Freeport McMoran Firms Up Balance Sheet

Of course they slashed their dividend. You didn’t think they’d keep paying it, all the while their core business sunk into the ground, did you? It’s absurd the way this stock has “performed”, down 30% in the past month.

Boy, I can’t wait until we get those fucking rate hikes.

Oil & Gas Review

As previously reported, co is deferring investments in several long-term projects in response to oil and gas market conditions. Following an ongoing review, capital expenditures for 2016 and 2017 have been reduced further from $2.0 billion per year in 2016 and 2017 to $1.8 billion in 2016 and $1.2 billion in 2017, including idle rig costs. Initiatives are expected to add low cost oil production, enabling cash production costs to decline from $19 per barrel of oil equivalents (BOE) in 2015 to less than $16 per BOE in 2016 and 2017. Under the revised plans, FM O&G’s cash flows would substantially fund its capital expenditures at $45 per barrel of Brent crude oil in 2017.

As previously reported, the FCX Board is engaged in a strategic review of its oil and gas business to evaluate alternative courses of action
Mining Review

FCX previously announced a 25 percent reduction in its capital spending for its mining business for 2016. FCX is undertaking further actions involving plans for a full shut-down of its Sierrita mine in Arizona and adjustments to its operating plans from its primary molybdenum mines, which will increase its curtailments to approximately 350 million pounds of copper and 34 million pounds of molybdenum per annum.

FCX is also evaluating other financing alternatives, the potential sale of minority interests in certain mining assets and other actions to provide additional proceeds for debt reduction.

Dividend on Common Stock

FCX also announced that its Board has suspended its annual common stock dividend of $0.20 per share. This action will provide cash savings of approximately $240 million per annum and further enhance FCX’s liquidity during this period of weak market conditions. FCX’s Board will review its financial policy on an ongoing basis and authorize cash returns to shareholders as market conditions improve.

Assuming prices of $2.00 per pound for copper and $45 per barrel Brent crude oil for 2016, FCX estimates consolidated operating cash flow would exceed capital expenditures by more than $600 million.

Amendment to Bank Credit Facility

Following recent declines in prices for its primary products, FCX has reached agreement with its bank group to amend the Leverage Ratio (Net Debt/EBITDA) under its revolving credit facility and $4 billion term loan from the previous limit of 4.75x to 5.5x at December 31, 2015, 5.9x for the first half of 2016, and stepping down to 5.0x by year-end 2016 and 4.25x in 2017. The Leverage Ratio is unchanged at 3.75x thereafter.

It’s everything you’d expect from a company trying to stay alive, in the middle of the deflationary vortex. In a rational world, the stock should rise on this news.