Freeport-McMoRan 2014 Annual Report Download - page 42

MANAGEMENT’S DISCUSSION AND ANALYSIS
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Revenues
Consolidated revenues totaled $21.4 billion in 2014, $20.9 billion
in 2013 and $18.0 billion in 2012. Revenues included the sale of
copper concentrates, copper cathodes, copper rod, gold,
molybdenum, silver, cobalt and beginning June 1, 2013, the sale
of oil, natural gas and NGLs by our oil and gas operations. Our
consolidated revenues for 2014 included sales of copper (60 percent),
oil (20 percent), gold (7 percent) and molybdenum (6 percent).
Following is a summary of changes in our consolidated revenues
between periods (in millions):
2014 2013
Consolidated revenues – prior year $ 2 0 , 9 21 $ 18,010
Mining operations:
(Lower) higher sales volumes from
mining operations:
Copper (650) 1,576
Gold 58 323
Molybdenum 17 151
(Lower) higher price realizations from
mining operations:
Copper (817) (1,226)
Gold (105) (421)
Molybdenum 84 (225)
Unfavorable impact of net adjustments
for prior year provisionally priced copper sales (92) (127)
(Lower) higher revenues from purchased copper (361) 313
Higher (lower) Atlantic Copper revenues 371 (668)
Oil and gas operations:
a
Higher oil and gas revenues, including realized
cash losses on derivative contracts 1,155 2,928
Favorable (unfavorable) impact of net noncash
mark-to-market adjustments on derivative
contracts 939 (312)
Other, including intercompany eliminations (82) 599
Consolidated revenues – current year $ 2 1,4 3 8 $ 20,921
a. Includes the results of FM O&G beginning June 1, 2013.
Mining Sales Volumes
Consolidated sales volumes totaled 3.9 billion pounds of copper,
1.25 million ounces of gold and 95 million pounds of molybdenum
in 2014; 4.1 billion pounds of copper, 1.2 million ounces of gold
and 93 million pounds of molybdenum in 2013; and 3.65 billion
pounds of copper, 1.0 million ounces of gold and 83 million
pounds of molybdenum in 2012. Lower consolidated copper sales
volumes in 2014, compared with 2013, primarily reflected
decreased volumes in Indonesia and South America, partly offset
by higher volumes from our North America copper mines. Higher
consolidated copper and gold sales volumes in 2013, compared
with 2012, primarily reflected improved volumes throughout
our global mining operations. Refer to “Operations“ for further
discussion of sales volumes at our operating divisions.
Metal Price Realizations
Our consolidated mining revenues can vary significantly as a
result of fluctuations in the market prices of copper, gold,
molybdenum, silver and cobalt. As presented above on the
summary operating data table, we recognized lower copper and
gold price realizations from our mining operations in 2014,
compared with 2013, and also in 2013, compared with 2012. Refer
to “Markets“ for further discussion.
Provisionally Priced Sales
Impacts of net adjustments for prior year provisionally priced
sales primarily relate to copper sales. Substantially all of our
copper concentrate and cathode sales contracts provide final
copper pricing in a specified future month (generally one to four
months from the shipment date) based primarily on quoted
LME monthly average spot copper prices (refer to “Disclosures
About Market Risks — Commodity Price Risk“ for further
discussion). Revenues included (unfavorable) favorable net
adjustments to prior years’ provisionally priced copper sales
totaling $(118) million in 2014, $(26) million in 2013 and $101 million
in 2012.
Purchased Copper
We purchased copper cathode for processing by our Rod &
Refining segment totaling 125 million pounds in 2014, 223 million
pounds in 2013 and 125 million pounds in 2012.
Atlantic Copper Revenues
Lower Atlantic Copper revenues in 2013, compared with 2014 and
2012, primarily reflected the impact of a major maintenance
turnaround in 2013.
Oil and Gas Revenues and Derivative Contracts
Oil and gas sales volumes totaled 56.8 MMBOE in 2014, and
38.1 MMBOE for the seven-month period from June 1, 2013, to
December 31, 2013. Oil and gas realizations of $71.83 per BOE
in 2014 were lower compared with $76.87 per BOE for the seven-
month period from June 1, 2013, to December 31, 2013, primarily
reflecting lower oil prices and higher realized cash losses on
derivative contracts (realized cash losses totaled $122 million or
$2.15 per BOE in 2014, compared with $22 million or $0.58 per
BOE for the seven-month period from June 1, 2013, to December 31,
2013). Refer to “Operations“ for further discussion of average
realizations and sales volumes at our oil and gas operations.
In connection with the acquisition of Plains Exploration &
Production Company (PXP), we have derivative contracts for 2015
consisting of crude oil options, and for 2013 and 2014, had
derivative contracts that consisted of crude oil options and swaps
and natural gas swaps. These crude oil and natural gas derivative
contracts are not designated as hedging instruments; accordingly,
they are recorded at fair value with the mark-to-market gains and