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Mining giant Freeport cuts back after poor oil bet
[WASHINGTON] Doubly hit by the crash in ore and oil prices, US mining giant Freeport McMoRan said Tuesday it would sell off more of its oil and gas assets to reduce debt.
The world's second largest copper miner, with huge operations in Indonesia, Democratic Republic of Congo, Chile and the United States, also said it would cut its oilfield workforce by 25 per cent as it seeks to rebound from a bad bet on oil and natural gas when the market was at its peak.
Freeport reported a sixth straight quarterly loss in the January-March period Tuesday. The company lost US$4.2 billion, most of that from writing down the value of oil interests it bought in 2012, when crude was more than US$100 a barrel.
For those purchases the Freeport ran its debt load up to US$20 billion, and with the price of crude plunging to as low as US$27 a barrel last year, the company is now trying to shed the business to strengthen its balance sheet.
During the first quarter it agreed to sell off interest in its Morenci copper mine in Arizona and its Timok exploration project in Serbia for US$1.3 billion. Another US$100 million will come from a deal to sell some oil and gas interests.
The company, known by its market symbol FCX, said however that it had failed to find a buyer for its entire oil and gas business due to weaker crude prices and tighter credit.
But it continues to negotiate over the sales of other oil and gas assets in order to further cut debt, it said.
"During the first quarter, we remained focused on executing our plans to strengthen FCX's balance sheet and to position the company to enhance shareholder value in a challenging market environment," said president and chief executive Richard Adkerson in a statement.
"We believe the quality and scale of our assets provide opportunities for significant debt reduction while retaining a substantial business with attractive low-cost, long-lived reserves and resources." Revenues dropped to US$3.53 billion in the first quarter from US$4.15 billion a year earlier, despite a 15 per cent rise in the volume of copper sold. Volumes of gold, oil and molybdenum were all lower.
The loss per share in the first quarter was $3.35, compared with $2.38 a year ago. But after stripping out the write-down charges, the loss was 16 cents a share, better than the analyst forecast of a 17-cent loss.
Freeport shares, which peaked at $60 in 2010, hit bottom at $3.70 in January amid worries of insolvency, but have since rebounded. In early trade Tuesday Freeport was down 4.9 per cent at $10.79.