Freeport-McMoRan 2013 Annual Report Download - page 57

MANAGEMENT’S DISCUSSION AND ANALYSIS
2013 ANNUAL REPORT | 55
The following table presents average sales volumes per day by
region for our oil and gas operations:
Seven Months From
June 1, 2013, to
December 31, 2013
Sales Volumes (MBOE per day):
GOM
a
72
Eagle Ford 46
California 39
Haynesville/Madden/Other 21
Total oil and gas operations 178
a. Includes sales from properties on the GOM Shelf and in the Deepwater GOM. Production
from the GOM Shelf totaled 13 MBOE per day (18 percent of the GOM total).
Daily sales volumes averaged 178 MBOE for the seven-month
period following the acquisition date, including 124 MBbls of crude
oil per day, 254 MMcf of natural gas per day and 11 MBbls of NGLs
per day. Sales volumes from oil and gas operations are expected
to average 166 MBOE per day for the year 2014, comprised of
approximately 70 percent oil, 24 percent natural gas and 6 percent
NGLs. Sales volumes for the year 2014 include the impacts of
planned platform maintenance and subsea tie-back upgrades on
the Marlin facility in the GOM during third-quarter 2014.
CAPITAL RESOURCES AND LIQUIDITY
Our consolidated operating cash flows vary with prices realized
from copper, gold, molybdenum and oil, our sales volumes,
production costs, income taxes, other working capital changes
and other factors. We have taken steps to reduce or defer capital
expenditures, and operating, exploration and other costs, and
are targeting reductions in total debt to $12 billion by year-end
2016. We will continue to review our portfolio of assets for
opportunities to accelerate our deleveraging plans through
potential asset sales, joint venture transactions or further
adjustments to capital spending plans.
Cash
Following is a summary of the U.S. and international components
of consolidated cash and cash equivalents, including cash
available to the parent company, net of noncontrolling interests’
share, taxes and other costs at December 31 (in billions):
2013 2012
Cash at domestic companies $ 0.4 $ 1.3
Cash at international operations 1.6 2.4
Total consolidated cash and cash equivalents 2.0 3.7
Less: Noncontrolling interests’ share (0.6) (0.8)
Cash, net of noncontrolling interests’ share 1.4 2.9
Less: Withholding taxes and other (0.1) (0.2)
Net cash available $ 1.3 $ 2.7
Cash held at our international operations is generally used to
support our foreign operations’ capital expenditures, operating
expenses, working capital and other tax payments or other cash
needs. Management believes that sufficient liquidity is available in
Financial and Operating Data. Following is summary operating
results for the oil and gas operations:
Seven Months From
June 1, 2013, to
December 31, 2013
Sales Volumes
Oil (MMBbls) 26.6
Natural gas (Bcf) 54.2
NGLs (MMBbls) 2.4
MMBOE 38.1
Average Realizations
a
Oil (per barrel) $ 9 8.3 2
Natural gas (per MMbtu) $ 3.99
NGLs (per barrel) $ 38.20
Gross Profit per BOE
Realized revenues
a
$ 76.87
Less: Cash production costs
a
17.14
Cash operating margin
a
59.73
Less: Depreciation, depletion and amortization 35.81
Less: Accretion and other costs 0.79
Revenue adjustments for unrealized losses on
derivative contracts (8.20)
Other net adjustments 0.04
Gross profit $ 14.97
a. Cash operating margin for our oil and gas operations reflects realized revenues less
cash production costs. Realized revenues exclude net unrealized and noncash realized
losses on derivative contracts and cash production costs exclude accretion and other
costs. For reconciliations of realized revenues (including average realizations for oil,
natural gas and NGLs) and cash production costs per BOE to revenues and production
and delivery costs reported in our consolidated financial statements, refer to “Product
Revenues and Production Costs.”
Realized revenues for our oil and gas operations averaged
$76.87 per BOE and cash production costs averaged $17.14 per
BOE for the seven-month period following the acquisition date.
Based on current sales volume and cost estimates, cash
production costs are expected to approximate $20 per BOE for
2014, primarily reflecting the impact of lower estimated volumes
from planned downtime associated with platform maintenance
and subsea tie-back upgrades on the Marlin facility in the GOM
during third-quarter 2014.
Our average realized price for crude oil was $98.32 per barrel
for the seven-month period following the acquisition date.
Excluding the impact of realized derivative contracts, our average
realized price for crude oil was $99.67 per barrel for the seven-
month period following the acquisition date (92 percent of
the average Brent crude oil price of $108.66 per barrel), reflecting
quality and location differentials.
Our average realized price for natural gas was $3.99 per MMBtu
for the seven-month period following the acquisition date.
Excluding the impact of realized derivative contracts, our average
realized price for natural gas was $3.73 per MMBtu for the
seven-month period following the acquisition date, compared with
NYMEX natural gas prices for the June through December 2013
contracts, which averaged $3.67 per MMBtu, reflecting quality and
location differentials.