US-based Freeport-McMoRan (FCX) is cutting two vessels in the Gulf of Mexico in an effort to defer investments in several of the company’s long-term projects due to the oil and gas market slump.
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Image from FCX. |
FCX is further reducing its capital expenditures for 2016 and 2017 from US$2 billion per year to $1.8 billion and $1.2 billion, respectively, which includes idle rig costs. The company first announced its plans to reduce its oil and gas sector in October.
“The revised plans, together with initiatives to obtain third party financing or other strategic alternatives, will be pursued with the goal of achieving funding for oil and gas capital spending within its cash flows and resources,” FCX said in a statement.
Plans for the deepwater Gulf of Mexico include the removal of two drillships, however, production is expected to increase from Q3 2015 rates of 150,000 boe/d to an average of 159,000 boe/d in both 2016 and 2017, a 6% increase.
FCX also expects to bring eight wells online in the remaining days of 2015 in addition to 2016 from its tie back drilling operations at the Holstein Deep, Horn Mountain and King Projects in the deepwater Gulf of Mexico.
“These projects, combined with other initiatives, are expected to add low cost oil production, enabling cash production costs to decline from $19/boe in 2015 to less than $16/boe in 2016 and 2017,” FCX said.
Under the company’s revised plans, cash flows would substantially fund its capital expenditures at $45/bbl of Brent crude oil in 2017.
FCX said it is also in ongoing discussions with its rig vendors and other service providers to obtain reductions in costs and to evaluate opportunities to market idled equipment to third parties.
“We are taking further actions to strengthen our financial position during a period of weak and uncertain market conditions,” James R. Moffett, FCX chairman of the board, and Richard C. Adkerson, vice chairman, president and CEO said. “As we approach 2016, we are positioning the company for free cash flow generation in a weak commodity price environment and remain focused on actions to reduce debt.”
Read more:
Freeport weighs oil and gas exit
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