Freeport cuts oil, gas officials as low prices, high debt weigh

TORONTO (miningweekly.com) – In response to a challenging fossil fuels market, US-based miner Freeport-McMoRan has reintegrated its oil and gas business as an operating division of the parent company, doing away with four senior executives, with one remaining.

NYSE-listed Freeport said that subsidiary Freeport-McMoRan Oil & Gas (FM O&G) would now be headed by industry veteran Mark Kidder, who had been named executive VP of operations of FM O&G.

Freeport advised that the management team of FM O&G, which had served as executive management since its acquisition of Plains Exploration Company (PXP) in 2013, would leave the company. This included FM O&G CEO Jim Flores, president and COO Doss Bourgeois, executive VP and CFO Winston Talbert and executive VP and general counsel John Wombwell.

Freeport advised that the changes were being undertaken to reduce costs, streamline functions and enhance capital allocation across its global business, in support of its debt reduction initiatives.

As at December 31, 2015, Freeport’s total consolidated debt was $20.4-billion and total consolidated cash was $224-million.

Freeport expanded into the oil and gas sector in 2013, having acquired Plains Exploration and McMoRan Exploration for $19-billion, including debt. The deals proved unpopular with investors owing to the big contributions to the company's heavy debt load, while oil prices at $35.72/bl on Tuesday had declined by almost 70% since 2013.

Meanwhile, Freeport’s energy division included assets in the Deepwater Gulf of Mexico, onshore and offshore assets in California and in the Haynesville natural gas shale formation, along with other natural gas assets in Louisiana.

Under pressure from activist investor Carl Icahn, media speculation late last year had it that Freeport was considering an auction sale of the oil and gas assets early this year, but this had not yet materialised.

Freeport in February said it would sell a 13% stake in its Morenci joint venture to Sumitomo Metal Mining, Japan's second-biggest copper producer, for $1-billion in cash, which could result in a gain of about $550-million on the transaction that was expected to close in mid-2016.

Freeport also owned some of the world's biggest copper mines, including the Grasberg mine, in Indonesia.