Freeport-McMoRan Inc. FCX said that its fully-owned subsidiary, Freeport-McMoRan Oil & Gas Inc. (FM O&G), has filed a registration with the U.S. Securities and Exchange Commission (SEC) for a potential initial public offering (IPO) of common stock. This will represent a minority interest in FM O&G.
FM O&G plans to apply to list the common stock on the NYSE under the ticker symbol “FMOG.” Barclays will act as book-runner for the planned IPO.
Freeport added a high quality portfolio of U.S.-based oil and gas assets to its global mining business in 2013 through its acquisitions of Plains Exploration & Production Company and McMoRan Exploration. The buyouts represent a part Freeport’s strategy to diversify away from its bread-and-butter copper mining business which has been hit by weak prices.
Freeport’s copper business remains affected by sluggish copper demand in China (a major market) and supply related issues. Copper prices remain under pressure given the oversupply of the metal in the market.
The twin acquisitions have provided Freeport the opportunity to exploit energy markets with positive fundamentals, strong margins and cash flows and a large resource base with financially attractive exploration and development investment opportunities.
In the first quarter of 2015, realized revenues for oil and gas operations were $43.71 per barrels of oil equivalents (BOE), primarily reflecting lower oil prices, partly offset by the impact of higher realized cash gains on derivative contracts. Daily sales volumes averaged 139 million barrels of oil equivalent (MBOE) in the first quarter.
For 2015, oil and gas sales volumes are expected to average 143 MBOE per day, comprising 67% oil, 29% percent natural gas and 4% natural gas liquids. Freeport expects consolidated sales to be around 52.35 million barrels of oil equivalent. Capital expenditures for oil and gas operations are estimated to total $2.8 billion in 2015.
Freeport is taking aggressive actions to reduce or defer capital expenditures and is considering 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.
Freeport currently carries a Zacks Rank #3 (Hold).
Better-ranked mining companies include Amerigo Resources Ltd. ARREF, Southern Copper Corp. SCCO and Newmont Mining Corp. NEM. All of them hold a Zacks Rank #2 (Buy).
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