What to Watch When Freeport-McMoRan Reports

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Freeport-McMoRan is scheduled to report second-quarter results on July 23rd. Investors need to watch how recent deals with Encana and Apache will impact its oil and gas business this quarter.

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What to Watch When Freeport-McMoRan Reports

  1. 1. What to Watch When Freeport- McMoRan Reports Second-Quarter Results Photo credit: Flickr/Jim Sneddon
  2. 2. Freeport-McMoRan’s Second Quarter • Analysts anticipate Freeport-McMoRan will report revenue of $5.24 billion and earnings of $0.49 per share. • If earnings do come in at $0.49 per share, it would mirror the results of the second quarter of 2013. • Further, $0.49 per share was what the company earned last quarter when it beat estimates by $0.08. • Needless to say, analysts aren’t expecting a whole lot of growth from the company this quarter. Freeport-McMoRan Copper & Gold is expected to report second-quarter results on July 23rd.
  3. 3. Freeport-McMoRan’s Second Quarter • In May, the company cashed in on its Eagle Ford Shale assets selling its entire position to Encana for $3.1 billion. • The next day it announced it was picking up Apache’s interest in several properties in the Gulf of Mexico for $1.4 billion. • It was the company’s second big Gulf of Mexico acquisition of the year as it made a big splash in a recent auction by the U.S. Government as it won 16 of the 17 bids it placed as it put up $321 million for these leases. That being said, this is still a very important quarter for Freeport-McMoRan. The company spent much of this past quarter reshuffling its oil and gas assets.
  4. 4. • In the first quarter the oil and gas business exceeded expectations as production was 16.1 million barrels of oil equivalent, well ahead of guidance for 15.3 million barrels of oil equivalent. • However, the company noted that production from its Eagle Ford Shale assets was higher than expected, which fueled that guidance beat. • Because those assets were sold to Encana in the second quarter, investors are not likely to benefit from any upside to outperformance again this quarter. What to Watch in Oil & Gas: Because of the portfolio reshuffle there is a lot to watch in the oil and gas segment.
  5. 5. • Further, the assets it acquired from Apache won’t be additive this quarter. • The two major development projects acquired aren’t producing oil yet. • Lucius is expected to deliver first oil later this year, while Heidelberg won’t begin producing until 2016. What to Watch in Oil & Gas: Source: Apache
  6. 6. • Because of the portfolio rebalance, the oil and gas business isn’t likely to fuel an earnings beat again. However, positives from the segment could still excite inventors. • Watch for word that Lucius is close to delivering first oil. • Also, keep an eye on the company’s exploration program in the Gulf of Mexico. The company was expected to start a number of wells in the quarter and any updates on these exploration prospects could move the stock. What to Watch in Oil & Gas:
  7. 7. Freeport-McMoRan’s Second Quarter • Rumors surfaced earlier this month that the company is considering selling some assets in its copper portfolio as well. • A Wall Street Journal report said that it was looking to sell its Candelaria copper mine. • While no deal has been announced, investors should see what the company has to say about its current copper portfolio. Oil and gas isn’t the only segment to keep an eye on this quarter.
  8. 8. What to Watch in Mining: • The price of copper recovered somewhat after hitting bottom this past March. • March’s plunge in price had an impact last quater. The company only realized $3.14 per pound of copper, which was well below the first quarter of 2013 when copper realization was $3.51 per pound. • Investors need to keep an eye on the price Freeport-McMoRan realized for its copper as it’s the company’s biggest cash flow driver. Copper prices will have a big impact on the quarter as well.
  9. 9. What to Watch in Mining: • The company hasn’t had export shipments since mid-January. • Because of that the company had to defer sales of 125 million pounds of copper and 140,000 ounces of gold. • However, the company was supposed to resume exports in May. Any delays could have a greater than expected impact on second- quarter sales and earnings. The other area to watch is the company’s Indonesian operations.
  10. 10. The second quarter was a busy one at Freeport-McMoRan as it completed two big oil and gas deals and was expected to restart exports from Indonesia. Because of that investors will need to dig deeper than the company’s headline numbers this quarter to see how these changes impacted second quarter results as well as what the impact will be on future growth. Photo credit: Flickr/Loco Steve Investor takeaway
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