Freeport-McMoRan’s (FCX) net loss of US$4.1 billion in Q4 2015 has led to several cuts across the company, including deferring exploration and development activities in the Gulf of Mexico by idling its three deepwater drillships that are currently under contract.
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Image from Freeport-McMoRan. |
The company’s net loss, attributable to common stock, totaled $4.1 billion for Q4 2015 and $12.2 billion for the full year 2015. After adjusting for net charges, adjusted net loss totaled $21 million for Q4 2015 and $89 million for the year 2015, FCX said.
In Q4, capital expenditures totaled $1.3 billion, which included $537 million for oil and gas operations primarily associated with amounts incurred for the deepwater GoM operations. For the full year 2015, capital expenditures totaled $6.35 billion, which included $3 billion, including $2.5 billion incurred for deepwater GoM and $0.2 billion for the Inboard Lower Tertiary/Cretaceous natural gas trend.
FCX’s wholly owned oil and gas subsidiary, FM O&G, expects past investments to enable production to be increased from Q4 2015 rates of 144,000 boe/d to an average of 157,000 boe/d in 2016 and 2017, and cash production costs to decline to approximately $15/boe in 2016 and 2017.
For 2016, capital expenditures are expected to be approximately $3.4 billion, including $1.5 billion for oil and gas operations, and excluding $0.6 billion in idle rig costs. FM O&G also expects to incur idle rig costs of $0.4 billion in 2017. About 85% of the company’s 2016 capital budget will be allotted for GoM operations.
FM O&G began development activities in the deepwater GoM in 2014 at three 100% owned production platforms: Holstein, Marlin, and Horn Mountain; and has drilled 14 wells in producing fields with positive results, including the King D-10 well in Q4 2015. FM O&G also has interests in the Lucius and Heidelberg oil fields, and in the Atwater Valley focus area, as well as interests in the Ram Powell and Hoover deepwater production platforms. The company plans to complete and place six additional wells on production in this year.
“As we enter 2016, our clear and immediate objective is to restore FCX’s balance sheet and position the company appropriately to enhance shareholder value in the current market environment,” Richard C. Adkerson, president and CEO said. “We achieved several important operational milestones during the fourth quarter while taking aggressive actions to adjust our plans in response to the decline in prices for our primary products.”
Holstein
Completion activities at Holstein Deep for the initial three-well subsea tieback development are on schedule, with first production expected by mid-2016. All three wells are slated to commence production at about 24,000 boe/d.
Holstein Deep is located in Green Canyon Block 643, west of the FM O&G 100% owned Holstein platform in 3890ft water depth, with production facilities capable of processing 113,000 b/d.
Marlin
FM O&G’s 100% owned Marlin Hub is located in Mississippi Canyon and has production facilities capable of processing 60,000 b/d. The company has drilled five successful tieback opportunities in the area since 2014, including its 100% owned Dorado and King development projects.
During Q4 2015, production began from the first King well (D-12) and logged oil pay in the King D-10 well.
In 2016, FM O&G plans to complete and tieback the King D-13 well to the Marlin production platform. The King D-9 and D-10 wells are expected to be completed in future periods.
Horn Mountain
FM O&G’s 100% owned HornMountain field, located in the Mississippi Canyon, has production facilities capable of processing 75,000 b/d.
In 2016, plans are in place to complete and tie back two wells to the Horn Mountain production platform, including the Quebec/Victory and Kilo/Oscar wells are.
Non-operated GoM projects
In January 2016, first oil production commenced at Anadarko’s Heidelberg oil field in Green Canyon. Three wells are expected to begin producing during the initial phase and another two wells are set to be drilled. Heidelberg is a subsea development consisting of five subsea wells tied back to a truss spar hull located in 5300ft of water. FM O&G has a 12.5% stake in Heidelberg.
FM O&G also has assets with infrastructure and associated resources with long-term production and development potential, including the Vito and Power Nap oil discoveries in the Atwater Valley and a large deepwater GoM project inventory with over 150 undeveloped locations.
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