US-based Freeport McMoRan is cutting nearly 30% from its oil and gas division, and a total of 29% from its July 2015 estimates.
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Image from Freeport McMoRan. |
The natural resources company is deferring investments in several long-term projects in response to oil and gas market conditions, as previously announced on 5 August. Capital expenditures for 2016 and 2017 have been reduced to US$2.0 billion per year. The revised plans, together with initiatives to obtain third party financing, including the previously announced potential initial public offering of a minority interest in Freeport McMoRan Oil & Gas or other actions, will be pursued as required to fund oil and gas capital spending within cash flow for 2016 and subsequent years.
Using the same price assumptions and the recent 2016 future prices of $54 per barrel for Brent crude, Freeport McMoRan’s operating cash flows are estimated to approximate $6.3 billion in 2016, providing cash flow for required capital investments totaling $4.0 billion, dividends and repayment of debt.
Since late 2014, Freeport McMoRan has reduced its consolidated 2015 capital expenditure budget from $7.5 billion to $6.3 billion, including reductions of $700 million in oil and gas expenditures.
After incorporating today’s (27 August) announcements and the 5 August 2015 announcement of reduced oil and gas expenditures, capital expenditures for 2016 are expected to decline to a total of $4.0 billion, including $2.0 billion in oil and gas expenditures.
The current 2016 capital estimate of $4.0 billion is approximately 29% lower than the $5.6 billion estimate on 23 July 2015, reflecting aggressive actions in response to current market conditions.
“The steps we are taking to reduce costs and capital expenditures will strengthen our financial position during a period of weak and uncertain market conditions and preserve our large resource base for improved future market conditions,” Freeport McMoRan executives said.
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