Freeport-McMoRan Inc. (NYSE: FCX) will axe its four top oil and gas executives and re-absorb the unit as an operating division, the mining and energy company said on April 5, announcing a move to cut costs as it tries to slash its $20 billion debt pile.
The move by mining-focused Freeport to reincorporate its energy unit comes just six months after the company announced plans to spin it out, signaling Freeport has failed to find buyers or partners at a time of weak energy prices.
"It is clear to us that attempts to sell all or part of the Oil & Gas business have so far not succeeded...," RBC Capital Markets analyst Fraser Phillips said in a note to clients.
He viewed the cost-cutting moves as positive for Freeport, which said in January it is working to cut its $20 billion in debt by up to half.
A large portion of Freeport's debt is due to its branching into energy in 2013 with acquisitions of Plains Exploration and McMoRan Exploration for $9 billion, purchases that were unpopular with the market.
Freeport's stock was up 0.5% at $9.48 on the New York Stock Exchange in late morning trade on April 5.
The Phoenix, Ariz.-based company, facing weak commodity prices and under pressure from its largest shareholder Carl Icahn, said Jim Flores, the chief executive of Freeport-McMoRan Oil & Gas, Doss Bourgeois, its COO, Winston Talbert, its CFO, and John Wombwell, its general counsel, will leave the company.
Freeport did not give details of their severance packages, and a spokesman did not immediately respond to a request for comment.
Mark Kidder, former vice president of operations for the oil and gas unit, will now lead its operating team.
RBC analyst Phillips said Freeport's management had confirmed that the integration of the oil and gas business "is not a signal of a change in the longer term strategy to focus on the mining business." Freeport owns some of the world's biggest copper mines, including the Grasberg mine in Indonesia.
Freeport said it would look to cut more costs and capex, and would keep evaluating options for selling oil and gas unit assets.
Daniel Rohr, an analyst at Morningstar, said Freeport's target of cutting debt by $5 billion to $10 billion through asset sales and joint ventures "is really ambitious given low commodity prices and the fact that many sellers are planning to do the same thing."
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