Freeport-McMoRan may spin off oil and gas business

Freeport-McMoRan Inc., the mining company that bought back its oil and natural gas business two years ago, is now exploring spinning off the unit amid slumping prices.

In a statement Tuesday, the Phoenix-based miner said it’s studying options for achieving self-funding of the oil and gas business. Without elaborating, Freeport referred to its underutilized deep-water Gulf of Mexico infrastructure and low-risk development opportunities. A previously disclosed proposal to take its energy business public remains an alternative for future consideration, it said.

“Other alternatives currently under consideration include a spinoff of FCX’s oil and gas business to its shareholders, joint venture arrangements and further spending reductions,” the world’s biggest publicly traded copper producer said.

The announcement Tuesday, including reducing the size of its board from 16 to nine members, follows “constructive discussions with many of its largest shareholders,”  it said. After accumulating an 8.8 percent stake in Freeport, billionaire activist investor Carl Icahn said in August that he intended to hold talks with the company on “capital expenditures, executive compensation practices and capital structure as well as curtailment of the issuer’s high-cost production operations.”

Asset Value

Freeport has been facing strong headwinds as the prices of copper — which accounted for about 60 percent of its revenue in 2014 — and oil plunged. The metals and energy producer increased its debt almost sixfold in 2013 after it established a significant presence in oil and gas when it purchased Plains Exploration & Production Co. and McMoRan Exploration Co.

Freeport said earlier this year it would consider selling as much as 20 percent of its oil and gas unit in an initial public offering as it tries to finance expansion plans amid depressed commodity prices. If it does, it may find the total assets are worth $1.8 billion less than they were a year ago, according to a report from Bloomberg Intelligence last month.

The reconstituted board is comprised of seven independent directors: Gerald Ford,Robert Day, Lydia Kennard, Jon Madonna, Dustan McCoy, Stephen Siegele and Frances Fragos Townsend; and two executive directors: Chairman James Moffett and Chief Executive Officer Richard Adkerson.