7.94 $ 23.45
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 X, which are available on FCX's website, “fcx.com.”
b.
Excludes international oil and gas
expenditures totaling $43 million in first-quarter 2016 and $15
million in first-quarter 2015, primarily related to the Morocco oil
and gas properties.
c.
Includes realized cash gains on crude oil
derivative contracts of $8.00 per BOE ($11.97 per barrel of oil).
FCX currently does not have any oil and gas derivative contracts in
place for 2016 or future years.
FM O&G's average realized price for crude oil was $29.06 per
barrel in first-quarter 2016 (83 percent of the average Brent crude
oil price of $35.21 per barrel). FM O&G's average realized
price for natural gas was $2.00 per MMBtu in first-quarter 2016,
compared to the New York Mercantile Exchange natural gas price
average of $2.07 per MMBtu for the January through March 2016
contracts.
Realized revenues for oil and gas operations of $23.79 per BOE
in first-quarter 2016 were below realized revenues of $43.71 per
BOE in first-quarter 2015, primarily reflecting lower oil prices
and the impact of realized cash gains on derivative contracts of
$8.00 per BOE in first-quarter 2015.
Cash production costs for oil and gas operations of $15.85 per
BOE in first-quarter 2016 were lower than cash production costs of
$20.26 per BOE in first-quarter 2015, primarily reflecting
increased production from the Deepwater GOM and cost reduction
efforts.
Following is a summary of average oil and gas sales volumes per
day by region for the first quarters of 2016 and 2015:
Three Months Ended March 31, Sales Volumes
(MBOE per day) 2016 2015 GOMa 81 74 California 33 39
Haynesville/Madden/Other 19 26 Total oil and gas operations
133 139
a.
Includes sales from properties on the GOM
Shelf and in the Deepwater GOM, and the Inboard Lower
Tertiary/Cretaceous natural gas trend.
Daily sales volumes averaged 133 MBOE for first-quarter 2016,
including 91 thousand barrels (MBbls) of crude oil, 216 million
cubic feet (MMcf) of natural gas and 6 MBbls of NGLs. Since
year-end 2015, FM O&G has commenced production from two
100-percent-owned Deepwater GOM wells and plans to commence
production from four additional Deepwater GOM wells by mid-2016.
Oil and gas sales volumes are expected to average 149 MBOE per day
for the year 2016, comprised of 73 percent oil, 22 percent natural
gas and 5 percent NGLs.
Based on current sales volume and cost estimates, cash
production costs are expected to approximate $15 per BOE for the
year 2016.
Oil and Gas Exploration, Operating and Development
Activities. FCX's oil and gas business has significant proved,
probable and possible reserves with valuable infrastructure and
associated resources with long-term production and development
potential.
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. Six of these wells have been brought on production. FM
O&G plans to complete and place four additional wells on
production in 2016.
FM O&G continues to take actions to reduce oil and gas costs
and capital expenditures, including undertaking a near-term
deferral of exploration and development activities. Past
investments are expected to enable production to be increased to
average rates of 149 MBOE per day in 2016 and 2017, and cash
production costs to decline to an average of approximately $14 per
BOE in 2016 and 2017.
Two drillships were fully idled in first-quarter 2016, and one
drillship was used for completion operations, including a
completion that commenced in March 2016 and is expected to be
completed in May 2016. Following this operation, the three
drillships are expected to remain idled. Under the existing
drillship contracts, which expire in 2017, FM O&G would incur
idle rig costs totaling an estimated $0.8 billion in 2016 and $0.5
billion in 2017. FCX continues to discuss the terms of the
contracts with the drillship owners.
Oil and Gas Capital Expenditures. Capital expenditures for oil
and gas operations in first-quarter 2016 totaled $480 million in
the U.S. (including $258 million incurred for Deepwater GOM and
$225 million associated with the change in capital expenditure
accruals) and $43 million primarily associated with prior period
costs in Morocco.
Capital expenditures for oil and gas operations for the year
2016 are estimated to total $1.5 billion, excluding $0.8 billion in
idle rig costs (which reduce operating cash flows). Approximately
90 percent of the 2016 capital budget is 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.
The Lucius field in the Keathley Canyon area,
which commenced production in first-quarter 2015, continues to
perform well. During first-quarter 2016, production from six
wells averaged 18 MBOE per day, net to FM O&G’s 25 percent
working interest. 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 receive preferred dividends and
have a liquidation preference which ranks above FM O&G’s common
equity in the subsidiary.
In January 2016, first oil production commenced in the
Heidelberg oil field in the Green Canyon area. Three
wells began producing during the initial phase. Heidelberg is a
subsea development consisting of five subsea wells tied back to a
truss spar hull located in 5,300 feet of water. 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 Holstein Deep, completion activities for the initial
three-well subsea tieback development program are progressing, and
the initial well commenced production in April 2016. Two additional
wells are expected to commence in second-quarter 2016. 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. 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 is currently completing the Kilo/Oscar well
as a tieback to the Horn Mountain production platform. The
Quebec/Victory well is also expected to be tied back and
commence production in 2016. FM O&G’s well inventory
also includes the Horn Mountain Deep well, where successful
drilling results in 2016 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 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. The King
D-9 and D-10 wells are expected to be completed in future
periods.
California. Sales volumes from California averaged 33 MBOE per
day for first-quarter 2016, compared with 39 MBOE per day for
first-quarter 2015. FM O&G’s position in California is located
onshore in the San Joaquin Valley and Los Angeles Basin, and
offshore in the Point Pedernales field.
CASH FLOWS, CASH and DEBT TRANSACTIONS
Operating Cash Flows. FCX generated operating cash flows of $740
million (including $188 million in working capital sources and
changes in other tax payments) for first-quarter 2016.
Based on current sales volume and cost estimates and assuming
average prices of $2.25 per pound of copper, $1,250 per ounce of
gold, $5 per pound of molybdenum and $45 per barrel of Brent crude
oil for the remainder of 2016, FCX's consolidated operating cash
flows are estimated to approximate $4.8 billion for the year 2016
(including $0.8 billion in working capital sources and other tax
payments). The impact of price changes for the remainder of 2016 on
operating cash flows would approximate $340 million for each $0.10
per pound change in the average price of copper, $45 million for
each $50 per ounce change in the average price of gold, $45 million
for each $2 per pound change in the average price of molybdenum and
$100 million for each $5 per barrel change in the average Brent
crude oil price.
Capital Expenditures. Capital expenditures totaled $982 million
for first-quarter 2016, consisting of $459 million for mining
operations (including $350 million for major projects) and $523
million for oil and gas operations. Capital expenditures are
expected to approximate $3.3 billion for the year 2016, consisting
of $1.8 billion for mining operations (including $1.4 billion for
major projects, primarily for underground development activities at
Grasberg and remaining costs for the Cerro Verde expansion) and
$1.5 billion for oil and gas operations. Projected capital
expenditures for the year 2016 exclude $0.8 billion for idle rig
cash costs, which reduce operating cash flows.
Cash. Following is a summary of the U.S. and international
components of consolidated cash and cash equivalents available to
the parent company, net of noncontrolling interests' share, taxes
and other costs at March 31, 2016 (in millions):
Cash at domestic companies $ 9 Cash at international
operations 322 Total consolidated cash and cash equivalents
331 Noncontrolling interests' share (84 ) Cash, net of
noncontrolling interests' share 247 Withholding taxes and other (15
)
Net cash available $ 232
Debt. FCX continues to focus on cost and capital management and
cash flow generation from its operations and is taking actions to
reduce debt by pursuing asset sales and joint venture transactions.
Following is a summary of total debt and the related
weighted-average interest rates at March 31, 2016 (in
billions, except percentages):
Weighted- Average Interest Rate FCX Senior
Notes $ 11.9 3.8% FCX Term Loan 3.0 2.9% FM O&G LLC Senior
Notes 2.5 6.6% Cerro Verde Credit Facility 1.8 2.8% FCX Revolving
Credit Facilitya 0.5 2.9% Other debt 1.1 4.3% $ 20.8
3.9%
a.
At March 31, 2016, FCX has $38 million in
letters of credit issued and availability of $3.0 billion under its
revolving credit facility.
In February 2016, FCX reached agreement with its bank group to
amend its revolving credit facility and term loan, which included
modifications of the maximum leverage ratio and minimum interest
expense coverage ratio to provide FCX with additional flexibility.
Additionally, the commitment under the revolving credit facility
was reduced from $4.0 billion to $3.5 billion.
A springing collateral and guarantee trigger was also added to
the revolving credit facility and term loan. Under this provision,
if FCX has not entered into definitive agreements for asset sales
totaling $3.0 billion in aggregate by June 30, 2016, which are
reasonably expected to close by December 31, 2016, FCX will be
required to secure the revolving credit facility and term loan with
a mutually acceptable collateral and guarantee package.
Additionally, many of the exceptions to the subsidiary indebtedness
and lien restrictions contained in the revolving credit facility
and term loan have been limited through March 31, 2017.
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 dividends were 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
first-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, May 27,
2016.
-----------------------------------------------------------------------------------------------------------
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 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, 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
agreement, 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, 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 March 31, Production Sales
COPPER
(millions of recoverable pounds)
2016 2015 2016 2015 (FCX's net interest in %)
North
America
Morenci (85%)a 232 205 238 211 Bagdad (100%) 48 53 50 58 Safford
(100%) 56 40 59 41 Sierrita (100%) 41 47 43 49 Miami (100%) 8 11 9
13 Chino (100%) 81 73 83 75 Tyrone (100%) 20 22 20 24 Other (100%)
1 1 1 1 Total North America 487 452 503 472
South
America
Cerro Verde (53.56%) 272 107 256 110 El Abra (51%) 63 86 67 90
Total South America 335 193 323 200
Indonesia
Grasberg (90.64%)b 165 154 174 155
Africa
Tenke Fungurume (56%) 110 116 123 133
Consolidated
1,097 915 1,123 960 Less noncontrolling
interests 221 157 222 168
Net 876 758
901 792 Consolidated sales from mines 1,123
960 Purchased copper 27 40 Total copper sales, including purchases
1,150 1,000 Average realized price per pound $ 2.17 $ 2.72
GOLD
(thousands of recoverable ounces)
(FCX's net interest in %) North America (100%) 6 4 6 3 Indonesia
(90.64%)b 178 255 195 260
Consolidated 184 259
201 263 Less noncontrolling interests 17 24 18 24
Net 167 235 183 239
Average realized price per ounce $ 1,227 $ 1,186
MOLYBDENUM (millions of recoverable
pounds)
(FCX's net interest in %) Henderson (100%) 2 7 N/A N/A Climax
(100%) 5 6 N/A N/A North America copper mines (100%)a 8 9 N/A N/A
Cerro Verde (53.56%) 5 2 N/A N/A
Consolidated 20
24 17 23 Less noncontrolling interests 2 1 1 1
Net 18 23 16 22 Average
realized price per pound $ 7.61 $ 10.17
COBALT
(millions of contained pounds)
(FCX's net interest in %)
Consolidated - Tenke Fungurume
(56%)
9 7 10 8 Less noncontrolling
interests 4 3 4 3
Net 5 4 6 5
Average realized price per pound $ 6.32 $ 8.72
a. Amounts are net of Morenci's 15 percent
joint venture partner's interest.
b. 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, 2016 2015
100% North America Copper Mines
Solution
Extraction/Electrowinning (SX/EW) Operations
Leach ore placed in stockpiles (metric tons per day) 833,400
915,100 Average copper ore grade (percent) 0.31 0.25 Copper
production (millions of recoverable pounds) 302 247
Mill
Operations
Ore milled (metric tons per day) 298,600 301,500 Average ore grades
(percent): Copper 0.50 0.48 Molybdenum 0.03 0.03 Copper recovery
rate (percent) 84.7 85.4 Production (millions of recoverable
pounds): Copper 226 241 Molybdenum 8 9
100% South America
Mining
SX/EW
Operations
Leach ore placed in stockpiles (metric tons per day) 140,700
233,600 Average copper ore grade (percent) 0.41 0.41 Copper
production (millions of recoverable pounds) 90 114
Mill
Operations
Ore milled (metric tons per day) 339,400 119,300 Average ore
grades: Copper (percent) 0.43 0.44 Molybdenum (percent) 0.02 0.02
Copper recovery rate (percent) 86.2 79.6 Production (recoverable):
Copper (millions of pounds) 245 79 Molybdenum (millions of pounds)
5 2
100% Indonesia Mining Ore milled (metric tons per
day)a Grasberg open pit 105,800 107,900 Deep Ore Zone underground
mine 44,200 49,000 Deep Mill Level Zone (DMLZ) underground mineb
4,100 — Grasberg Block Cave underground minec 2,300 — Big Gossan
underground minec 200 — Total 156,600 156,900 Average ore grades:
Copper (percent) 0.69 0.57 Gold (grams per metric ton) 0.53 0.68
Recovery rates (percent): Copper 89.3 90.5 Gold 80.6 84.5
Production (recoverable): Copper (millions of pounds) 183 154 Gold
(thousands of ounces) 190 255
100% Africa Mining Ore
milled (metric tons per day) 15,100 14,500 Average ore grades
(percent): Copper 3.97 4.36 Cobalt 0.48 0.35 Copper recovery rate
(percent) 92.8 94.0 Production (millions of pounds): Copper
(recoverable) 110 116 Cobalt (contained) 9 7
100%
Molybdenum Mines Ore milled (metric tons per day) 33,700 40,600
Average molybdenum ore grade (percent) 0.22 0.19 Molybdenum
production (millions of recoverable pounds) 7 13
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. Production from the DMLZ underground
mine commenced in September 2015.
c. 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 March 31, Sales Volumes
Sales per Day 2016 2015 2016 2015
Gulf of Mexico
(GOM)a Oil (thousand barrels or MBbls) 5,373 4,963 59 55
Natural gas (million cubic feet or MMcf) 8,898 7,355 98 82 Natural
gas liquids (NGLs, in MBbls) 525 472 6 5 Thousand barrels of oil
equivalents (MBOE) 7,382 6,661 81 74 Average realized price per
BOEb $ 25.69 $ 40.65 Cash production costs per BOEb $ 12.08 $ 17.39
Capital expenditures (in millions) $ 277 $ 705
CALIFORNIA Oil (MBbls) 2,881 3,374 32 38 Natural gas (MMcf)
480 584 5 6 NGLs (MBbls) 36 42 — d 1 MBOE 2,997 3,513 33 39 Average
realized price per BOEb $ 25.97 $ 38.74 Cash production costs per
BOEb $ 28.27 $ 31.70 Capital expenditures (in millions) $ 9 $ 29
HAYNESVILLE/MADDEN/OTHER Oil (MBbls) 44 35 — d — d
Natural gas (MMcf) 10,261 13,828 113 154 NGLs (MBbls) 13 10 — d — d
MBOE 1,767 2,350 19 26 Average realized price per BOEb $ 12.19 $
17.18 Cash production costs per BOEb $ 10.49 $ 11.29 Capital
expenditures (in millions) $ — $ 21
TOTAL U.S. OIL AND
GAS OPERATIONS Oil (MBbls) 8,298 8,372 91 93 Natural gas (MMcf)
19,639 21,767 216 242 NGLs (MBbls) 574 524 6 6 MBOE 12,146 12,524
133 139 Cash operating margin per BOE:b Realized revenues $ 23.79 $
43.71 c
Less: cash production costs
15.85
20.26 Cash operating margin $ 7.94 $ 23.45 Depreciation, depletion
and amortization per BOE $ 20.97 $ 42.30 Capital expenditures (in
millions) $ 480 e $ 1,018 e
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 X, which are available on FCX's website,
fcx.com.
c. Includes realized cash gains on crude
oil derivative contracts of $8.00 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 any oil
and gas derivative contracts in place for 2016 or future years.
d. Rounds to less than 1 MBbl per day.
e. Consolidated capital expenditures for
U.S. oil and gas operations reflect total spending, which includes
accrual and other adjustments totaling $194 million for
first-quarter 2016 and $263 million for first-quarter 2015 that are
not specifically allocated to the above regions. Excludes
international oil and gas capital expenditures totaling $43 million
in first-quarter 2016 and $15 million for first-quarter 2015,
primarily related to the Morocco oil and gas properties.
FREEPORT-McMoRan
INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended March 31, 2016
2015 (In millions, except per share amounts) Revenuesa $
3,527 $ 4,153 b Cost of sales: Production and deliveryc 2,725 2,912
Depreciation, depletion and amortization 722 939 Impairment of oil
and gas properties 3,787 3,104 Total cost of sales
7,234 6,955 Selling, general and administrative expenses 140 154
Mining exploration and research expenses 19 33 Environmental
obligations and shutdown costs 10 13 Net gain on sale of assets —
(39 ) Total costs and expenses 7,403 7,116
Operating loss (3,876 ) (2,963 ) Interest expense, netd (200 ) (146
) Other income, net 38 7 Loss before income taxes and
equity in affiliated companies' net earnings (4,038 ) (3,102 )
(Provision for) benefit from income taxese (70 ) 695 Equity in
affiliated companies' net earnings 7 1 Net loss
(4,101 ) (2,406 ) Net income attributable to noncontrolling
interests (72 ) (58 ) Preferred dividends attributable to
redeemable noncontrolling interest (11 ) (10 ) Net loss
attributable to common stockholdersf $ (4,184 ) $ (2,474 )
Basic and diluted net loss per share attributable to common
stockholders $ (3.35 ) $ (2.38 ) Basic and diluted
weighted-average common shares outstanding 1,251 1,040
Dividends declared per share of common stock $ —
$ 0.05
a. Includes favorable (unfavorable)
adjustments to provisionally priced concentrate and cathode copper
sales recognized in prior periods totaling $5 million ($3 million
to net loss attributable to common stock) in first-quarter 2016 and
$(106) million ($(59) million to net loss attributable to common
stock) in first-quarter 2015. For further discussion, refer to the
supplemental schedule, "Derivative Instruments," beginning on page
VII.
b. Includes net noncash mark-to-market
losses associated with crude oil derivative contracts totaling $48
million ($30 million to net loss attributable to common stock). FCX
currently does not have any oil and gas derivative contracts in
place for 2016 or future years.
c. Includes charges at oil and gas
operations totaling (i) $165 million ($165 million to net loss
attributable to common stock) in first-quarter 2016 and $13 million
($8 million to net loss attributable to common stock) in
first-quarter 2015 for idle rig costs and (ii) $35 million ($35
million to net loss attributable to common stock) in first-quarter
2016 and $4 million ($2 million to net loss attributable to common
stock) in first-quarter 2015 primarily for inventory write
downs.
d. Consolidated interest expense,
excluding capitalized interest, totaled $228 million in
first-quarter 2016 and $210 million in first-quarter 2015.
e. As a result of the impairment to oil
and gas properties, FCX recorded net tax charges of $1.4 billion in
first-quarter 2016 and $458 million in first-quarter 2015 to
establish valuation allowances against U.S. federal and state
deferred tax assets that will not generate a future benefit. For a
summary of income taxes, refer to the supplemental 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 reductions to net loss
attributable to common stock of $2 million in first-quarter 2016
and $24 million in first-quarter 2015. For further discussion,
refer to the supplemental schedule, "Deferred Profits," on page
VIII.
FREEPORT-McMoRan
INC. CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 2016 2015
(In millions) ASSETS Current assets: Cash and cash equivalents $
331 $ 224 Trade accounts receivable 837 689 Income and other tax
receivables 1,182 1,414 Other accounts receivables 122 174
Inventories: Materials and supplies, net 1,714 1,869 Mill and leach
stockpiles 1,644 1,724 Product 1,170 1,195 Other current assets 233
173 Total current assets 7,233 7,462 Property, plant,
equipment and mining development costs, net 27,376 27,509 Oil and
gas properties, net - full cost method: Subject to amortization,
less accumulated amortization and impairment 1,700 2,262 Not
subject to amortization 1,743 4,831 Long-term mill and leach
stockpiles 2,324 2,271 Other assets 2,288 2,242 Total
assets $ 42,664 $ 46,577 LIABILITIES AND
EQUITY Current liabilities: Accounts payable and accrued
liabilities $ 2,987 $ 3,363 Current portion of debt 1,139 649
Current portion of environmental and asset retirement obligations
270 272 Accrued income taxes 30 23 Total current
liabilities 4,426 4,307 Long-term debt, less current portion 19,638
19,779 Deferred income taxes 4,442 4,288 Environmental and asset
retirement obligations, less current portion 3,762 3,739 Other
liabilities 1,659 1,656 Total liabilities 33,927
33,769 Redeemable noncontrolling interest 767 764
Equity: Stockholders' equity: Common stock 138 137 Capital in
excess of par value 24,333 24,283 Accumulated deficit (16,570 )
(12,387 ) Accumulated other comprehensive loss (503 ) (503 ) Common
stock held in treasury (3,706 ) (3,702 ) Total stockholders' equity
3,692 7,828 Noncontrolling interests 4,278 4,216
Total equity 7,970 12,044 Total liabilities and
equity $ 42,664 $ 46,577
FREEPORT-McMoRan INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) Three
Months Ended March 31, 2016 2015 (In millions) Cash
flow from operating activities: Net loss $ (4,101 ) $ (2,406 )
Adjustments to reconcile net loss to net cash provided by operating
activities: Depreciation, depletion and amortization 722 939
Impairment of oil and gas properties 3,787 3,104 Oil and gas
inventory write downs 35 4 Net gain on sale of assets — (39 ) Net
charges for environmental and asset retirement obligations,
including accretion 57 53 Payments for environmental and asset
retirement obligations (90 ) (42 ) Deferred income taxes 152 (709 )
Increase in long-term mill and leach stockpiles (53 ) (82 ) Net
gains on crude oil derivative contracts — (52 ) Other, net 43 33
Changes in working capital and other tax payments, excluding
amounts from disposition: Accounts receivable 93 316 Inventories
114 165 Other current assets (68 ) (42 ) Accounts payable and
accrued liabilities 9 (402 ) Accrued income taxes and changes in
other tax payments 40 (123 ) Net cash provided by operating
activities 740 717 Cash flow from investing
activities: Capital expenditures: North America copper mines (34 )
(107 ) South America (157 ) (445 ) Indonesia (225 ) (225 ) Africa
(35 ) (39 ) Molybdenum mines (1 ) (3 ) U.S. oil and gas operations
(480 ) (1,018 ) Other (50 ) (30 ) Other, net 2 127
Net cash used in investing activities (980 ) (1,740 ) Cash
flow from financing activities: Proceeds from debt 1,796 2,273
Repayments of debt (1,442 ) (802 ) Net proceeds from sale of common
stock 32 — Cash dividends and distributions paid: Common stock (4 )
(327 ) Noncontrolling interests (18 ) (23 ) Stock-based awards net
payments, including excess tax benefit (4 ) (6 ) Debt financing
costs and other, net (13 ) (7 ) Net cash provided by financing
activities 347 1,108 Net increase in cash and
cash equivalents 107 85 Cash and cash equivalents at beginning of
year 224 464 Cash and cash equivalents at end of
period $ 331 $ 549
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160426005963/en/
Freeport-McMoRan Inc.Financial Contacts:Kathleen L. Quirk,
602-366-8016orDavid P. Joint, 504-582-4203orMedia Contact:Eric E.
Kinneberg, 602-366-7994
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