| Understanding Freeport-McMoRan’s Energy Strategy | |
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Freeport-McMoRan’s 2Q15 Earnings: An Investor's Guide (Continued from Prior Part) Freeport McMoRan’s energy strategy
Previously, we looked at Freeport-McMoRan’s (FCX) 2Q15 earnings. We also explored some of the major growth opportunities Freeport is pursuing in the copper business. Now we’ll take a look at Freeport-McMoRan’s energy strategy. The company continues to make capital investments in its oil and gas business despite lower energy prices.
Lower crude oil prices
The above graph shows the recent movement in WTI (West Texas Intermediate) crude oil prices. Falling prices have prompted energy exploration companies (XOP), including ConocoPhillips (COP) and Suncor Energy (SU), to rethink their business plans. Freeport has reduced its capital expenditure budget for its energy business and even sold some assets last year.
However, the company continues to invest in select growth projects. Freeport’s current strategy is to invest in lower-risk drilling and tieback opportunities. In tieback opportunities, Freeport looks for lower-risk drilling facilities near its existing production facilities. This arrangement requires lower capital than a Greenfield development project, since Freeport’s existing infrastructure provides it with a competitive advantage.
Increase in production
As we’ve already seen, Freeport has managed to reduce its cash production costs in 2Q15. Freeport expects to further increase its energy (XLE) output over the next couple of years. This would lead to economies of scale as the fixed costs get spread out. This would also bring down unit production costs.
Lower unit production costs would help Freeport make some money even if crude oil hovers around $50 per barrel.
In its 2Q15 earnings conference call, Freeport said it’s looking at several opportunities. But does the current market scenario leave Freeport many alternatives? We’ll explore that in the next part of this series.
Continue to Next Part Browse this series on Market Realist:
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Freeport McMoRan Copper and Gold Inc.
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PRODUCER |
CODE : FCX |
ISIN : US35671D8570 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Freeport McMoran is a copper and gold producing company based in United states of america. Freeport McMoran produces copper, gold, cobalt, molybdenum and silver in Chile, in Congo Dem. Rep. of, in Indonesia and in Peru, develops copper in Peru, and holds various exploration projects in Chile. Its main assets in production are CANDELARIA, EL ABRA, CHINO - MILL, HENDERSON, MIAMI - ROM LEACH, MORENCI - MILL, OJOS DEL SALADO, MORENCI and MORENCI - ROM LEACH in Chile, GRASBERG, SIERRITA and BAGDAD in Indonesia, TENKE FUNGURUME and TYRONE in Congo Dem. Rep. of and CERRO VERDE in Peru, its main asset in development is SAFFORD in Peru and its main exploration properties are BAGDAD - ROM LEACH and CHINO - ROM LEACH in Peru and CERRO VERDE - MILL, CERRO VERDE - CRUSHED LEACH, CERRO VERDE - ROM LEACH, EL ABRA - ROM LEACH and CLIMAX in Chile. Freeport McMoran is listed in Germany and in United States of America. Its market capitalisation is US$ 57.9 billions as of today (€ 52.1 billions). Its stock quote reached its lowest recent point on March 06, 2020 at US$ 10.00, and its highest recent level on September 06, 2024 at US$ 40.00. Freeport McMoran has 1 448 000 000 shares outstanding. |