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Freeport-McMoRan Reports Third-Quarter and Nine-Month 2016 Results

10/25/2016

PHOENIX--(BUSINESS WIRE)-- Freeport-McMoRan Inc. (NYSE: FCX):

  • Net income attributable to common stock totaled $217 million, $0.16 per share, for third-quarter 2016. After adjusting for net gains totaling $39 million, $0.03 per share, third-quarter 2016 adjusted net income attributable to common stock totaled $178 million, $0.13 per share.
  • Consolidated sales (including volumes from Tenke Fungurume (Tenke), which is being reported as discontinued operations) totaled 1.2 billion pounds of copper, 317 thousand ounces of gold, 16 million pounds of molybdenum and 12.0 million barrels of oil equivalents (MMBOE) for third-quarter 2016, compared with 1.0 billion pounds of copper, 294 thousand ounces of gold, 23 million pounds of molybdenum and 13.8 MMBOE for third-quarter 2015.
  • Consolidated sales for the year 2016 are expected to approximate 4.8 billion pounds of copper (including 485 million pounds from Tenke), 1.26 million ounces of gold and 73 million pounds of molybdenum, including 1.3 billion pounds of copper, 590 thousand ounces of gold and 21 million pounds of molybdenum for fourth-quarter 2016.
  • Average realized prices were $2.18 per pound for copper, $1,327 per ounce for gold and $40.63 per barrel for oil for third-quarter 2016.
  • Average unit net cash costs were $1.14 per pound of copper for mining operations and $15.00 per barrel of oil equivalents (BOE) for oil and gas operations for third-quarter 2016. Unit net cash costs for the year 2016 are expected to average $1.20 per pound of copper for mining operations.
  • Operating cash flows totaled $980 million for third-quarter 2016. Based on current sales volume and cost estimates and assuming average prices of $2.10 per pound for copper, $1,250 per ounce for gold and $7 per pound for molybdenum for fourth-quarter 2016, operating cash flows for the year 2016 are expected to approximate $3.6 billion (including $0.3 billion in working capital sources and changes in other tax payments).
  • Capital expenditures totaled $494 million for third-quarter 2016, consisting of $333 million for mining operations (including $250 million for major projects) and $160 million for oil and gas operations. Capital expenditures are expected to approximate $2.8 billion for the year 2016, consisting of $1.6 billion for mining operations (including $1.2 billion for major projects) and $1.2 billion for oil and gas operations.
  • At September 30, 2016, consolidated debt totaled $19.0 billion and consolidated cash totaled $1.1 billion. At September 30, 2016, FCX had no borrowings and $3.5 billion available under its $3.5 billion revolving credit facility.
  • FCX expects to receive $5.2 billion in gross proceeds during fourth-quarter 2016 in connection with previously announced asset sale transactions.
  • In July 2016, FCX commenced a registered at-the-market offering of up to $1.5 billion of common stock. Through October 24, 2016, FCX has sold 33.5 million shares of its common stock for gross proceeds of $415 million ($12.39 per share average price).

Freeport-McMoRan Inc. (NYSE: FCX) reported net income attributable to common stock of $217 million, $0.16 per share, for third-quarter 2016 and net losses attributable to common stock of $4.4 billion, $3.45 per share, for the first nine months of 2016, $3.8 billion, $3.58 per share, for third-quarter 2015 and $8.2 billion, $7.77 per share, for the first nine months of 2015. FCX’s net income attributable to common stock for third-quarter 2016 includes net gains of $39 million, $0.03 per share, primarily reflecting net tax credits, partly offset by the impairment of oil and gas properties. Third-quarter 2015 net loss attributable to common stock included net charges of $3.7 billion, $3.43 per share, primarily for the impairment of oil and gas properties. For further discussion of these amounts and net charges impacting the nine month periods, refer to the supplemental schedule "Adjusted Net Income (Loss)," on page IX, which is available on FCX's website, "fcx.com."

Richard C. Adkerson, President and Chief Executive Officer, said, "Our actions during 2016 position us to achieve our objectives of restoring our balance sheet strength and focusing our strategy on our industry leading portfolio of high quality, long-lived copper assets. Our announced asset sale transactions totaling $6.6 billion combined with significant free cash flow generation in the coming quarters will enable us to achieve our debt reduction targets. Our global team continues to execute our cost and capital management initiatives during a period of weak copper prices in a manner that protects the long-term values of our large resources. We remain focused on completing our announced transactions, executing our operating plans and building long-term values from our portfolio of low-cost, long-lived reserves and resources for the benefit of our shareholders."

         

SUMMARY FINANCIAL DATA

Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015     2016     2015
(in millions, except per share amounts)
Revenuesa,b $ 3,877     $ 3,382 $ 10,453     $ 11,091
Operating income (loss)a $ 359 $ (3,964 ) $ (3,495 ) $ (9,415 )
Net income (loss) from continuing operations $ 292 $ (3,815 ) $ (4,034 ) $ (8,090 )
Net (loss) income from discontinued operationsc $ (6 ) $ 25 $ (191 ) $ 95
Net income (loss) attributable to common stockd,e $ 217 $ (3,830 ) $ (4,446 ) $ (8,155 )
Diluted net income (loss) per share of common stock:
Continuing operations $ 0.18 $ (3.59 ) $ (3.27 ) $ (7.80 )
Discontinued operations (0.02 ) 0.01   (0.18 ) 0.03  
$ 0.16   $ (3.58 ) $ (3.45 ) $ (7.77 )
 
Diluted weighted-average common shares outstanding 1,351 1,071 1,289 1,050
Operating cash flowsf $ 980 $ 822 $ 2,594 $ 2,608
Capital expenditures $ 494 $ 1,527 $ 2,309 $ 5,055
At September 30:
Cash and cash equivalents $ 1,108 $ 233 $ 1,108 $ 233
Total debt, including current portion $ 18,982 $ 20,698 $ 18,982 $ 20,698
 

a. For segment financial results, refer to the supplemental schedules, "Business Segments," beginning on page XII, which are available on FCX's website, "fcx.com."

 

b. Includes (unfavorable) favorable adjustments to provisionally priced concentrate and cathode copper sales recognized in prior periods totaling $(15) million ($(7) million to net income attributable to common stock from continuing operations or $(0.01) per share) in third-quarter 2016, $(117) million ($(58) million to net loss attributable to common stock from continuing operations or $(0.05) per share) in third-quarter 2015, $5 million ($2 million to net loss attributable to common stock from continuing operations or less than $0.01 per share) for the first nine months of 2016 and $(100) million ($(48) million to net loss attributable to common stock from continuing operations or $(0.05) per share) for the first nine months of 2015. For further discussion, refer to the supplemental schedule, "Derivative Instruments," on page XI, which is available on FCX's website, "fcx.com."

 

c. Net income (loss) from discontinued operations includes charges for (i) allocated interest expense totaling $12 million in third-quarter 2016, $6 million in third-quarter 2015, $33 million for the first nine months of 2016 and $20 million for the first nine months of 2015 associated with the portion of the FCX term loan that is required to be repaid as a result of the sale of FCX's interest in Tenke and (ii) income tax (benefit) provision totaling $(2) million in third-quarter 2016, $(11) million in third-quarter 2015, $(25) million for the first nine months of 2016 and $20 million for the first nine months of 2015. In accordance with accounting guidelines, the first nine months of 2016 are also net of an estimated loss on disposal, which will be adjusted through closing of the transaction (refer to the supplemental schedule, “Adjusted Net Income (Loss),” on page IX, which is available on FCX’s website, “fcx.com”).

 

d. Includes net gains (charges) totaling $39 million ($0.03 per share) in third-quarter 2016, $(3.7) billion ($(3.43) per share) in third-quarter 2015, $(4.4) billion ($(3.43) per share) for the first nine months of 2016 and $(8.1) billion ($(7.71) per share) for the first nine months of 2015, which are described in the supplemental schedule, “Adjusted Net Income (Loss),” on page IX, which is available on FCX’s website, “fcx.com.”

 

e. FCX defers recognizing profits on intercompany sales until final sales to third parties occur. For a summary of net impacts from changes in these deferrals, refer to the supplemental schedule, "Deferred Profits," on page XI, which is available on FCX's website, "fcx.com."

 

f. Includes net working capital (uses) sources and changes in other tax payments of $(3) million in third-quarter 2016, $507 million in third-quarter 2015, $463 million for the first nine months of 2016 and $342 million for the first nine months of 2015.

 

DEBT REDUCTION INITIATIVES

FCX is taking actions to restore its balance sheet strength through a combination of asset sale transactions, cash flow from operations and capital market transactions. During 2016, FCX has announced $6.6 billion in asset sale transactions and has received aggregate cash consideration of $1.4 billion. The remaining $5.2 billion in gross proceeds is expected to be received in fourth-quarter 2016 associated with the pending Tenke and oil and gas transactions. In September 2016, FCX agreed to sell its Deepwater Gulf of Mexico (GOM) properties for cash consideration of $2.0 billion and up to $150 million of contingent payments, and in October 2016, FCX agreed to sell its onshore California oil and gas properties for cash consideration of $592 million and up to $150 million of contingent consideration. Following provides a summary of FCX’s completed and pending asset sales (in billions):

       
Cash

Completed Transactions:

Consideration a
Morenci (13 percent interest) $ 1.00
Timok exploration project in Serbia 0.13 b
Oil and gas transactions 0.19
Other land sales 0.06  
1.38

Pending Transactions:

Tenke 2.65 b
Deepwater GOM 2.00 b,c
Onshore California 0.59   b
5.24  
Total, excluding potential transactions and contingent consideration 6.62
Potential Freeport Cobalt/Kinsanfu transactionsd 0.15
Contingent considerationb 0.53  
Total $ 7.30  
 

a. Reflects aggregate cash consideration, before purchase price adjustments.

 

b. Excludes contingent consideration of (i) up to $107 million associated with the Timok transaction, which is payable to FCX in stages based upon achievement of defined development milestones, (ii) up to $120 million for the Tenke transaction, consisting of $60 million if the average copper price exceeds $3.50 per pound and $60 million if the average cobalt price exceeds $20 per pound, both for the 24-month period ending December 31, 2019, (iii) up to $150 million for the Deepwater GOM transaction payable to FCX as the buyer realizes future cash flows in connection with FCX's third-party production handling agreement for the Marlin platform, and (iv) up to $150 million for the onshore California transaction, consisting of $50 million per year for 2018, 2019 and 2020, if the price of Brent crude oil averages $70 per barrel or higher in that calendar year.

 

c. In connection with the Deepwater GOM transaction, FCX Oil & Gas LLC (FM O&G) entered into an agreement to amend the terms of the Plains Offshore Operations Inc. preferred stock to provide FM O&G the right to call these securities for $582 million. FM O&G expects to exercise this option at the time the Deepwater GOM sale closes.

 

d. FCX has agreed to negotiate exclusively with China Molybdenum Co., Ltd. (CMOC) until December 31, 2016, to enter into a definitive agreement to sell its interests in Freeport Cobalt for $100 million and the Kinsanfu exploration project in the Democratic Republic of Congo (DRC) for $50 million in separate transactions.

 

In July 2016, FCX commenced a registered at-the-market (ATM) offering of up to $1.5 billion of common stock. Through October 24, 2016, FCX has sold 33.5 million shares of its common stock for gross proceeds of $415 million ($12.39 per share average price).

FCX continues to aggressively manage production, exploration and administrative costs and capital spending. With the successful completion of the Cerro Verde expansion and anticipated access to higher grade ore from the Grasberg mine in future quarters, FCX expects to generate substantial cash flows for debt reduction.

FCX remains focused on retaining a high-quality portfolio of long-lived copper assets positioned to generate value as market conditions improve. In addition to debt reduction plans, FCX is pursuing opportunities to create additional value through mine designs that would increase copper reserves, reduce costs and provide opportunities to enhance net present values, and continues to advance studies for future development of its copper resources, the timing of which will be dependent on market conditions.

         

SUMMARY OPERATING DATA

 

Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015 2016     2015
Copper (millions of recoverable pounds)a
Production 1,217 1,003 3,447 2,895
Sales, excluding purchases 1,231 1,001 3,465 2,925
Average realized price per pound $ 2.18 $ 2.38 $ 2.16 $ 2.54
Site production and delivery costs per poundb $ 1.39 $ 1.74 $ 1.44 $ 1.84
Unit net cash costs per poundb $ 1.14 $ 1.52 $ 1.28 $ 1.56
Gold (thousands of recoverable ounces)
Production 308 281 658 907
Sales, excluding purchases 317 294 674 909
Average realized price per ounce $ 1,327 $ 1,117 $ 1,292 $ 1,149
Molybdenum (millions of recoverable pounds)
Production 19 23 58 72
Sales, excluding purchases 16 23 52 69
Average realized price per pound $ 9.14 $ 7.91 $ 8.36 $ 9.21
Oil Equivalents
Sales volumes
MMBOE 12.0 13.8 36.6 39.4
Thousand BOE (MBOE) per day 131 150 133 144
Cash operating margin per BOEc
Realized revenues $ 34.99 $ 43.00 d $ 30.50 $ 45.57 d
Cash production costs (15.00 ) (18.85 ) (15.28 ) (19.42 )
Cash operating margin $ 19.99   $ 24.15   $ 15.22   $ 26.15  
 

a. Includes production and sales volumes from Tenke, which is reported as discontinued operations. Copper sales from Tenke totaled 118 million pounds in third-quarter 2016, 113 million pounds in third-quarter 2015, 365 million pounds for the first nine months of 2016 and 350 million pounds for the first nine months of 2015. Average realized copper prices (excluding Tenke) were $2.19 per pound in third-quarter 2016, $2.39 per pound in third-quarter 2015, $2.17 per pound for the first nine months of 2016 and $2.54 per pound for the first nine months of 2015.

 

b. Reflects per pound weighted-average production and delivery costs and unit net cash costs (net of by-product credits) for all copper mines, before net noncash and other costs. Excluding Tenke, mining unit net cash costs averaged $1.14 per pound in third-quarter 2016, $1.57 per pound in third-quarter 2015, $1.28 per pound for the first nine months of 2016 and $1.61 per pound for the first nine months of 2015. For reconciliations of per pound unit costs by operating division to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XV, which are available on FCX's website, "fcx.com."

 

c. Cash operating margin for oil and gas operations reflects realized revenues less cash production costs. Cash production costs exclude accretion and other costs. For reconciliations of realized revenues and cash production costs per BOE to revenues and production and delivery costs reported in FCX's consolidated financial statements, refer to the supplemental schedules, “Product Revenues and Production Costs,” beginning on page XV, which are available on FCX's website, “fcx.com.”

 

d. Includes realized cash gains on crude oil derivative contracts of $7.44 per BOE in third-quarter 2015 and $7.72 per BOE for the first nine months of 2015.

 

Consolidated Sales Volumes

Third-quarter 2016 consolidated copper sales (including Tenke) of 1.23 billion pounds were approximately six percent lower than the July 2016 estimate of 1.3 billion pounds principally reflecting lower mining rates at the Grasberg mine operated by PT Freeport Indonesia (PT-FI), which affected the timing of access to higher grade ore. Third-quarter 2016 consolidated copper sales were higher than third-quarter 2015 sales of 1.0 billion pounds, primarily reflecting higher volumes from Cerro Verde and PT-FI.

Third-quarter 2016 consolidated gold sales of 317 thousand ounces were lower than the July 2016 estimate of 410 thousand ounces primarily reflecting lower mining rates which reflected timing of access to higher grade ore at PT-FI, but were higher than third-quarter 2015 sales of 294 thousand ounces.

Third-quarter 2016 consolidated molybdenum sales of 16 million pounds were lower than the July 2016 estimate of 20 million pounds and third-quarter 2015 sales of 23 million pounds, primarily reflecting weak demand.

Third-quarter 2016 sales from oil and gas operations of 12.0 MMBOE, including 9.1 million barrels (MMBbls) of crude oil, 13.8 billion cubic feet (Bcf) of natural gas and 0.6 MMBbls of natural gas liquids (NGLs), were higher than the July 2016 estimate of 11.4 MMBOE, primarily reflecting higher than anticipated oil sales volumes from GOM, but were lower than third-quarter 2015 sales of 13.8 MMBOE, primarily reflecting the July 2016 sale of Haynesville.

Sales volumes for the year 2016 are expected to approximate 4.8 billion pounds of copper (including 485 million pounds for Tenke), 1.26 million ounces of gold and 73 million pounds of molybdenum, including 1.3 billion pounds of copper (including 120 million pounds for Tenke), 590 thousand ounces of gold and 21 million pounds of molybdenum for fourth-quarter 2016. Projected sales volumes are dependent on a number of factors, including operational performance, shipping schedules and the timing of completing the pending Tenke transaction.

Consolidated Unit Costs

Mining Unit Net Cash Costs. Consolidated average unit net cash costs (net of by-product credits) for FCX's copper mines (including Tenke) of $1.14 per pound of copper in third-quarter 2016 were lower than unit net cash costs of $1.52 per pound in third-quarter 2015, primarily reflecting higher copper sales volumes and the impact of ongoing cost reduction initiatives.

Assuming average prices of $1,250 per ounce of gold and $7 per pound of molybdenum for fourth-quarter 2016 and achievement of current sales volume and cost estimates, consolidated unit net cash costs (net of by-product credits) for copper mines (including Tenke) are expected to average $0.99 per pound of copper in fourth-quarter 2016 and $1.20 per pound for the year 2016. The impact of price changes for fourth-quarter 2016 on consolidated unit net cash costs would approximate $0.0075 per pound for each $50 per ounce change in the average price of gold and $0.004 per pound for each $2 per pound change in the average price of molybdenum. Quarterly unit net cash costs vary with fluctuations in sales volumes and realized prices primarily for gold and molybdenum.

Oil and Gas Cash Production Costs per BOE. Cash production costs for oil and gas operations of $15.00 per BOE in third-quarter 2016 were lower than cash production costs of $18.85 per BOE in third-quarter 2015, primarily reflecting ongoing cost reduction efforts in California.

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 72 percent undivided joint venture interest in Morenci using the proportionate consolidation method.

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 revised plans for its North America copper mines to incorporate reductions in mining rates to reduce operating and capital costs. In addition, FCX curtailed operations at the Miami and Tyrone mines and is operating its Sierrita mine at reduced rates. The revised plans at each of the operations incorporate the impacts of lower energy, acid and other consumables, reduced labor costs and a significant reduction in capital spending plans. These operating plans will 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 third quarters and first nine months of 2016 and 2015:

         
Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015 2016     2015
Copper (millions of recoverable pounds)
Production 455 499 1,411 1,420
Sales 458 483 1,425 1,441
Average realized price per pound $ 2.19 $ 2.42 $ 2.18 $ 2.59
 
Molybdenum (millions of recoverable pounds)
Productiona 9 9 25 28
 
Unit net cash costs per pound of copperb
Site production and delivery, excluding adjustments $ 1.44 $ 1.68 $ 1.41 $ 1.76
By-product credits (0.17 ) (0.12 ) (0.12 ) (0.15 )
Treatment charges 0.10   0.12   0.11   0.12  
Unit net cash costs $ 1.37   $ 1.68   $ 1.40   $ 1.73  
 

a. Refer to summary operating data on page 4 for FCX's consolidated molybdenum sales, which includes sales of molybdenum produced at the North America copper mines.

 

b. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XV, which are available on FCX's website, "fcx.com."

 

North America's consolidated copper sales volumes of 458 million pounds in third-quarter 2016 were less than third-quarter 2015 sales of 483 million pounds, primarily attributable to the May 2016 sale of a portion of FCX's interest in Morenci. North America copper sales are estimated to approximate 1.8 billion pounds for the year 2016, compared with 2.0 billion pounds in 2015.

Average unit net cash costs (net of by-product credits) for the North America copper mines of $1.37 per pound of copper in third-quarter 2016 were lower than the unit net cash costs of $1.68 per pound in third-quarter 2015, primarily reflecting cost reduction initiatives.

Average unit net cash costs (net of by-product credits) for the North America copper mines are expected to approximate $1.41 per pound of copper for the year 2016, based on achievement of current sales volume and cost estimates and assuming an average molybdenum price of $7 per pound for fourth-quarter 2016. North America's average unit net cash costs would change by approximately $0.005 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. The Cerro Verde expansion project commenced operations in September 2015 and achieved capacity operating rates during first-quarter 2016. Cerro Verde's expanded operations benefit from its large-scale, long-lived reserves and cost efficiencies. The project expanded the concentrator facilities from 120,000 metric tons of ore per day to 360,000 metric tons of ore per day and is on track to provide incremental annual production of approximately 600 million pounds of copper and 15 million pounds of molybdenum.

During 2015, FCX revised plans for its South America copper mines, principally to reflect adjustments to the mine plan at El Abra to reduce mining and stacking rates by approximately 50 percent to achieve lower operating and labor costs, defer capital expenditures and extend the life of the existing operations.

FCX continues to evaluate a potential large-scale milling operation at El Abra to process additional sulfide material and to achieve higher recoveries. Exploration results in recent years at El Abra indicate a significant sulfide resource, which could potentially support a major mill project. Future investments will depend on technical studies, economic factors and global copper market conditions.

Operating Data. Following is a summary of consolidated operating data for the South America mining operations for the third quarters and first nine months of 2016 and 2015:

         
Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015 2016     2015
Copper (millions of recoverable pounds)
Production 317 204 986 585
Sales 323 207 973 585
Average realized price per pound $ 2.19 $ 2.37 $ 2.17 $ 2.52
 
Molybdenum (millions of recoverable pounds)
Productiona 5 1 14 5
 
Unit net cash costs per pound of copperb
Site production and delivery, excluding adjustments $ 1.27 $ 1.54 $ 1.23 $ 1.68
By-product credits (0.12 ) (0.04 ) (0.10 ) (0.05 )
Treatment charges 0.24 0.18 0.24 0.17
Royalty on metals 0.01        
Unit net cash costs $ 1.40   $ 1.68   $ 1.37   $ 1.80  
 

a. Refer to summary operating data on page 4 for FCX's consolidated molybdenum sales, which includes sales of molybdenum produced at Cerro Verde.

 

b. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XV, which are available on FCX's website, "fcx.com."

 

South America's consolidated copper sales volumes of 323 million pounds in third-quarter 2016 were significantly higher than third-quarter 2015 sales of 207 million pounds, reflecting Cerro Verde's expanded operations. Sales from South America mining are expected to approximate 1.3 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 third-quarter 2016 were lower than unit net cash costs of $1.68 per pound in third-quarter 2015, primarily reflecting higher copper sales volumes and efficiencies associated with the Cerro Verde expansion and higher by-product credits. Average unit net cash costs (net of by-product credits) for South America mining are expected to approximate $1.42 per pound of copper for the year 2016, based on current sales volume and cost estimates and assuming average prices of $7 per pound of molybdenum for fourth-quarter 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 concentrate that contains significant quantities of gold and silver.

Regulatory Matters. PT-FI continues to engage with Indonesian government officials regarding its long-term operating rights under its Contract of Work (COW), and its rights to export concentrate without restriction.

PT-FI and the Indonesian government entered into a Memorandum of Understanding in July 2014, in which subject to concluding an agreement to extend PT-FI's operations beyond 2021 on acceptable terms, PT-FI 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 also agreed to pay higher royalties and to pay export duties until certain smelter development milestones were met.

In October 2015, the Indonesian government provided a letter of assurance to PT-FI indicating that it would revise regulations allowing it to 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 COW.

In August 2016, PT-FI's export permit was renewed through January 11, 2017. Current regulations published by the Indonesian government prohibit exports of copper concentrate and anode slimes after January 12, 2017. Indonesian government officials have indicated an intent to revise this regulation to protect employment and government revenues. PT-FI is actively engaged with Indonesian government officials on this matter.

Operating and Development Activities. PT-FI is currently mining the final phase of the Grasberg open pit, which contains very high copper and gold ore grades. PT-FI expects to mine high-grade ore over the next several quarters prior to transitioning to the Grasberg Block Cave underground mine in the first half of 2018.

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. From 2017 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 third quarters and first nine months of 2016 and 2015:

         
Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015 2016     2015
Copper (millions of recoverable pounds)
Production 321 192 694 551
Sales 332 198 702 549
Average realized price per pound $ 2.20 $ 2.35 $ 2.17 $ 2.45
 
Gold (thousands of recoverable ounces)
Production 301 272 637 887
Sales 307 285 653 891
Average realized price per ounce $ 1,327 $ 1,117 $ 1,292 $ 1,149
 
Unit net cash costs per pound of coppera
Site production and delivery, excluding adjustments $ 1.37 $ 2.16 $ 1.70 $ 2.39
Gold and silver credits (1.29 ) (1.59 ) (1.28 ) (1.93 )
Treatment charges 0.27 0.31 0.29 0.31
Export duties 0.10 0.17 0.09 0.16
Royalty on metals 0.12   0.13   0.12   0.16  
Unit net cash costs $ 0.57   $ 1.18   $ 0.92   $ 1.09  
 

a. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XV, which are available on FCX's website, "fcx.com."

 

Indonesia's consolidated copper sales totaled 332 million pounds in third-quarter 2016 and were higher than third-quarter 2015 sales of 198 million pounds, primarily reflecting higher copper ore grades. Indonesia's third-quarter 2016 gold sales of 307 thousand ounces were higher than third-quarter 2015 sales of 285 thousand ounces. Third-quarter 2016 sales volumes were below previous estimates because of lower mining rates that affected the timing of access to higher grade ore and a deferral of production into future periods resulting from labor productivity issues and a 10-day work stoppage beginning in late September.

At the Grasberg mine, the sequencing of mining areas with varying ore grades causes fluctuations in quarterly and annual production of copper and gold. Consolidated sales volumes from Indonesia mining operations are expected to approximate 1.2 billion pounds of copper and 1.24 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. Ore grades are expected to further improve in 2017 because of increased access to higher grade sections of the Grasberg open pit.

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 $0.57 per pound of copper in third-quarter 2016 were lower than unit net cash costs of $1.18 per pound in third-quarter 2015, primarily reflecting higher sales volumes, partly offset by lower by-product credits.

Based on current sales volume and cost estimates, and assuming an average gold price of $1,250 per ounce for fourth-quarter 2016, unit net cash costs (net of gold and silver credits) for Indonesia mining are expected to approximate $0.19 per pound of copper for fourth-quarter 2016 and $0.62 per pound for the year 2016. Indonesia mining's unit net cash costs for the year 2016 would change by approximately $0.03 per pound for each $50 per ounce change in the average price of gold for fourth-quarter 2016. Because of the fixed nature of a large portion of Indonesia mining's costs, unit costs vary from quarter to quarter depending on copper and gold volumes. Anticipated higher ore grades from the Grasberg mine are expected to result in lower unit net cash costs in fourth-quarter 2016 and for the year 2017.

Indonesia mining's projected sales volumes are dependent on a number of factors, including operational performance, the timing of shipments and approval by the Indonesian government to continue the export of copper concentrate and anode slimes.

Africa Mining. In May 2016, FCX entered into an agreement to sell its interest in TF Holdings Limited (TFHL), through which FCX holds an effective 56 percent interest in the Tenke copper and cobalt mining concessions in the Southeast region of the DRC. In accordance with accounting guidelines, the operating results of Africa mining have been separately reported as discontinued operations in FCX’s consolidated statements of operations for all periods presented. The transaction is expected to close in fourth-quarter 2016.

Operating Data. Following is a summary of operating data for the Africa mining operations for the third quarters and first nine months of 2016 and 2015:

         
Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015 2016     2015
Copper (millions of recoverable pounds)
Production 124 108 356 339
Sales 118 113 365 350
Average realized price per pounda $ 2.07 $ 2.32 $ 2.07 $ 2.52
 
Cobalt (millions of contained pounds)
Production 9 9 28 25
Sales 9 10 29 26
Average realized price per pound $ 7.83 $ 8.96 $ 7.15 $ 9.04
 
Unit net cash costs per pound of copperb
Site production and delivery, excluding adjustments $ 1.57 $ 1.63 $ 1.61 $ 1.58
Cobalt creditsc (0.46 ) (0.53 ) (0.39 ) (0.47 )
Royalty on metals 0.05   0.05   0.05   0.06  
Unit net cash costs $ 1.16   $ 1.15   $ 1.27   $ 1.17  
 

a. Includes point-of-sale transportation costs as negotiated in customer contracts.

 

b. For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in net income (loss) from discontinued operations in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XV, which are available on FCX's website, "fcx.com."

 

c. Net of cobalt downstream processing and freight costs.

 

Africa mining's copper sales of 118 million pounds in third-quarter 2016 were slightly higher than third-quarter 2015 copper sales of 113 million pounds. Africa mining's sales for 2016 are expected to approximate 485 million pounds of copper and 38 million pounds of cobalt, compared with 467 million pounds of copper and 35 million pounds of cobalt for the year 2015. Africa mining's projected sales for the year 2016 would be impacted by the timing of the completion of the sale of FCX's interest in TFHL.

Africa mining's unit net cash costs (net of cobalt credits) of $1.16 per pound of copper in third-quarter 2016 were slightly higher than unit net cash costs of $1.15 per pound of copper in third-quarter 2015. Unit net cash costs (net of cobalt credits) for Africa mining are expected to approximate $1.26 per pound of copper for 2016, based on current sales volume and cost estimates and assuming an average cobalt price of $11 per pound for fourth-quarter of 2016.

Molybdenum Mines. FCX has two wholly owned molybdenum mines in North America - the Henderson underground mine and the Climax open-pit mine, both in Colorado. The Henderson and Climax mines produce high-purity, chemical-grade molybdenum concentrate, which is typically further processed into value-added molybdenum chemical products. The majority of molybdenum concentrate produced at the Henderson and Climax mines, as well as from FCX's North and South America copper mines, is processed at FCX's conversion facilities.

Operating and Development Activities. In response to market conditions, the revised plans for the Henderson molybdenum mine incorporate lower operating rates, resulting in an approximate 65 percent reduction in Henderson's annual production volumes. FCX also adjusted production plans at its by-product mines, including reduced production at its Sierrita mine. Additionally, FCX incorporated changes in the commercial pricing structure for its chemicals products to promote continuation of chemical-grade production.

Production from the Molybdenum mines totaled 5 million pounds of molybdenum in third-quarter 2016 and 13 million pounds in third-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 $10.28 per pound of molybdenum in third-quarter 2016 were higher than average unit net cash costs of $6.93 per pound in third-quarter 2015, primarily reflecting lower volumes. Based on current sales volume and cost estimates, unit net cash costs for the Molybdenum mines are expected to average approximately $8.50 per pound of molybdenum for the year 2016.

For a reconciliation of unit net cash costs per pound to production and delivery costs applicable to sales reported in FCX's consolidated financial statements, refer to the supplemental schedules, "Product Revenues and Production Costs," beginning on page XV, which are available on FCX's website, "fcx.com."

Mining Exploration Activities. FCX's mining exploration activities are generally associated with its existing mines focusing on opportunities to expand reserves and resources to support development of additional future production capacity. Exploration results continue to indicate opportunities for significant future potential reserve additions in North and South America. Exploration spending continues to be constrained by market conditions and is expected to approximate $45 million for the year 2016.

OIL AND GAS OPERATIONS

Through its wholly owned oil and gas subsidiary, FM O&G, FCX's principal oil and gas assets include oil production facilities in the Deepwater GOM and California.

In September 2016, FCX entered into an agreement to sell its Deepwater GOM properties to Anadarko Petroleum Corporation (Anadarko) for cash consideration of $2.0 billion (before closing adjustments) and up to $150 million in contingent payments. The contingent payments would be received over time as Anadarko realizes future cash flows in connection with FCX's third-party production handling agreement for the Marlin platform. The transaction has an effective date of August 1, 2016, and is expected to close in fourth-quarter 2016, subject to customary closing conditions. In connection with the sale of the Deepwater GOM properties, FM O&G entered into an agreement to amend the terms of the Plains Offshore Operations Inc. preferred stock to provide FM O&G the right to call these securities for $582 million. FM O&G expects to exercise this option at the time the Deepwater GOM sale closes.

In October 2016, FCX entered into an agreement to sell its onshore California oil and gas properties to Sentinel Peak Resources California LLC for cash consideration of $592 million (before closing adjustments) and contingent consideration of up to $150 million, consisting of $50 million per year for 2018, 2019 and 2020 if the price of Brent crude oil averages $70 per barrel or higher in each of these calendar years. The transaction has an effective date of July 1, 2016, and is expected to close in fourth-quarter 2016, subject to customary closing conditions.

Impairment of Oil and Gas Properties. FCX follows the full cost method of accounting for its oil and gas operations, 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 $41.68 per barrel at September 30, 2016, compared with $43.12 per barrel at June 30, 2016. As a result of the impact of the reduction in twelve-month historical prices and reserve revisions, net capitalized costs exceeded the ceiling test limitation under full cost accounting rules, which resulted in the recognition of a third-quarter 2016 impairment charge of $239 million.

Financial and Operating Data. Following is a summary of financial and operating data for the U.S. oil and gas operations for the third quarters and first nine months of 2016 and 2015:

         
Three Months Ended Nine Months Ended
September 30, September 30,
2016     2015 2016     2015
Financial Summary (in millions)
Realized revenuesa $ 421 $ 593 b $ 1,115 $ 1,796 b
Cash production costsa (180 ) (260 ) (558 ) (765 )
Cash operating margin $ 241 $ 333 $ 557 $ 1,031
Capital expendituresc $ 160 $ 635 $ 1,028 $ 2,430
Sales Volumes
Oil (MMBbls) 9.1 9.3 26.1 26.3
Natural gas (Bcf) 13.8 22.8 52.2 68.1
NGLs (MMBbls) 0.6 0.7 1.8 1.8
MMBOE 12.0 13.8 36.6 39.4
Average Realized Pricesa
Oil (per barrel) $ 40.63 $ 55.88 b $ 37.11 $ 59.92 b
Natural gas (per million British thermal units, or MMBtu) $ 2.84 $ 2.72 $ 2.24 $ 2.74
NGLs (per barrel) $ 17.65 $ 16.68 $ 16.85 $ 19.78
Cash Operating Margin per BOEa
Realized revenues $ 34.99 $ 43.00 b $ 30.50 $ 45.57 b
Cash production costs (15.00 ) (18.85 ) (15.28 ) (19.42 )
Cash operating margin $ 19.99   $ 24.15   $ 15.22   $ 26.15  
 

a. Cash operating margin for oil and gas operations reflects realized revenues less cash production costs. Cash production costs exclude accretion and other costs. For reconciliations of realized revenues (including average realized prices for oil, natural gas and NGLs) and cash production costs to revenues and production and delivery costs reported in FCX's consolidated financial statements, refer to the supplemental schedules, “Product Revenues and Production Costs,” beginning on page XV, which are available on FCX's website, “fcx.com.”

 

b. Includes realized cash gains on crude oil derivative contracts of $103 million ($11.03 per barrel of oil and $7.44 per BOE) in third-quarter 2015 and $304 million ($11.58 per barrel of oil and $7.72 per BOE) for the first nine months of 2015.

 

c. Excludes international oil and gas expenditures totaling $37 million in third-quarter 2015, $47 million for the first nine months of 2016 and $81 million for the first nine months of 2015, primarily related to the Morocco oil and gas properties.

 

The average realized price for crude oil was $40.63 per barrel in third-quarter 2016 (86 percent of the average Brent crude oil price of $46.99 per barrel). The average realized price for natural gas was $2.84 per MMBtu in third-quarter 2016, compared to the New York Mercantile Exchange natural gas price average of $2.81 per MMBtu for the July through September 2016 contracts.

Lower realized revenues for oil and gas operations of $34.99 per BOE in third-quarter 2016, compared to $43.00 per BOE in third-quarter 2015, primarily reflects the impact of realized cash gains on derivative contracts of $7.44 per BOE in third-quarter 2015.

Cash production costs for oil and gas operations of $15.00 per BOE in third-quarter 2016 were lower than cash production costs of $18.85 per BOE in third-quarter 2015, primarily reflecting ongoing cost reduction efforts.

Following is a summary of average oil and gas sales volumes per day by region for the third quarters and first nine months of 2016 and 2015:

         
Three Months Ended Nine Months Ended
September 30, September 30,
Sales Volumes (MBOE per day) 2016     2015 2016     2015
GOMa 92 91 87 82
Californiab 33 35 32 37
Haynesville/Madden/Otherc 6   24   14   25
Total oil and gas operations 131   150   133   144
 

a. In September 2016, FCX entered into an agreement to sell its Deepwater GOM properties; this transaction is expected to close in fourth-quarter 2016.

 

b. In October 2016, FCX entered into an agreement to sell its onshore California properties; this transaction is expected to close in fourth-quarter 2016.

 

c. In July 2016, FCX completed the sale of its Haynesville shale assets.

 

Daily sales volumes averaged 131 MBOE for third-quarter 2016, including 99 thousand barrels (MBbls) of crude oil, 150 million cubic feet (MMcf) of natural gas and 7 MBbls of NGLs.

Following completion of the Deepwater GOM and onshore California transactions, FCX’s portfolio of oil and gas assets would include oil and natural gas production onshore in South Louisiana and on the GOM Shelf, oil production offshore California and natural gas production from the Madden area in Central Wyoming. In third-quarter 2016, these properties produced an average of 7 MBbls of oil and NGLs per day and 74 MMcf of natural gas per day.

Oil and Gas Capital Expenditures. Capital expenditures for oil and gas operations in third-quarter 2016 totaled $160 million (including $75 million incurred for GOM and $97 million associated with the change in capital expenditure accruals).

CASH FLOWS, CASH, DEBT and EQUITY TRANSACTIONS

Operating Cash Flows. FCX generated operating cash flows of $980 million for third-quarter 2016 and $2.6 billion (including $463 million in working capital sources and changes in other tax payments) for the first nine months of 2016.

Based on current sales volume and cost estimates and assuming average prices of $2.10 per pound of copper, $1,250 per ounce of gold, $7 per pound of molybdenum and $51 per barrel of Brent crude oil for fourth-quarter 2016, FCX's consolidated operating cash flows are estimated to approximate $3.6 billion for the year 2016 (including $0.3 billion in working capital sources and other tax payments). The impact of price changes during fourth-quarter 2016 on operating cash flows would approximate $150 million for each $0.10 per pound change in the average price of copper, $20 million for each $50 per ounce change in the average price of gold, $15 million for each $2 per pound change in the average price of molybdenum and $28 million for each $5 per barrel change in the average Brent crude oil price.

Capital Expenditures. Capital expenditures totaled $494 million for third-quarter 2016, consisting of $333 million for mining operations (including $250 million for major projects primarily for the development of underground mines by PT-FI) and $160 million for oil and gas operations. Capital expenditures for the first nine months of 2016 totaled $2.3 billion, consisting of $1.2 billion for mining operations (including $0.9 billion for major projects) and $1.1 billion for oil and gas operations.

Capital expenditures are expected to approximate $2.8 billion for the year 2016, consisting of $1.6 billion for mining operations (including $1.2 billion for major projects, primarily for the development of underground mines by PT-FI and for the Cerro Verde expansion, which was completed earlier in the year) and $1.2 billion for oil and gas operations.

Cash. Following is a summary of the U.S. and international components of consolidated cash and cash equivalents available to the parent company (excluding cash and cash equivalents of $68 million in assets held for sale), net of noncontrolling interests' share, taxes and other costs at September 30, 2016 (in millions):

     
Cash at domestic companies $ 709
Cash at international operations 399  
Total consolidated cash and cash equivalents 1,108
Noncontrolling interests' share (97 )
Cash, net of noncontrolling interests' share 1,011
Withholding taxes and other (30 )
Net cash available $ 981  
 

Debt. FCX continues to focus on cost and capital management and cash flow generation from its operations and is taking actions to reduce debt through asset sales, available cash flows and other transactions. Following is a summary of total debt and the related weighted-average interest rates at September 30, 2016 (in billions, except percentages):

           
Weighted-
Average
Interest Rate
FCX Senior Notes $ 11.5 3.8 %
FCX Term Loana 2.5 3.3 %
FM O&G Senior Notes 2.5 6.6 %
Cerro Verde Credit Facility 1.6 2.7 %
Other debt 0.9   4.9 %
$ 19.0   4.0 %
 

a. In accordance with the mandatory prepayment provision of the amended Term Loan, 50 percent of the proceeds associated with FCX's pending asset sale transactions must be applied toward repaying the Term Loan.

 

At September 30, 2016, FCX had no borrowings, $43 million in letters of credit issued and availability of $3.5 billion under its revolving credit facility.

Equity. In July 2016, FCX commenced a registered ATM offering of up to $1.5 billion of common stock. Through October 24, 2016, FCX has sold 33.5 million shares of its common stock for gross proceeds of $415 million ($12.39 per share average price). As of September 30, 2016, FCX has 1.36 billion common shares outstanding.

FINANCIAL POLICY

FCX intends to continue to seek to strengthen its financial position, with a focus on significant debt reduction. In December 2015, FCX's common stock dividend was suspended. FCX's Board of Directors will continue to review its financial policy on an ongoing basis.

WEBCAST INFORMATION

A conference call with securities analysts to discuss FCX's third-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, November 25, 2016.

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FCX is a premier U.S.-based natural resources company with an industry-leading global portfolio of mineral assets. 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, and significant mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America. 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, operating cash flows, capital expenditures, debt reduction initiatives, including FCX's ability to complete pending asset sales and the anticipated timing thereof, and to sell additional assets, exploration efforts and results, development and production activities and costs, liquidity, tax rates, the impact of copper, gold, molybdenum, cobalt, crude oil and natural gas price changes, the impact of deferred intercompany profits on earnings, reserve estimates, future dividend payments, and share purchases and sales. The words “anticipates,” “may,” “can,” “plans,” “believes,” “estimates,” “expects,” “projects,” "targets," “intends,” “likely,” “will,” “should,” “to be,” ”potential" and any similar expressions are intended to identify those assertions as forward-looking statements. Under its term loan and revolving credit facility, as amended, FCX is not permitted to pay dividends on common stock on or prior to March 31, 2017. The declaration of dividends is at the discretion of FCX's Board of Directors (Board), subject to restrictions under FCX's credit agreements, and will depend on FCX's financial results, cash requirements, future prospects, and other factors deemed relevant by the Board.

FCX cautions readers that forward-looking statements are not guarantees of future performance and actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that can cause FCX's actual results to differ materially from those anticipated in the forward-looking statements include supply of and demand for, and prices of, copper, gold, molybdenum, cobalt, crude oil and natural gas, mine sequencing, production rates, drilling results, potential effects of cost and capital expenditure reductions and production curtailments on financial results and cash flow, the outcome of FCX's debt reduction initiatives, FCX's ability to secure regulatory approvals, satisfy closing conditions and consummate pending asset sales, potential additional oil and gas property impairment charges, potential inventory adjustments, potential impairment of long-lived mining assets, the outcome of ongoing discussions with the Indonesian government regarding PT-FI's Contract of Work (COW), the potential effects of violence in Indonesia generally and in the province of Papua, the resolution of administrative disputes in the Democratic Republic of Congo, 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. With respect to FCX's operations in Indonesia, such factors include whether PT-FI will be able to continue to export its copper concentrate directly and indirectly through PT Smelting (PT-FI's 25 percent-owned Indonesian smelting unit) after the January 12, 2017, effective date of regulations prohibiting exports of copper concentrate and anode slimes, including whether and when those regulations may be revised and whether any such revisions would impose additional conditions on PT-FI. PT-FI's inability to export copper concentrate itself and through PT Smelting for any extended period of time would lead to the suspension of all of FCX's production in Indonesia.

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 September 30,
Production Sales

COPPER (millions of recoverable pounds)

2016 2015 2016 2015

(FCX's net interest in %)

North America
Morenci (72%)a 202 232 208 224
Bagdad (100%) 47 53 46 52
Safford (100%) 64 57 62 51
Sierrita (100%) 40 45 40 46
Miami (100%) 6 10 5 10
Chino (100%) 78 82 78 79
Tyrone (100%) 17 20 18 21
Other (100%) 1     1    
Total North America 455   499   458   483  
 
South America
Cerro Verde (53.56%) 265 123 272 128
El Abra (51%) 52   81   51   79  
Total South America 317   204   323   207  
 
Indonesia
Grasberg (90.64%)b 321   192   332   198  
Consolidated - continuing operations 1,093 895 1,113

c

 

888

c

Discontinued operations - Tenke Fungurume (Tenke) (56%) 124   108   118   113  
Total 1,217 1,003 1,231 1,001
Less noncontrolling interests 234   162   235   167  
Net 983   841   996   834  
 
 
Average realized price per pound $ 2.19 $ 2.39
Average realized price per pound (including Tenke) $ 2.18 $ 2.38
 
GOLD (thousands of recoverable ounces)
(FCX's net interest in %)
North America (100%) 7 9 10 9
Indonesia (90.64%)b 301   272   307   285  
Consolidated 308   281   317   294  
Less noncontrolling interests 28   25   29   27  
Net 280   256   288   267  
 
Average realized price per ounce $ 1,327 $ 1,117
 
MOLYBDENUM (millions of recoverable pounds)
(FCX's net interest in %)
Henderson (100%) 2 7 N/A N/A
Climax (100%) 3 6 N/A N/A
North America copper mines (100%)a 9 9 N/A N/A
Cerro Verde (53.56%) 5   1   N/A N/A
Consolidated 19   23   16   23  
Less noncontrolling interests 2     1   1  
Net 17   23   15   22  
 
Average realized price per pound $ 9.14 $ 7.91
 
COBALT (millions of contained pounds)
(FCX's net interest in %)
Discontinued operations - Tenke (56%) 9 9 9 10
Less noncontrolling interests 4   4   4   4  
Net 5   5   5   6  
 
Average realized price per pound $ 7.83 $ 8.96
 

a. Amounts are net of Morenci's undivided joint venture partner's interest; effective May 31, 2016, FCX's undivided interest in Morenci was prospectively reduced from 85 percent to 72 percent.

 

b. Amounts are net of Grasberg's joint venture partner's interest, which varies in accordance with the terms of the joint venture agreement.

 

c. Consolidated sales volumes exclude purchased copper of 61 million pounds in third-quarter 2016 and 28 million pounds in third-quarter 2015.

 
               
FREEPORT-McMoRan INC.
SELECTED MINING OPERATING DATA (continued)
 
Nine Months Ended September 30,
Production Sales
COPPER (millions of recoverable pounds) 2016 2015 2016 2015
(FCX's net interest in %)
North America
Morenci (72%)a 658 656 667 660
Bagdad (100%) 139 157 141 166
Safford (100%) 173 136 173 132
Sierrita (100%) 122 140 123 146
Miami (100%) 20 33 21 35
Chino (100%) 239 231 239 232
Tyrone (100%) 56 65 57 68
Other (100%) 4   2   4   2  
Total North America 1,411   1,420   1,425   1,441  
 
South America
Cerro Verde (53.56%) 815 334 798 335
El Abra (51%) 171   251   175   250  
Total South America 986   585   973   585  
 
Indonesia
Grasberg (90.64%)b 694   551   702   549  
Consolidated - continuing operations 3,091 2,556 3,100 c 2,575 c
Discontinued operations - Tenke (56%) 356   339   365   350  
Total 3,447 2,895 3,465 2,925
Less noncontrolling interests 684   479   683   484  
Net 2,763   2,416   2,782   2,441  
 
 
Average realized price per pound $ 2.17 $ 2.54
Average realized price per pound (including Tenke) $ 2.16 $ 2.54
 
GOLD (thousands of recoverable ounces)
(FCX's net interest in %)
North America (100%) 21 20 21 18
Indonesia (90.64%)b 637   887   653   891  
Consolidated 658   907   674   909  
Less noncontrolling interests 59   83   61   84  
Net 599   824   613   825  
 
Average realized price per ounce $ 1,292 $ 1,149
 
MOLYBDENUM (millions of recoverable pounds)
(FCX's net interest in %)
Henderson (100%) 7 21 N/A N/A
Climax (100%) 12 18 N/A N/A
North America copper mines (100%)a 25 28 N/A N/A
Cerro Verde (53.56%) 14   5   N/A N/A
Consolidated 58   72   52   69  
Less noncontrolling interests 6   2   4   3  
Net 52   70   48   66  
 
Average realized price per pound $ 8.36 $ 9.21
 
COBALT (millions of contained pounds)
(FCX's net interest in %)
Discontinued operations - Tenke (56%) 28 25 29 26
Less noncontrolling interests 12   11   13   11  
Net 16   14   16   15  
 
Average realized price per pound $ 7.15 $ 9.04
 

a. Amounts are net of Morenci's undivided joint venture partner's interest; effective May 31, 2016, FCX's undivided interest in Morenci was prospectively reduced from 85 percent to 72 percent.

 

b. Amounts are net of Grasberg's joint venture partner's interest, which varies in accordance with the terms of the joint venture agreement.

 

c. Consolidated sales volumes exclude purchased copper of 131 million pounds for the first nine months of 2016 and 92 million pounds for the first nine months of 2015.

 
               
FREEPORT-McMoRan INC.
SELECTED MINING OPERATING DATA (continued)
 
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
100% North America Copper Mines
Solution Extraction/Electrowinning (SX/EW) Operations
Leach ore placed in stockpiles (metric tons per day) 681,400 927,900 764,900 911,100
Average copper ore grade (percent) 0.31 0.27 0.32 0.26
Copper production (millions of recoverable pounds) 316 300 921 808
 
Mill Operations
Ore milled (metric tons per day) 300,500 311,500 299,900 309,700
Average ore grades (percent):
Copper 0.47 0.50 0.48 0.48
Molybdenum 0.03 0.03 0.03 0.03
Copper recovery rate (percent) 87.8 85.6 86.3 85.6
Production (millions of recoverable pounds):
Copper 216 240 661 728
Molybdenum 9 9 25 28
 
100% South America Mining
SX/EW Operations
Leach ore placed in stockpiles (metric tons per day) 163,000 192,300 158,100 220,800
Average copper ore grade (percent) 0.41 0.46 0.41 0.43
Copper production (millions of recoverable pounds) 78 107 250 330
 
Mill Operations
Ore milled (metric tons per day) 355,300 131,200 348,900 122,400
Average ore grades:
Copper (percent) 0.41 0.49 0.42 0.46
Molybdenum (percent) 0.02 0.02 0.02 0.02
Copper recovery rate (percent) 84.4 79.2 86.1 79.0
Production (recoverable):
Copper (millions of pounds) 239 97 736 255
Molybdenum (millions of pounds) 5 1 14 5
 
100% Indonesia Mining

Ore milled (metric tons per day)a

Grasberg open pit 135,600 117,300 117,200 118,400
Deep Ore Zone underground mine 35,100 40,400 38,700 44,000
Deep Mill Level Zone (DMLZ) underground mineb 6,000 3,800 5,000 2,700
Grasberg Block Cave underground mineb 2,800 2,600
Big Gossan underground mineb 1,000     700  
Total 180,500   161,500   164,200   165,100
Average ore grades:
Copper (percent) 1.02 0.68 0.86 0.65
Gold (grams per metric ton) 0.69 0.71 0.58 0.76
Recovery rates (percent):
Copper 91.4 89.6 90.5 90.2
Gold 82.7 81.1 81.4 83.1
Production (recoverable):
Copper (millions of pounds) 327 192 736 551
Gold (thousands of ounces) 300 272 664 887
 
100% Africa Mining (Discontinued Operations)
Ore milled (metric tons per day) 15,300 14,000 15,400 14,600
Average ore grades (percent):
Copper 4.31 4.02 4.11 4.13
Cobalt 0.43 0.43 0.45 0.41
Copper recovery rate (percent) 93.5 94.0 93.6 94.0
Production (millions of pounds):
Copper (recoverable) 124 108 356 339
Cobalt (contained) 9 9 28 25
 
100% Molybdenum Mines
Ore milled (metric tons per day) 16,100 36,800 17,700 37,700
Average molybdenum ore grade (percent) 0.19 0.20 0.21 0.20
Molybdenum production (millions of recoverable pounds) 5 13 19 39
 

a. Amounts represent the approximate average daily throughput processed at PT-FI's mill facilities from each producing mine and from development activities that result in metal production.

 

b. Targeted production rates once the DMLZ underground mine reaches full capacity are expected to approximate 80,000 metric tons of ore per day in 2021; production from the Big Gossan underground mine is expected to restart in the first half of 2017 and production from the Grasberg Block Cave underground mine is expected to commence in 2018.

 
               
FREEPORT-McMoRan INC.
SELECTED U.S. OIL AND GAS OPERATING DATA
 
Three Months Ended September 30,
Sales Volumes Sales per Day
2016 2015 2016 2015
Gulf of Mexico (GOM)a
Oil (thousand barrels or MBbls) 6,272 6,168 68 67
Natural gas (million cubic feet or MMcf) 9,922 9,513 108 103
Natural gas liquids (NGLs, in MBbls) 554 632 6 7
Thousand barrels of oil equivalents (MBOE) 8,479 8,386 92 b 91 b
Average realized price per BOEc $ 35.70 $ 38.99
Cash production costs per BOEc $ 12.77 $ 15.96
Capital expenditures (in millions) $ 75 $ 630
 
CALIFORNIAa
Oil (MBbls) 2,873 3,073 31 33
Natural gas (MMcf) 438 518 5 6
NGLs (MBbls) 38 44 1 1
MBOE 2,983 3,203 33 b 35 b
Average realized price per BOEc $ 36.72 $ 39.84
Cash production costs per BOEc $ 23.75 $ 32.82
Capital expenditures (in millions) $ 6 $ 19
 
HAYNESVILLE/MADDEN/OTHERd
Oil (MBbls) 1 46 e 1
Natural gas (MMcf) 3,439 12,788 37 139
NGLs (MBbls) 1 14 e e
MBOE 576 2,191 6 b 24 b
Average realized price per BOEc $ 15.55 $ 16.20
Cash production costs per BOEc $ 2.45 $ 9.49
Capital expenditures (in millions) $ $

2

 
TOTAL U.S. OIL AND GAS OPERATIONS
Oil (MBbls) 9,146

9,287

99 101
Natural gas (MMcf) 13,799 22,819 150 248
NGLs (MBbls) 593 690 7 8
MBOE 12,038 13,780 131 150
Cash operating margin per BOE:c
Realized revenues $ 34.99 $ 43.00 f
Less: cash production costs 15.00   18.85  
Cash operating margin $ 19.99 $ 24.15
Depreciation, depletion and amortization per BOE $ 18.54 $ 32.71
Capital expenditures (in millions) $ 160 g $ 635 g
 

a. FCX has entered into agreements to sell its Deepwater GOM and onshore California properties; these transactions are expected to close in fourth-quarter 2016.

 

b. Production following the completion of the pending oil and gas transactions would include (i) GOM Shelf, which totaled 12 MBOE per day for third-quarter 2016 and 15 MBOE per day for third-quarter 2015, (ii) offshore California, which totaled 4 MBOE per day for both third quarter 2016 and 2015 and (iii) the Madden area, which totaled 3 MBOE per day for third-quarter 2016 and 4 MBOE per day for third-quarter 2015.

 

c. Cash operating margin for oil and gas operations reflects realized revenues less cash production costs. For reconciliations of average realized price and cash production costs per BOE to revenues and production and delivery costs reported in FCX's consolidated financial statements, refer to the supplemental schedules, “Product Revenues and Production Costs,” beginning on page XV, which are available on FCX's website, “fcx.com.”

 

d. In July 2016, FCX completed the sale of its Haynesville shale assets.

 

e. Rounds to less than 1 MBbl per day.

 

f. Includes realized cash gains on crude oil derivative contracts of $7.44 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.

 

g. Consolidated capital expenditures for U.S. oil and gas operations reflect total spending, which includes changes in capital expenditure accruals and other adjustments totaling $79 million for third-quarter 2016 and $(16) million for third-quarter 2015 that are not specifically allocated to the above regions. Excludes international oil and gas capital expenditures totaling $37 million for third-quarter 2015, primarily related to the Morocco oil and gas properties.

 
               
FREEPORT-McMoRan INC.
SELECTED U.S. OIL AND GAS OPERATING DATA (continued)
 
Nine Months Ended September 30,
Sales Volumes Sales per Day
2016 2015 2016 2015
GOMa
Oil (MBbls) 17,470 16,365 64 60
Natural gas (MMcf) 28,634 26,147 105 96
NGLs (MBbls) 1,638 1,633 6 6
MBOE 23,880 22,356 87 b 82 b
Average realized price per BOEc $ 32.38 $ 42.37
Cash production costs per BOEc $ 12.44 $ 16.72
Capital expenditures (in millions) $ 557 $ 2,011
 
CALIFORNIAa
Oil (MBbls) 8,546 9,773 31 36
Natural gas (MMcf) 1,323 1,664 5 6
NGLs (MBbls) 104 128 d d
MBOE 8,870 10,178 32 b 37 b
Average realized price per BOEc $ 33.08 $ 42.33
Cash production costs per BOEc $ 25.23 $ 30.71
Capital expenditures (in millions) $ 22 $ 72
 
HAYNESVILLE/MADDEN/OTHERe
Oil (MBbls) 82 120 d d
Natural gas (MMcf) 22,276 40,309 81 148
NGLs (MBbls) 21 39 d d
MBOE 3,816 6,877 14 b 25 b
Average realized price per BOEc $ 12.69 $ 16.52
Cash production costs per BOEc $ 9.88 $ 11.48
Capital expenditures (in millions) $ 2 $ 29
 
TOTAL U.S. OIL AND GAS OPERATIONS
Oil (MBbls) 26,098 26,258 95 96
Natural gas (MMcf) 52,233 68,120 191 250
NGLs (MBbls) 1,763 1,800 6 6
MBOE 36,566 39,411 133 144
Cash operating margin per BOE:c
Realized revenue $ 30.50 $ 45.57 f
Less: cash production costs 15.28   19.42  
Cash operating margin $ 15.22 $ 26.15
Depreciation, depletion and amortization per BOE $ 19.03 $ 37.18
Capital expenditures (in millions) $ 1,028 g $ 2,430 g
 

a. FCX has entered into agreements to sell its Deepwater GOM and onshore California properties; these transactions are expected to close in fourth-quarter 2016.

 

b. Production following the completion of the pending oil and gas transactions would include (i) GOM Shelf, which totaled 13 MBOE per day for the first nine months of 2016 and 14 MBOE per day for the first nine months of 2015, (ii) offshore California, which totaled 4 MBOE per day for the first nine months of 2016 and 6 MBOE per day for the first nine months of 2015 and (iii) the Madden area, which totaled 3 MBOE per day for the first nine months of 2016 and 4 MBOE per day for the first nine months of 2015.

 

c. Cash operating margin for oil and gas operations reflects realized revenues less cash production costs. For reconciliations of average realized price and cash production costs per BOE to revenues and production and delivery costs reported in FCX's consolidated financial statements, refer to the supplemental schedules, “Product Revenues and Production Costs,” beginning on page XV, which are available on FCX's website, “fcx.com.”

 

d. Rounds to less than 1 MBbl per day.

 

e. In July 2016, FCX completed the sale of its Haynesville shale assets.

 

f. Includes realized cash gains on crude oil derivative contracts of $7.72 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.

 

g. Consolidated capital expenditures for U.S. oil and gas operations reflect total spending, which includes changes in capital expenditure accruals and other adjustments totaling $447 million for the first nine months of 2016 and $318 million for the first nine months of 2015 that are not specifically allocated to the above regions. Excludes international oil and gas capital expenditures totaling $47 million for the first nine months of 2016 and $81 million for the first nine months of 2015, primarily related to the Morocco oil and gas properties.

 
 
FREEPORT-McMoRan INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
                 
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
(In millions, except per share amounts)
Revenuesa $ 3,877 $ 3,382 $ 10,453 $ 11,091
Cost of sales:
Production and deliveryb 2,509 2,595 7,957 7,862
Depreciation, depletion and amortization 643 823 1,937 2,522
Impairment of oil and gas properties 239 3,652 4,317 9,442
Metals inventory adjustments 20   91   27   154  
Total cost of sales 3,411 7,161 14,238 19,980
Selling, general and administrative expenses 110 c 122 408 c 421
Mining exploration and research expenses 13 26 46 83
Environmental obligations and shutdown (credits) costs (3 ) 37 18 61
Net gain on sales of assets (13 )   (762 ) (39 )
Total costs and expenses 3,518   7,346   13,948   20,506  
Operating income (loss) 359 (3,964 ) (3,495 ) (9,415 )
Interest expense, netd (187 ) (157 ) (574 ) (438 )
Net gain on early extinguishment of debt 15 51
Other (expense) income, net (10 ) (41 ) 54   2   e
Income (loss) from continuing operations before income taxes and equity in affiliated companies' net earnings (losses) 177 (4,162 ) (3,964 ) (9,851 )
Benefit from (provision for) income taxesf 114 349 (79 ) 1,762
Equity in affiliated companies' net earnings (losses) 1   (2 ) 9   (1 )
Net income (loss) from continuing operations 292 (3,815 ) (4,034 ) (8,090 )
Net (loss) income from discontinued operationsg (6 ) 25   (191 ) 95  
Net income (loss) 286 (3,790 ) (4,225 ) (7,995 )
Net income attributable to noncontrolling interests:
Continuing operations (37 ) (13 ) (146 ) (61 )
Discontinued operations (22 ) (16 ) (44 ) (68 )
Preferred dividends attributable to redeemable noncontrolling interest (10 ) (11 ) (31 ) (31 )
Net income (loss) attributable to common stockholdersh $ 217   $ (3,830 ) $ (4,446 ) $ (8,155 )
 
Basic and diluted net income (loss) per share attributable to common stockholders:
Continuing operations $ 0.18 $ (3.59 ) $ (3.27 ) $ (7.80 )
Discontinued operations (0.02 ) 0.01   (0.18 ) 0.03  
$ 0.16   $ (3.58 ) $ (3.45 ) $ (7.77 )
 
Basic weighted-average common shares outstanding 1,346   1,071   1,289   1,050  
Diluted weighted-average common shares outstanding 1,351   1,071  

1,289

  1,050  
 
Dividends declared per share of common stock $   $ 0.05   $   $ 0.2605  
 

a. Revenues include favorable (unfavorable) adjustments to provisionally priced concentrate and cathode copper sales recognized in prior periods (refer to the supplemental schedule, "Derivative Instruments," on page XI for a summary of these amounts). Revenues for the 2015 periods also include net noncash mark-to-market losses associated with crude oil derivative contracts (refer to the supplemental schedule, "Adjusted Net Income (Loss)," on Page IX for a summary of these amounts).

 

b. Includes charges (i) at oil and gas operations associated with drillship settlements/idle rigs, inventory adjustments, asset impairments and other net charges and (ii) at mining operations for asset retirement/impairment and restructuring charges. Refer to the supplemental schedule, "Adjusted Net Income (Loss)," on page IX for a summary of these charges.

 

c. Includes net restructuring-related charges at oil and gas operations. Refer to the supplemental schedule, "Adjusted Net Income (Loss)," on page IX.

 

d. Consolidated interest expense, excluding capitalized interest, totaled $211 million in each of third quarter 2016 and 2015, $647 million for the first nine months of 2016 and $622 million for the first nine months of 2015.

 

e. Includes a gain for the proceeds received from insurance carriers and other third parties related to a shareholder derivative litigation settlement. Refer to the supplemental schedule, "Adjusted Net Income (Loss)," on page IX.

 

f. Refer to the supplemental schedule, "Income Taxes," on page X for a summary of FCX's benefit from (provision for) income taxes.

 

g. Net of charges for (i) allocated interest expense associated with FCX's term loan that is required to be repaid as a result of the sale of FCX's interest in TF Holdings Limited totaling $12 million in third-quarter 2016, $6 million in third-quarter 2015, $33 million for the first nine months of 2016 and $20 million for the first nine months of 2015 and (ii) income tax (benefit from) provision for totaling $(2) million in third-quarter 2016, $(11) million in third-quarter 2015, $(25) million for the first nine months of 2016 and $20 million for the first nine months of 2015. In accordance with accounting guidelines, the first nine months of 2016 also include an estimated loss on disposal, which will be adjusted through closing of the transaction (refer to the supplemental schedule, "Adjusted Net Income (Loss)," on page IX.

 

h. FCX defers recognizing profits on intercompany sales until final sales to third parties occur. Refer to the supplemental schedule, "Deferred Profits," on page XI for a summary of net impacts from changes in these deferrals.

 
 
FREEPORT-McMoRan INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
       
September 30, December 31,
2016 2015
(In millions)
ASSETS
Current assets:
Cash and cash equivalents $ 1,108 $ 195
Trade accounts receivable 788 660
Income and other tax receivables 857 1,341
Other accounts receivable 97 154
Inventories:
Materials and supplies, net 1,349 1,594
Mill and leach stockpiles 1,312 1,539
Product 1,025 1,071
Other current assets 299 164
Held for sale 4,663   744  
Total current assets 11,498 7,462
Property, plant, equipment and mining development costs, net 23,415 24,246
Oil and gas properties, net - full cost method:
Subject to amortization, less accumulated amortization and impairment 979 2,262
Not subject to amortization 1,644 4,831
Long-term mill and leach stockpiles 1,723 1,663
Other assets 2,141 1,989
Held for sale   4,124  
Total assets $ 41,400   $ 46,577  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 2,347 $ 3,255
Current portion of debt 802 649
Current portion of environmental and asset retirement obligations 357 272
Accrued income taxes 161 23
Held for sale 821   108  
Total current liabilities 4,488 4,307
Long-term debt, less current portion 18,180 19,779
Deferred income taxes 3,549 3,607
Environmental and asset retirement obligations, less current portion 3,725 3,717
Other liabilities 1,618 1,641
Held for sale   718  
Total liabilities 31,560 33,769
 
Redeemable noncontrolling interest 774 764
 
Equity:
Stockholders' equity:
Common stock 149 137
Capital in excess of par value 25,601 24,283
Accumulated deficit (16,832 ) (12,387 )
Accumulated other comprehensive loss (476 ) (503 )
Common stock held in treasury (3,710 ) (3,702 )
Total stockholders' equity 4,732 7,828
Noncontrolling interestsa 4,334   4,216  
Total equity 9,066   12,044  
Total liabilities and equity $ 41,400   $ 46,577  
 

a. Includes noncontrolling interests of $1.2 billion at September 30, 2016, and December 31, 2015, associated with Tenke.

 
 
FREEPORT-McMoRan INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
   
Nine Months Ended September 30,
2016       2015
(In millions)
Cash flow from operating activities:
Net loss $ (4,225 ) $ (7,995 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion and amortization 2,017 2,717
Impairment of oil and gas properties 4,317 9,442
Non-cash oil and gas drillship settlements 606
Other asset impairments, inventory adjustments, restructuring and other 119 104
Metals inventory adjustments 27 154
Net gain on sales of assets (762 ) (39 )
Net charges for environmental and asset retirement obligations, including accretion 149 174
Payments for environmental and asset retirement obligations (190 ) (135 )
Net gain on early extinguishment of debt (51 )
Deferred income taxes (22 ) (1,926 )
Estimated loss on disposal of discontinued operations 182
Increase in long-term mill and leach stockpiles (84 ) (183 )
Net gains on crude oil derivative contracts (87 )
Other, net 48 40
Changes in working capital and other tax payments, excluding amounts from dispositions:
Accounts receivable 257 990
Inventories 251 83
Other current assets (120 ) (13 )
Accounts payable and accrued liabilities (80 ) (150 )
Accrued income taxes and changes in other tax payments 155   (568 )
Net cash provided by operating activities 2,594   2,608  
 
Cash flow from investing activities:
Capital expenditures:
North America copper mines (87 ) (308 )
South America (332 ) (1,339 )
Indonesia (715 ) (660 )
Molybdenum mines (2 ) (10 )
U.S. oil and gas operations (1,028 ) (2,430 )
Other (145 ) (308 )
Net proceeds from sale of additional interest in Morenci 996
Net proceeds from sales of other assets 410 151
Other, net 9   (37 )
Net cash used in investing activities (894 ) (4,941 )
 
Cash flow from financing activities:
Proceeds from debt 3,463 6,552
Repayments of debt (4,539 ) (4,693 )
Net proceeds from sale of common stock 442 999
Cash dividends and distributions paid:
Common stock (5 ) (547 )
Noncontrolling interests (87 ) (89 )
Stock-based awards net payments, including excess tax benefit (5 ) (8 )
Debt financing costs and other, net (17 ) (7 )
Net cash (used in) provided by financing activities (748 ) 2,207  
 
Net increase (decrease) in cash and cash equivalents 952 (126 )
(Increase) decrease in cash and cash equivalents in assets held for sale (39 ) 42
Cash and cash equivalents at beginning of year 195   317  
Cash and cash equivalents at end of period $ 1,108   $ 233  
 
   

FREEPORT-McMoRan INC.

ADJUSTED NET INCOME (LOSS)

 

Adjusted net income (loss) is intended to provide investors and others with information about FCX's recurring operating performance. This information differs from net income (loss) attributable to common stockholders determined in accordance with U.S. generally accepted accounting principles (GAAP) and should not be considered in isolation or as a substitute for measures of performance determined in accordance with U.S. GAAP. FCX's adjusted net income (loss) follows, which may not be comparable to similarly titled measures reported by other companies (in millions, except per share amounts):

 
Three Months Ended September 30,
2016     2015
Pre-tax     After-tax     Per Share Pre-tax     After-tax     Per Share
Net income (loss) attributable to common stock N/A $ 217   $ 0.16   N/A $ (3,830 ) $ (3.58 )
Net noncash mark-to-market losses on crude oil derivative contracts $ $ $ $ (74 ) $ (46 ) $ (0.04 )
Impairment of oil and gas properties (239 ) (239 ) a (0.18 ) (3,652 ) (3,481 ) a (3.25 )
Other oil and gas net (charges) credits:
Drillship settlements/idle rig (costs) credits (19 ) (19 ) (0.01 ) 3 2
Inventory adjustments, asset impairments and other net chargesb (31 ) (31 ) (0.02 ) (24 ) (15 ) (0.01 )
Net restructuring-related credits 1 1
Metals inventory adjustments (20 ) (20 ) (0.01 ) (91 ) (58 ) (0.05 )
Mining asset retirement/impairment and restructuring charges (20 ) (20 ) (0.01 ) (92 ) (56 ) (0.05 )
Adjustments to environmental obligations and related litigation reserves 12 12 0.01 (28 ) (18 ) (0.02 )
Net gain on sales of assets 13 13 0.01
Net gain on early extinguishment of debt 15 15 0.01
Net tax creditsc N/A 332 0.24 N/A
Estimated loss on disposal of discontinued operations (5 ) (5 )        
$ (293 ) $ 39   $ 0.03   d $ (3,958 ) $ (3,672 ) $ (3.43 ) d
 
Adjusted net income (loss) attributable to common stock N/A $ 178 $ 0.13 N/A $ (158 ) $ (0.15 )
 
 
Nine Months Ended September 30,
2016 2015
Pre-tax After-tax Per Share Pre-tax After-tax Per Share
Net loss attributable to common stock N/A $ (4,446 ) $ (3.45 ) N/A $ (8,155 ) $ (7.77 )
Net noncash mark-to-market losses on crude oil derivative contracts $ $ $ $ (217 ) $ (135 ) $ (0.13 )
Impairment of oil and gas properties (4,317 ) (4,317 ) a (3.35 ) (9,442 ) (7,855 ) a (7.48 )
Other oil and gas net charges:
Drillship settlements/idle rig costs (823 ) (823 ) (0.64 ) (13 ) (8 ) (0.01 )
Inventory adjustments, asset impairments and other net chargesb (119 ) (119 ) (0.09 ) (46 ) (29 ) (0.03 )
Net restructuring-related charges (38 ) (38 ) (0.03 )
Metals inventory adjustments (27 ) (27 ) (0.02 ) (154 ) (99 ) (0.09 )
Mining asset retirement/impairment and restructuring charges (17 ) (17 ) (0.01 ) (92 ) (56 ) (0.05 )
Adjustments to environmental obligations and related litigation reserves 11 11 0.01 (36 ) (23 ) (0.02 )
Net gain on sales of assets 762 757 0.59 39 25 0.02
Net gain on early extinguishment of debt 51 51 0.04
Gain on shareholder derivative litigation settlement 92 92 0.09
Net tax creditsc N/A 290 0.22 N/A
Estimated loss on disposal of discontinued operations (182 ) (182 ) (0.14 )      
$ (4,699 ) $ (4,414 ) $

(3.43

)

d

$ (9,869 ) $ (8,088 ) $

(7.71

)

d

 
Adjusted net loss attributable to common stock N/A $ (32 ) $ (0.02 )

 

N/A $ (67 ) $ (0.06 )

 

 

a. As a result of the impairment to oil and gas properties, FCX recorded tax charges to establish a valuation allowance against deferred tax assets that will not generate a future benefit. These tax charges have been reflected in the above after-tax impacts for the impairment of oil and gas properties.

 

b. Other net charges for oil and gas operations include $17 million in the 2016 periods for the termination of the Morocco well commitment, and $14 million in third-quarter 2015 and $13 million for the first nine months of 2015 for prior period tax assessments related to California properties.

 

c. For further discussion of net tax credits impacting the third quarter and first nine months of 2016, refer to "Income Taxes," on page X.

 

d. Per share amounts do not foot down because of rounding.

 

Source: Freeport-McMoRan Inc.

Freeport-McMoRan Inc.

Financial Contacts:

Kathleen L. Quirk, 602-366-8016

or

David P. Joint, 504-582-4203

or

Media Contact:

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