費利浦·麥克莫蘭銅金 (FCX) 2014 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Freeport-McMoRan fourth-quarter earnings conference call.

At this time all participants are in a listen-only mode.

Later we will conduct a question-and-answer session.

(Operator Instructions).

I would now like to turn the conference over to Ms. Kathleen Quirk, Executive Vice President and Chief Financial Officer.

Please go ahead, ma'am.

Thank you and good morning.

Welcome to the Freeport-McMoRan fourth-quarter 2014 earnings conference call.

Our results were released earlier this morning and a copy of the press release and slides for today's call are available on our website at fcx.com.

Our conference call today is being broadcast live on the Internet and anyone may listen to the call by accessing our website homepage and clicking on the webcast link for the conference call.

In addition to analysts and investors, the financial press has been invited to listen to today's call and a replay of the webcast will be available on our website later today.

Before we begin our comments, we would like to remind everyone that today's press release and certain of our comments on this call include forward-looking statements and actual results may differ materially.

I would like to refer everyone to the cautionary language included in our press release and presentation materials and to the risk factors described in our Form 10-K and subsequent SEC filings.

On the call today is Jim Bob Moffett, Chairman of the Board; Richard Adkerson, Vice Chairman, President and CEO; Jim Flores, Vice Chairman and CEO of Freeport-McMoRan Oil & Gas, with several other of our senior team here today joining the call.

I will start by briefly summarizing our financial results and then turn the call over to Richard who will review our recent performance and outlook using the slide materials that are on our website.

As usual, after our remarks we will open up the call for questions.

Today FCX reported a net loss attributable to common stock of $2.9 billion or $2.75 per share for the fourth quarter of 2014.

There are a number of special items in the quarter which are detailed in the press release.

The net loss attributable to common stock included net charges of $3.1 billion or $3.00 per share in the fourth quarter primarily associated with a reduction in the carrying value of oil and gas properties pursuant to SEC full cost accounting rules and goodwill impairment charges as further detailed in the press release.

These were partly offset by non-cash mark to market gains on oil and gas derivative contracts and a net gain from the sale of the Candelaria and Ojos mining operations which were completed in the fourth quarter.

Copper sales totaled 972 million pounds in the quarter and 3.9 billion pounds for the full year.

Gold sales were 377,000 ounces in the fourth quarter and 1.25 million ounces for the year 2014.

Our oil and gas sales totaled 12.1 million barrels of oil equivalents in the fourth quarter and were 56.8 million barrels of oil equivalents for the year.

Our average realized prices for copper during the quarter were $2.95 per pound, below the year-ago period of $3.31 per pound.

Gold prices averaged $1193 per ounce, below last year's fourth quarter of $1220 per ounce and our average realized price for crude oil in the fourth quarter was $78.02 per barrel which included $7.77 per barrel of realized cash gains on derivative contracts.

Operating cash flows for the quarter totaled $1.1 billion, capital expenditures totaled $1.8 billion.

Previously announced, we completed the sale of our interest in Candelaria for $1.8 billion in cash during November.

We ended the year with total debt of $19 billion and a consolidated cash position totaled $464 million.

I would now like to turn the call over to Richard who will be referring to the materials in our slide presentation.

Good morning, everyone, and we are thinking about all of you on the East Coast dealing with this snow storm.

It is even raining here in Phoenix so it is a strange year in a lot of ways.

We are going to focus today on our Company's response to the new commodity price environment we are having to deal with.

The situation we face now in some ways is mindful of 2008 when (technical difficulty) in just a quarter and a half.

Beginning midyear in 2014, we saw a significant drop in oil prices and oil dropped about 50% during 2014.

Then in the fourth quarter we saw copper prices drop and copper prices dropped almost 20% in the fourth quarter and then going into this year we are seeing further drops.

Now what does this mean to us overall?

One thing we are having to change our focus from our previously stated debt reduction targets by 2016 because under these commodity prices those targets are unrealistic.

We will be seeing higher cash flows from our mining business as we complete projects and add volumes and reduce CapEx and we see 2015 as a bridging year to get us to higher cash flows that we have before us even without increases in commodity prices.

We want to emphasize we are not backing away from our objectives of reducing leverage and going forward we are going to continue to prioritize debt reduction.

We have a track record as a Company of taking necessary actions and executing plans to maintain financial strength during periods of weak commodity prices and that is what we want to talk about today.

We are prepared to deal with whatever commodity price environment we have to live with.

In many ways there is a disconnect today kind of unlike 2008 between the current fundamentals of the marketplace and what we are seeing with commodity prices.

But the market is what the market is and we are not developing plans that's based on an assumed near-term quick recovery in prices.

So that is kind of setting the stage for what we want to talk with you about today and be prepared to answer any of your questions about it.

Turning to slide three, we have made good progress in this moving towards achieving higher volumes from our business.

The Morenci expansion is complete following the completion of the Tenke expansion earlier and the Morenci is expected to reach full rates in the first quarter of this year.

The Cerro Verde expansion is physically more than 50% complete.

We have incurred a lot of the costs and contracted for other costs.

We have a substantial construction project going on there.

To date it is going well and we are targeting a 2016 start up of Cerro Verde.

The Lucius project operated by Anadarko that we are a significant investor in, has achieved its first oil production this month.

We had a successful production test at our Highlander project in South Louisiana that Jim will be talking about and positive drilling results in our deepwater projects at Holstein Deep and Power Nap.

As previously reported, completed the sale of our Candelaria project in Chile.

We had a successful $3 billion senior note offering which essentially allowed us to repay all of our 2015 maturities and also to retire some higher coupon debt.

We are today talking about a plan to take aggressive action in response to these commodity prices.

We are cutting our capital expenditures in 2015 by $1.5 billion.

That is over a one-third decrease in our oil and gas CapEx.

And we engaged in a project, a process to obtain third-party funding for some of our Gulf of Mexico development projects, things that this Company has done before and we will be talking about how we will be using that to mitigate our capital expenditures further.

Kathleen reviewed the financial highlights on page 4. And I won't repeat those, those are there for your purposes.

You can see that our unit cash costs are in line with our guidance for the year at about $1.50 per pound.

Turning to page five, we, I have mentioned the status of our expansion projects, the three projects that we undertook to substantially increase our volumes are on track.

Our capital expenditures will be declining.

We will have substantial free cash flows beyond 2015.

And in the oil and gas business, we have had strong operational performance.

Our efforts continue to identify substantial resources that will be the basis for future growth with lower risk development opportunities and we are reducing spending in response to today's conditions without eliminating that opportunity for future growth.

You can see in these charts just how significantly suddenly and recently commodity prices have dropped.

We had roughly two years of copper prices that bounced around between $3.00 and $3.50.

Before this drop, we had three years of oil prices where Brent was over $100 and then this sudden change as I said in many ways appears to be disconnected from the current fundamentals of our business.

Note on the copper chart on the left side of the page, our stock price of course indirectionally follows the movement in copper prices but I think the global exchange stock is one indication of this disconnect between today's prices and the fundamentals.

Historically in weak economic times, exchange stocks and inventories held by consumers will be increasing and today while we have seen a recent relatively small uptick in global exchange stocks, they are still low by historical purposes, by historical perspectives and certainly not rising to the point that would indicate a drop in prices like we have seen.

Page six talks about what our current focus is and that is protecting our balance sheet.

We have completed $5 billion of asset sales, we reduced CapEx.

We, as I mentioned, did this bond financing to strengthen our liquidity.

We are continuing as we speak today to work with our management team and we will be working hand in glove with our Board on a real-time basis as we go forward into 2015 to decide what further actions need to be taken.

We will be monitoring the state of commodity prices, the performance of our business, how we are doing in terms of meeting these plans, completing our project at Cerro Verde for example.

We are looking for partners to help provide funding for our CapEx in the Gulf of Mexico as I mentioned.

We are working with our bank group and the holders of our bank term loans about dealing with issues that would further improve our financial flexibility.

We are in good shape now but we want to make sure that we are taking every step to stay that way as we go forward.

In Indonesia, as we work with the government to get our contract of work issue resolved, we just this week signed an extension of the MOU that we had signed last July and in that MOU we responded to a very strong position of Indonesian government about the advancement of development of a smelter in Indonesia and we are working with partners and with site preparation and construction plans to go forward with that in conjunction with getting a resolution of our contract situation.

As we look forward, what we are planning to do we are presenting a plan for you here today and that plan involves reduced CapEx, reduced cost and pursuit of capital expenditures where it is economically rational for us to do so.

The plan we are presenting to you today involves a continuation of the payment of our current cash dividends to our shareholders.

We will be working with our Board to review all aspects of our financial policy and our financial planning as we go forward.

I think you can see -- judge from our past history that our Board is going to be prepared to do what is necessary to protect liquidity of this Company.

Page seven shows the cost reductions and deferrals that our plan today involves a significant reduction of $1.5 billion of capital expenditures with $1.2 billion of that coming in the oil and gas business and we are taking advantage of every opportunity that we can of achieving cost reductions in all of our global operations.

Particularly in our mining business, lower oil prices is leading to lower costs and also lower commodity prices in terms of some of our input costs.

It is also giving us the opportunity to achieve a lower cost structure and we are going to take every advantage of that that we have.

The strength of this Company and the strength of Freeport-McMoRan lies in our long-term assets and those remain in play and as a Company we remain highly positive about the future outlook of our business even as we deal with the current situation.

We have substantial long-lived reserves both in our mining business and our oil and gas business.

These reserves are in a diverse portfolio of world scale copper assets and strategic position in the Gulf of Mexico to take advantage of existing underutilized and well-placed infrastructure.

We have a very large valuable resource potential.

In copper, we have over 100 billion pounds of proven and probable copper reserves at $2.00 copper and roughly that same amount of mineralized material at a $2.20 price range and additional resources beyond that.

So we have within our Company the resources for long-term profitability and growth and in the same way in the oil and gas business our resource base is very large and gives us a basis to have future growth there.

Now talking about the copper business, you know I referenced the fact that there is an apparent disconnect now between the copper price and market fundamentals.

Clearly the market is trading on the basis of the oil price decline and the impact generally on commodity prices.

Traders are looking at the relative values of metals in relation to oil, they are looking at the relative value of copper in relation to other metals.

And what we have seen is this significant decrease in prices but inventories remain low, the fundamentals of our business in dealing with customers remains relatively strong.

The market is relatively tight.

And from a supply standpoint, the consensus expectations of very large surpluses that were expected in 2014 have not materialized.

The surplus expected in 2015 appears to be much smaller than anticipated.

Supply is coming on slower, disruptions are more frequent and beyond 2016, the market remains to be uncertain.

All of this reflects the global macroeconomic political uncertainty that we see around the world.

China is in a slower situation but the government is responding with economic stimulus and in fact there is a lot of positive things in China.

Imports rose by 12% year on year in 2014 and set records at the end of the year.

Domestic cathode production set new records in November and December, state grids announced an increase of 9% in their spending next year and so even though China's growth rate is slowing, it is still consuming a lot of copper.

In the US, the fundamentals are stable.

Despite the price volatility, our customers are continuing to have confidence in their business going forward.

Supply side issues still significantly underlie this market.

As I said, the forecast for large surpluses has not materialized.

The exchange stocks are low, new projects are facing delays.

As you read fourth-quarter earnings reports and announcements you will be struck by the number of production declines that are being announced around the industry.

Grades are falling, people are constraining CapEx, all of this will be very supportive of copper prices as we go forward.

The lower prices is taking a lot of scrap out of the marketplace.

That is going to be supportive of prices.

So we continue to see long-term fundamentals.

The stronger dollar is an issue for the marketplace and that is one thing about it.

Now I want to refer to page 10, which is a chart I have used before but just to put all of this in perspective about what the world is going to need for copper.

The top chart is total copper consumption.

This includes consumption of directly used scrap in addition to consumption of refined metal.

And if you assume a growth of 2.5% over the next 10 years and that embeds a growth rate in China that is half of the growth rate over the last 10 years, the market is going to require another 7.6 million tons of copper.

Over this same period, existing mines are going to decline.

(inaudible) expects existing mines to decline by over 3 million tons so that is 10.7 million ton shortfall that is going to be made up, needs to be made up over the next 10 years by expansions, new projects and scrap.

To put that number in perspective in 2014, the top 10 mines in the world are estimated to produce less than 5 million tons.

So the requirements for the next 10 years are twice the annual production of the 10 largest mines in the world.

We'd have to get through this current situation but the fundamentals of our market are very positive and we are very optimistic about it.

Page 11 shows our mining unit production cost experience for the fourth quarter, roughly in line with what we had guided to in our third-quarter earnings release.

It does reflect the sale of the Candelaria operations in early November and it does reflect in Indonesia some higher royalties and export duties that we have agreed to pay in connection with these MOUs that we signed.

But you can see there our cost experience continues to be positive.

Cerro Verde is in the stage of full-blown construction now.

We have 12,000 to 14,000 workers there who have a project that will be the world's largest concentrating facility.

This construction is advancing and is expected to be completed late in 2015 and we have incurred roughly three-quarters of the cost of the project to date.

As we looked at constraining capital, it was clearly quickly clear that delaying Cerro Verde was not economic for our Company because of the stage of the project and the amount of money that is spent and the coming volumes beginning in 2016 and going forward.

We are going to be focused on managing the completion of that project.

In Indonesia, we continue to engage in active discussions with the new government being led Joko Widodo to amend our contract or to extend our right to operate beyond 2021, the exploration of the existing contract or of the initial term of the existing contract.

We have approached this process with an aim of keeping a positive long-term partnership in Indonesia.

We are focused on working with the government for the economic development of Papua and to provide significant benefits to the overall Indonesian economy.

Our existing contract continues in place as we speak and we are focused as we go forward in being responsive to the aspirations of the government and the people of Indonesia and taking into consideration our need for assurance of legal and physical terms to support the major investments that we are making.

The MOU that we signed last July has been extended until July of 2015.

We this week got an approval to continue to export.

We had a six-month license which needed to be renewed and it has been renewed.

And as I mentioned, we are advancing plans for the new smelter project in parallel with our COW amendment and we are all focusing on Papua development during this process.

At Grasberg, we have completed development of the access to our underground ore bodies and continuing with development of the Grasberg block cave and the Deep MLZ mines so development capital of almost $3 billion has been spent to date and in total, $2.3 to Freeport and our share of development capital is expected to average $700 million a year over the next five years.

This is an important project as this replaces the production coming out of the Grasberg pit.

The pit is now expected to extend until the end of 2017 roughly.

That has been delayed somewhat by the labor issues we faced in recent times.

Let me just say we are making progress with those now and expect during the first quarter to return to normal levels of operations.

While we are not spending significant capital on further development projects in the mining business, we are continuing our studies on the potential for a very large scale expansion at El Abra for the further expansion of our Tenke Fungurume project in the Congo where operations are going well and we have a resource that provides us optimism about future long-term growth.

And in our US mine, where we have large sulfide resources at our Bagdad mine in northwest Arizona and the Safford/Lone Star mine where we have an enormous resource.

All of these things are the future for our Company and we are continuing studies without spending current capital on the projects.

Jim, I will turn the mic over to you and let you talk about our oil and gas business.

Thank you, Richard.

Good morning and 2014 was an outstanding year operationally for the oil and gas business, primarily the fourth quarter.

We successfully rotated out of the low margin shale project.

We had one of the better shale plays out there in the Eagle Ford and now they are under a lot of pressure obviously with the low prices.

But in that rotation we were able to increase interest in our high margin areas like the Gulf of Mexico namely, increased interest in Lucius and Heidelberg.

We had excellent revenues during the year of $4.1 billion; cash operating margin of $2.9 billion; and almost 57 million barrels of oil equivalent in production and sales in 2014.

The drilling results we had in the fourth quarter in mainly successful Holstein Deep, Dorado, King and Power Nap were all four significant new development opportunities for our Company.

They are also the first three truly development projects adjacent to our world-class infrastructure in the Gulf of Mexico that gives us all the operating leverage and the high margins to our business.

The aspect of the long-term play of Freeport-McMoRan oil and gas of developing resources in and around our existing infrastructure and driving production and reserves higher while reducing our costs because most of our costs there are fixed, is off to a great start although we are obviously going to take action here to reduce our CapEx exposure because of the low commodity prices.

Operationally the plant is working just perfectly.

On the ILT, the Inboard Lower Tertiary Cretaceous, our significant discovery in the Highlander, we have significantly -- we were able to flow test the Highlander well at 43.5 million cubic feet of gas a day, the first production below 29,000 feet in the Gulf Coast onshore and we were able to prove that we have a large gas reserve there in Highlander and I will talk a little bit about that going forward.

In California, we had excellent execution, drilled over 177 wells with over 100% success ratio as expected.

So all in all we were rolling out of 2014 looking forward with a lot of optimism in 2015 until page 17, the price of oil feel out and feel out of bed and the market has gone down 50%, 60%.

This is unexpected from a lot of people's standpoint.

We thought oil would get a little soft but we had no idea it would find a mind of its own and create this kind of calamity.

The oil and gas market is under severe stress.

Our business is healthy as anybody that is out there because of the rotation out of the shales so we actually have economic projects to go forward on.

At the same point in time with our cash flow impaired and the ability of the Company from a standpoint of funding its obligations, we need to raise some capital.

And the way we do that is to take our development projects and find outside funding just like we did in 2008.

You will see the drop in 2008, 2009.

We were in the same situation and we took our Lucius project right after the financial crisis and we were able to do some project financing there.

It was a nice rate of return for our investors as well as us.

We basically got 75% of the project free of charge going forward and it just came on production as Richard said here in January this year.

So we are going to repeat that financing going forward and the only way we can do that is because of the strength and economics of the project and the operational leverage of tying back to our facilities to where the investors feel like they have a great shot at buying oil low and with good execution and be a part of a great project that will enjoy the oil prices at a higher level in the future.

So we are in a unique position to raise that funding and also having done it before and I will go over the Lucius case study in a second.

The other operational highlights, the study production points out of California.

We completed our maintenance at Marlin.

We sold 12.1 million barrels of sales in the fourth quarter.

Cash operating margin was about $0.5 billion and $64 million worth of net hedge realizations with our hedge book that does extend into 2015 with about, I think the mark on that is about $500 million to the positive right now.

Responding to market conditions, we have gone through a significant capital reduction of 34% of $1.2 billion of announced CapEx cuts.

That is basically from our previous $3.5 billion budget at -- to $2.3 billion and when you are making these budgets based on risk success when you go through a fourth-quarter when every well works, obviously you expect your budget to increase the following year.

So it is a direct $1.2 billion discount or reduction in CapEx of 34% but in real terms it is probably much higher than that based on the success and the development that it would cause because we obviously had it risked in our budget.

It all rolls over into a 43% discount in our capital spending in 2016 of $1.7 billion.

Now the development joint ventures we are going to be talking about will be in addition to these reductions and we will go through that and that is where we are talking about deferring the discretionary spending.

We will focus on our highest priority projects, anything marginal or anything discretionary or anything kind of out on the frontiers has been shelved.

And when you reduce spending this much, you slow growth and you preserve the resource value for the future, better price, economics are better.

It's just from the function of reducing capital and reducing activity.

And then levered the past successes there for funding arrangements, and that is what page 20 of the Lucius case study is all about.

We had discovered Lucius, drilled a couple of different delineation wells and established a reserve.

We basically project financed it with $450 million of an 8% convertible preferred into a 20% equity position.

With warrants and everything else, it ended up being about 25% at the end of the day and with a $300 million bank revolver at that subsidiary level.

That allowed us to fund all of the development which basically came in on time and on budget.

And this is where we had a third-party operator; it was right after the financial crisis.

And at the time we did the funding, the moratorium for drilling in the Gulf of Mexico was still in place post the Macondo deal.

This situation we have going forward, we have projects that come on at 18 to 24 months; they come on much faster.

We are the operator, we own 100%.

We have the equipment in place, the plan in place to execute on them.

So we are in a much better position physically and operationally, and interest rates are much lower to repeat this financing going forward.

We had these thoughts in mind anyway going forward because we have sold our Eagle Ford production and our cash flow is going to be down in the oil and gas sector of our Company so we just accelerated those plans.

We can do this multiple times.

We are going to do it at Holstein and Heidelberg, those are the two developments we are going out with first and then we can do King and Marlin and then Power Nap.

We can continue every successful resource that we established, we can project finance this at we think at very favorable rates to the Company and really highlight the true value of our exploration business through our Company versus just developing the reserves on our balance sheet to be able to leverage that part of the business.

Page 21 is the list of these projects we are talking about.

Holstein Deep and Heidelberg -- one is green and one is blue -- will be in our initial joint venture.

We have already done Lucius and then we have in the black, Dorado and King and we expect to drill [Kilo Oscar] and the rest of them in mid-2015.

Power Nap is part of our Vito project which is a great validation of our Vito acquisition last year.

It is the first exploratory well out of that strong portfolio.

It is a fantastic reservoir.

So we are off to a great start establishing our inventory for our development joint ventures in the Gulf to drive those high returns to the shareholders.

I mentioned earlier about the Inboard Lower Tertiary Cretaceous update in the Highlander.

This is a significant geologic and engineering milestone.

It is still producing gas below $3.00 so economically challenged, therefore we are idling most of this activity, if not all of this activity this year and to see what happens with better gas prices.

The Highlander well should be on here in the first quarter on production and we are going to be monitoring that closely and pressures and so forth but all indications we have truly validated a significant reservoir in the gas business but we need better economics to go to the WIP.

And obviously the best economics, the best cash flow is going to be in the oil side of our business in the Gulf of Mexico.

So a great success for the team and a long time coming on the flow test and the success and then we will deal with it and develop it when prices are a little bit better.

Richard?

Thanks, Jim.

Now before we get to questions, we will take a view of our 2015 outlook.

On slide 23 is our sales outlook which is for copper, gold, molybdenum and oil consistent with our previous guidance.

Unit cost of $1.53 for copper, $18 a barrel equivalent for oil is also consistent.

Operating cash flows and I will show a further analysis of this at $2.60 copper and $50 oil, our plan would provide $4 billion of operating cash flows.

Each $0.10 of copper is $315 million of variance in that.

Our current plan for capital expenditures is $6 billion.

That is a reduction from $7.5 billion of earlier guidance and this does not reflect the participation, contributions to be made under these arrangements that we are currently pursuing that Jim talked to you about if we are looking for partners and project type to come in for our developments in the Gulf of Mexico.

Page 24 shows our production outlook and I mentioned earlier the growing volumes that we will be seeing in our business beyond 2015.

2015 shows 4.4 -- $4.3 billion growing to $5.4 billion.

You can see increasing volumes of gold as we get closer to the bottom of the pit, our fleeting mining at Grasberg and our volumes for molybdenum and oil and gas sales.

Quarterly sales this year, the first quarter is expected to be our weakest quarter from a volume standpoint, that is just a function of our mine plans and is a ramp up of our labor issues.

But by the end of the year, we would see increasing growing in copper sales throughout the year.

Our sales by region are shown on page 26.

The growth in North America is primarily Morenci.

The decline in South America is primarily reflects these sale of Candelaria and you can see Indonesia growing as a result of improved productivity from our labor group.

Our unit costs for 2015 are detailed on slide 27.

Notably we would see a decrease in our site production delivery cost on a unit basis from $1.90 to $1.81 but that is offset by higher royalties and export duties in Indonesia but still at a very attractive raise in the $1.50 range.

EBITDA analysis, cash flow analysis is shown on page 28.

We show a variation again with oil at $50 and copper varying between $2.50 and $3.50.

This is an average of 2016 and 2017 and you can see cash flows of $6.4 billion a year average at $2.50 and over $8 billion at $3.

Sensitivities are on page 29; our biggest sensitivity of course is the copper price, $0.10 of change is $350 million and cash flow, for oil $5 dollars is $150 million in cash flow.

So those are going to be key factors we are going to be watching as we go forward.

Page 30 shows our declining capital expenditures going from projected $6 billion in 2015 to just over $5 billion in 2016.

Again repeating, this does not reflect the plans that we are on right now to have a significant portion of these cash flows in the oil and gas business fund through participation by third parties.

So that is our plan.

I mentioned earlier, our strong commitment to a strong balance sheet management.

At year-end, we had no borrowings under our $4 billion bank credit facility.

We also have a separate $1.8 billion line of credit at Cerro Verde to help fund that project along with cash flows that the project is generating from its current operation.

We had $425 million drawn under that separate facility at the end of the year but that is another aspect of our balance sheet management.

We have a strong resource base, strong cash flows and capital discipline.

We are taking the steps already to deal with this current situation and we are going to be responsive to what we have to deal with.

And as I said, this is going to be a real-time effort working hand in glove with our Board to make decisions as we go forward.

In summary, want to protect our balance sheet and liquidity and we are going to complete our near-term mining projects, continue with our oil and gas investments where that makes economic sense, work on these third-party investments with the primary goal -- the imperative of preserving this really attractive and large long-term asset base for the future benefit of our Company.

So with that, we will open the line for questions and Jim Bob, Jim and I are here with Kathleen to respond to whatever questions you might have.

(Operator Instructions).

Michael Gambardella, JPMorgan.

Good morning.

In the past I mean since you made the oil and gas acquisitions a few years back, you have consistently said that the oil and gas part of your business would be self funding.

And I know you talked a little bit about how you have done some of those things in the past but do you still think you will be self funding for 2015 given what you see right now and how specifically do you plan to address that?

Mike, this is Jim.

That is a target.

It is going to be difficult to be totally self funding with the horrific drop in prices and our plan was to be self funding to replace the revenues that we did not have in 2015 due to the sale of the Eagle Ford.

So we are moving towards additional funding sources and so forth but it is going to be a challenge to make it dollar per dollar.

Hopefully we can raise about $900 million in this first development joint venture off of the $2.3 billion to get close to it.

But even though it is January, I am optimistic we can get another one done as well but we will see what the market holds.

But we are going to try to offset as much as we can.

Mike, I mentioned here in my comments that we are seeing -- we are having to deal with this sudden change in the cash flows from just how quickly prices are moving, not for oil and gas but also for copper now.

And 2015 is a bridge year.

I mean we are going to have higher volumes in 2016 so the way we are looking about this issue about our goals for oil and gas lending and so forth and for managing our balance sheet is really how we deal with this over a two-year period.

We have the financial flexibility to do it but that is really the focus of where we are getting to and going to be monitoring to see what prices do and so forth.

But that is really the way we are looking at it.

That is our long-term goal.

Our long-term goal remains for oil and gas to be self funding and as it build assets and longer run it is going to be with success it is going to be generating substantial cash flows.

Could you talk a little bit -- just staying on the oil and gas side -- how you could turn the growth back on for oil and gas because you cut it pretty dramatically here?

The outside funding as I said, that turns the growth back on.

We share some of that growth so it will be muted but say it will be 75% of the growth that we had before once we are able to secure these financings and show some visibility there.

So by year end, we could have a couple of these things done and be turning growth back on but it wouldn't be as high as it was before because obviously we are sharing some of that growth with our investors that are putting up the money.

All right.

Thank you.

Tony Rizzuto, Cowen and Company.

Thanks very much and it is good to see the response to these deteriorating market conditions.

Just a follow-up to Mike's.

Thinking about on the mining side, are there other mining assets that you deem to be non-core in nature?

Tony, when you look at our mining assets, the bulk of those assets are existing producing mines that have significant undeveloped resources that we believe are going to be much more valuable in the future.

The reason for selling Candelaria was -- is it was not one of those mines, it was a very good operation, good production fully developed but it did not have the significant undeveloped resources that we have at El Abra, Tenke and Cerro Verde, Tenke or in our US assets.

So in that sense, those assets, both of our assets would be viewed as core and important for our business.

We do have some older mines in New Mexico.

We have, we are mining some at Miami, we are completing that but those are really operations that we are mining to manage our reclamation obligations and so forth.

Now we do have in the plans for dealing with our situation in Indonesia, plans to divest interest in PTFI over time.

We have indicated that the government would increase the Indonesian ownership in Indonesia to 30%, it is currently 9.36%.

Exactly how that will proceed is dependent on our progress with this MOU.

The first step is to offer it to the government.

We have talked about the possibility of a listing on the Indonesian Exchange but that is one area of divestment.

Interest in our mining assets is strong.

We would have the option of selling interest in those assets if that is what we decided we wanted to do but they are core to our future.

Okay.

Just a follow-up here.

How important is maintenance of the dividend at the current level?

You talked about the bridge year 2015 in some previous conversations and you obviously have some flexibility around that.

But just can you give us a little bit more color on how you view the maintenance of the current level of the dividend?

Well, Tony, this is a Board decision and as I said, we are going to be working very closely on our Board on a real-time basis as we go forward.

We have developed a plan now that includes the preservation of the dividend.

There's uncertainties about the future of commodity prices and there is different views about whether prices are going to rebound in the near-term or medium-term or there is talk about oil prices staying low or weakening.

So all of those things are things we are going to have to work with our Board and keeping our finger on top of it and that is going to be a decision that the Board would make and all I can say is right now we have developed a plan that preserves the dividend in this plan and our expectation is the Board is going to take steps to preserve our liquidity as we go forward.

We all want to keep the dividend and we're going to work hard to try to do it.

Okay, Richard.

Just a follow-up on a question for Jim.

Jim, it sounds like the plans at least for the first tranche in the first funding might be pretty advanced at this stage.

Is that a fair assessment?

Yes, Tony, the success we have had in the past, we've got great partners, we've got a lot of interest and mainly because you think about what oil properties out there in this vast array -- you just take North America, they actually have economics at these levels.

They are not the shales and they have had so much capital and there is a tremendous amount of private equity capital that is unused out there.

I think the bank was telling me as much as $100 billion of unused capital and fresh capital that has just been raised.

There is a lot of mezzanine capital (inaudible) and a lot of countercyclical investors that want to do just like we did at Lucius is buy oil when it is $50.

And so the meeting schedule is robust and we are not ruling out international players, sovereign wealths or those types of things but having done this and having the makeup of our properties where we 100% control operate, they are actually producing now taking away a lot of the operating risk and timing risk with these larger projects is key to get attractive financing.

So we are just going to be arguing about how much we give up as a Company and how much investors need to get their returns and that is a good, healthy argument for a good transaction I think.

So we are hitting the ground running and just think about this as a multiple way of financing and irrespective of where oil prices are, it still gives us the best rate of return as a Company of identifying these assets and then financing the development, the development with third parties to drive higher returns for FCX.

So we had these thought processes in mind and it would sure come in handy when prices do what they just did.

That is very helpful.

Thank you very much, gentlemen.

Sal Tharani, Goldman Sachs.

Thank you.

Richard can you or Kathleen give us an idea of the write down between the gas and oil assets or [MMR] and how was it distributed?

We follow full cost accounting and under full cost accounting, the original acquisition cost of both PXP and McMoRan went into what is called the full cost pool.

And then as we go forward, all cost of exploration and development for oil and gas reserves go into that single pool.

So all of the costs are kind of like mix masters, they just get all blended together and then they are subject to a ceiling test that is prescribed by the SEC that puts a limit on how much of those costs that can be capitalized and so in our write down there is two aspects to it.

First of all, the cost in excess of this SEC ceiling amount has been written off and then in addition, there was goodwill assigned to the oil and gas assets and all of that goodwill has been written off.

So it is not possible to distinguish it between McMoRan and PXP and this is of course is a function of pricing.

Under the SEC rules, they currently require that the prices used for these full cost ceiling tests be a trailing 12-month average.

And so in our ceiling tests those costs, the oil price that was used was roughly $90.

It is $95 actually Kathleen is telling me.

And that is because that is a 12-month average.

And as we roll into 2015, as we talk about in the press release and if prices stay low that average is going to come down and that would be indicative of further full cost write offs going into 2015.

All the goodwill is gone so it is just a question of the ceiling tests.

Okay.

Also the cost decline on the -- the gross cash cost you have from 2014 to 2015, is that all -- I am talking about this high production delivery cost, $1.90 to $1.81.

Is it all coming from the lower fuel or is there anything else in there also?

No, lower fuel is a factor but of course lower energy cost rolls into all other cost logistics and things like that from suppliers.

But with commodity price dropping, some of our costs are related to steel.

For example, the steel balls that we use in our grinding processing facilities, component parts for maintenance and truck tires.

There is across the board this change in the commodity price environment is affecting costs and one of the things we are doing is trying to make sure we take full advantage of that.

Yes, Sal, further to that, we do forecast here the significant benefit from lower diesel prices.

Offsetting some of that is we do have higher consumption as we are mining higher rates, productivity, improving in Indonesia, we are mining higher rates at Cerro Verde.

So we do have some consumption offsets and then offsetting that we do have some improved volume.

So you net all that together and you see the decline from $1.90 to $1.81.

As Richard talked about, we believe there will these some additional benefit from other commodity index type of costs which we reflected some of that in this plan but we expect to see if commodity prices stay low, we expect to see additional savings as we go throughout the year.

Great.

Lastly, Kathleen, can you give us some idea of your appetite for increased debt and how the rating agencies will look at it you think?

For increased debt?

If you need to, if the commodity prices remain low and you need to borrow some money to pay for the shortfall, what is your appetite for that?

Well, our plan is to manage our business so that we don't increase debt.

I mean we are going to take steps as we can to improve the maturity schedule of our debt.

There will be times because of the nature of our business that we will have some draws under our bank credit facility.

So that is what our credit facility is for, to give us bridges to deal with short-term issues whether they come up in business risk or so forth.

But in terms of thinking about substantially increasing our debt level over time, that is not what we are focused on.

We still, as I started out saying, we have plans of reducing our debt level.

We are just not going to be able to do it within the timeframe that we had originally targeted.

And 2015, Sal, is that bridging year in terms of getting to the point where we see free cash flows, substantial free cash flows coming out of the mining business.

And then we've got the initiatives underway to offset some of the CapEx in the oil and gas business.

So you might see some increase in 2015 but that is not our plan.

Our plan over time is to take leverage down.

You have all seen that the credit rating agencies are focused obviously as you would expect them to be on lower commodity prices and we are working with them and we are working with a plan to do everything we can to preserve our credit ratings.

Great.

Thank you very much.

David Gagliano, BMO.

I just have a few quick clarification questions really.

First of all, does the oil and gas production targets, do those include an assumption of project financing?

No, they do not.

That will be added once we get the financing secured.

The CapEx and the production and are both aggregate with no partner.

With no partner at this point so that is the baseline and you can build from there as we announce things.

Okay, great.

And then the operating cash flow numbers, are those before or after a minority interest payment?

Those are before.

The minority interest payments will come out of financing.

Okay, fair enough.

And then the last question, does the CapEx reflect any expectations (technical difficulty) shares potentially for a smelter in Indonesia?

No, they are currently not in there.

Our plans would be to develop as we did with the smelter that we developed in the mid-1990s to do a structured financing for that project which would be based on a contract for TCs and RCs and it would be a PTFI type contract for processing fees that would provide the basis for financing.

And then the amount of equity that would be required depends on the participation by the partners that we put together with it but it is not in there at this point.

Okay, great.

That is all I had.

Thanks.

Brian Yu, Citi.

Thanks.

Good morning.

I have a couple on questions on oil and gas.

You have taken the CapEx expense down to about $2.3 billion annually and then at the same time the production outlook has been dropped to about 56 million, 57 million barrels and so the math on that implies $41 per BOE of CapEx.

Is this a reasonable measure of sustaining CapEx for the business, $41 BOE?

No, because you've got different complexions of what is being spent and what is not because a lot of the wells that are being drilled are being hooked up timely so you're getting a muted production number.

I would use closer to $30 is probably a reasonable run rate under our nonstress scenario.

And Brian, that is basically what happens when we bring in third-party financing.

We drop that number from $30 to $20 and get our costs in line in a $50, $60 oil environment.

So that highlights the goal of what we are trying to do with the financing but $30 is more representative of a real market.

Okay.

So if you are spending at a $40 rate then, does that imply maybe at this rate in 2018 and 2019 we should see a growth in production out of the oil and gas?

If we didn't do any joint ventures that is correct, you would be growing at a $20 rate because you would just be completing wells and putting them on instead of drilling any but you have drilled them in the first couple of years.

But our plan is to do the outside financing and take them from a $40 a barrel rate -- your number -- down to $20 and grow the business with our partners say 75/25.

Okay.

And the second was just on the outside finance team.

If I looked at what's happened with Lucius, you sold 20% interest in the project but then the convertible preferreds were backed by the parent company and if we take that same analogy then in a way doesn't that involve the mining assets again or is the plan to just limit any kind of outside financing purely to the energy assets and not involve FCX, the parent company in the mining side?

Brian, I am not sure that was guaranteed by the parent company.

I think you are reading through something there.

It is at the subsidiary level, Brian, so there is not a guarantee.

Okay.

Yes, I thought the party that purchased it, they had some warrants to purchase PXP common stock.

No, the warrants for the subsidiary.

Okay, got it.

That is why I said instead of -- it is 20% base but when you look at the full percentage of the subsidiary, they got 25%.

I am sorry if I blended that I am sorry but it is all at the subsidiary level until about 25%.

Got it.

Okay, thank you.

Oscar Cabrera, Bank of America.

Thank you, operator.

Good morning, everyone.

Just want to get back to the question on the dividend.

Is there in your lines of credit or debt any covenants that would limit you from paying the dividend if commodity prices stayed low and we are at the low end of your expectations in operating cash flow?

Oscar, this is Kathleen.

There is not a specific covenant on the dividend.

We have maintenance covenants, financial covenants to maintain and that is all going into our plan.

Richard mentioned we are having some discussions about some flexibility with the covenants as we bridge through 2015 but there is not a specific covenant on the dividend.

Okay, great.

And then the other thing is just getting back into this oil and gas CapEx so $1.7 billion in cutbacks or cut capital in 2016.

Jim, could you just clarify, you are expecting to get economics of sharing 25% of -- I am assuming cash flow on this well but you are expecting to get 50% of the CapEx.

Could you just go over that again please?

Let me tell you how it works because I couldn't follow your math, Oscar.

Basically the financing we have $900 million of CapEx ahead of us at our Holstein Deep and Heidelberg.

We are asking investors to put up the 100%.

Putting up $900 million and for that they would get an X amount of return on the capital they put up plus a residual interest, probably in the form of an override and that would generate above market returns for their capital.

Somewhere on the low end, 10% to 12%, on the high end, 16% to 20% depending on what oil prices do.

And there is a lot of capital out there that have contacted us and wants to do those type of things.

We will use that capital and it is selling a piece of the growth, it is not selling our existing assets, existing cash flow, those types of things but it is helping us to accelerate the growth instead of just postponing spending.

And production performance we're actually going to be able to in effect accelerate it with the third-party capital.

That will all be at the subsidiary level and with the structure be a form of equity at that level.

So there won't be any debt to consolidate or anything to FCX and it is a great win, win for both parties and they get the upside of the oil on the piece they get and we get the upside of the production oil.

And one thing you will see in the oil and gas business, we have also -- it effected our operating cost because if you are not growing production, your operating costs are going to stay high or increase.

One thing about doing the joint venture, we are able to have more production go to the same facilities and you will see our operating -- our LOE cost go down too.

So the purpose of lowering the CapEx cost through the joint ventures and also increasing the production or accelerating the development will also lower our operating costs and you will end up getting our operating costs down below 20 or in the low 20s from where they are in the high 20s now and then we also have our fixed G&A cost and so forth and then you have our capital cost.

So we got our capital cost in the 20s, we got our operating cost in the low 20s, we are a $40, $45 cost environment or expense environment in 2016, that is our goal on the oil and gas side.

And we can live and prosper in a $60 world.

It is not as fun as $100 but it is still -- we've got to right size our costs and this is the most aggressive and best way to do it.

And Oscar, one of the things that you can think of in terms of this funding is we did it on the mining side several years ago with the expansion at Grasberg where someone came in and funded the development.

We added volumes and shared those volumes so it is not exactly but it is just another analog that you can think about and help you think about.

A lot of different structures, a lot of different deals but the key about having quality projects with good economics where you can do it, that is the big difference.

Fair enough.

Grasberg 60/40 with Rio Tinto.

But what would be the attributable production then and the required CapEx if we just -- you were looking at 80 million barrels so are we looking at 70 million now and an additional $1 billion in expenditures?

I will tell you what, Oscar, sign a CA and I will send you a teaser and show you exactly what it is.

We are looking for investors.

Seriously, there is a three-well development, a five-well development, a 10-well development depending on the success but it is somewhere between call it net to FCX doing 30 million and 70 million barrels depending on the success.

Thanks, Jim.

I'm sorry, 30,000 and 70,000 barrels a day not million barrels 30,000 and 70,000 barrels a day of incremental production over the next three to four years.

So they are big significant projects and that is why we want to preserve them and develop them with outside capital for the benefit of the FCX shareholders.

Thank you, sir.

John Tumazos, John Tumazos Very Independent Research.

Thank you.

The debt target had been $12 billion net looking forward a couple of years.

Has that target changed?

Should it be lower because you have divested some assets impaired some assets, JV-ed some assets, the price has changed?

Where do you think the debt target is going to be for 2016, 2018?

John, I started out by saying that the change in copper and gold prices has really resulted in us having to shift a focus from reaching any sort of debt target certainly in the 2016 timeframe to adjusting our business to be responsive to much lower copper and oil prices and that is what we are doing now.

As we go through this process, we will have a longer-term goal of debt reduction and adjusting our balance sheet.

But we are going to have to see how the world evolves to say how we are going to respond to it and it would just be impossible right now to set any sort of debt targets within time frames.

We will be talking with all of you on a quarter-by-quarter basis and reporting to you how we are responding to it.

We are not backing away from our debt reduction objective in having a very strong balance sheet.

It is what we are going to do.

It is just the realities are we have to deal with the world that is put before us and that is the way we are going to approach it.

Thank you.

It is tough times and we appreciate all your efforts.

I appreciate that, John.

As you know as well as anybody, we have been through th6ese several times before and we were always aware that that is a possibility and we have been preparing ourselves for it and now it is our job to execute.

Thank you.

Nathan Littlewood, Credit Suisse.

Good morning, guys.

Thanks for the opportunity.

I had a few more questions on oil and gas as well.

The first was just about the production and decline rates.

You have given some really useful guidance on what is required in this business to maintain outputs at that sort of mid-50s sort of level.

But under a best scenario, could you talk a little bit about what the un-remediated decline rates look for each of these oil and gas assets?

Just look at an average, think about somewhere around 12%, 13% in our business and remember with the timing of oil and gas coming on, spending -- like we have some spending in our Vito project in our budget that doesn't come on until 2020.

It is not a direct correlation to decline rates the capital being spent.

There is some different variations but if you think about a 12% decline rate in the business that would get you kind of where you need to be on a maintenance capital which will be lower than what you are seeing in our CapEx.

And would the Gulf of Mexico number be a bit higher than that?

Yes, use 13% to 14% there and use 4% to 5% in California.

Okay, got you.

That will get you kind of there.

Okay.

Just on this whole funding side of things, obviously at current oil prices the underlying assumption here is that the oil and gas business is willing to lever up to spend the capital that you have got planned here.

What I am a little unclear on though is just how much further you are willing to leverage this business up?

How much further debt, how much more debt is appropriate here for this business to take on before a more drastic change to the production outlook might be required?

When you are saying lever up, Nathan, what are you talking about?

Are you talking about CapEx spend or are you talking about actual balance sheet debt?

The balance sheet debt.

I mean there is no way that this business can generate anywhere near $2.3 billion in cash flow on $50 oil.

Right.

What we are working to do is to obtain third-party funding for some of these capital expenditures, not in the form of debt but in the form of an equity participation by these investors in these projects.

So it is not leveraging up it is sharing the CapEx with other third parties and sharing the economics of the development activity.

And trying to drive a net neutral goal as I was trying to be clear, it is going to be difficult to do that in 2015 but we think we will be able to achieve it in 2016 just timing and capital inflows.

So I guess the global answer to your question, Nathan, is that we don't have much appetite at all to leverage it up or lever it at all.

We are going to do whatever we can to not do that.

Okay, cool.

I think this is an important point to make because we are talking about joint venture participations, not debt obligations of the consolidated group.

You are obviously giving up some of the equity in these assets at the asset level but in return because these projects have been put together, value has already been created and you will have people willing and this kind of gets back to Oscar's question, to pay more than their proportionate share of the forward costs because they are compensating our Company for all the good work we have done in identifying the assets, developing (inaudible) presenting the opportunity.

So this equity and JV opportunities, this is sort of independent of the $900 million Holstein and Heidelberg that was mentioned earlier, is that correct?

No, that is how we generate the $900 million.

That is $900 million of CapEx going forward in the Holstein and Heidelberg projects.

We are going to get through the development JV to fund that $900 million which will reduce the $2.3 billion.

So you go from $2.3 billion to like $1.4 billion.

I guess what I'm getting at is that at $50 oil there isn't $1.4 billion of cash flow coming out of that business.

Then we are going to do the next one at Marlin and King and keep going and I was trying to make a point.

I am not sure it is all going to line up in the same year and Richard talked about we are looking at a two-year type of scenario to make sure that we get to a net neutral.

(multiple speakers) And then on top of that, these projects drive such good economics from Freeport at any oil price they are a good business based on finding discoveries that delineate them and get somebody to help develop them with us so we can drive higher returns for the shareholders.

So it is kind of a continuation of the plan we were discussing to take on greater importance now that you highlighted because the cash flows are not there to fund our projects right now and so but it still drives better economics even in a higher oil price environment.

Keep in mind for 2015 as you are thinking about the numbers, we do have the puts in place that really give us a higher realization than $50 for 2015.

So we've got that $20 of price protection.

We've got to pay the put premiums of just under $7 a barrel but -- so our cash flows from oil and gas in 2015 will be higher than what you would expect in the $50 market.

Absolutely.

That is already helpful.

Thank you.

So just one final question and I guess a higher level one here.

Your approach or attitude towards diversification of the businesses is a little bit different to other diversified mining companies.

If I look at some of your peers, they have all demonstrated a willingness in the past to sort of subsidize unprofitable businesses with profitable ones for a period.

I guess Rio Tinto with its iron ore and aluminum businesses is a pretty obvious and recent example.

It sounds that your approach towards these two businesses is as it was from the beginning which is that there is still sort of two separate buckets.

You've got a mining or copper bucket and an oil and gas bucket and the two are sort of not subsidizing one another.

I am just wondering if that is an approach that is necessarily set in stone going forward.

I guess what I am thinking about is some of the cost of capital that you are talking about here for external funding of the oil and gas business seem to me to be significantly higher than the cost of capital that the copper business has got access to at the moment and the copper business is generating some cash.

Why would you not use some copper earnings to support oil and gas?

It comes back to the Company's overall financial situation.

When we announced the acquisition of the oil and gas business, we talked about our entry into that business in two stages.

The first stage was going to be one of delever.

In other words, we incurred significant debt in acquiring oil and gas assets.

At that point we had a clear-cut path because of commodity prices and paying that debt off in a reasonable amount of time.

And then we said we were going to go forward beyond that point in investing where returns were greatest for our shareholders.

I think that is still the way we would see it is these significant recent declines in commodity prices are requiring us to take steps to protect our balance sheet currently.

We want to work hard to protect our credit rating.

I think that is important for credit investors as well as equity investors and it has other implications to our business.

And so that means we are going to be focused on looking at alternative sources of capital in these joint ventures in the oil and gas business provide us a near-term way of doing that is something our organization has been experienced in, the industry is experienced in and there is a huge amount of capital as Jim said available to do those sorts of things.

So we are having a primary objective of protecting our balance sheet and our liquidity in the current environment.

We don't believe the current environment is going to be the long-term environment.

We don't have any predictions of when it will turn but we believe it will turn and then we will be in a position of allocating capital in a different way.

Just on a standpoint of the oil and gas business, it has flexibility to fund itself, fund its projects but really we are all about driving high returns for our shareholders.

And if we are using outside capital on a promoted basis to develop these assets and we can manufacture these assets as we have in the past with great exploration results or exploitation results, and we have this huge project in the Gulf of Mexico with tens of billions of dollars worth of development opportunities, maybe at some point in time it would make sense.

But right now it is much better to accelerate the PV of that in the reserve life of our Gulf of Mexico business and we need to use outside funding to do it and we drive high returns for the FCX shareholders.

So it is a pretty cut -- get away from the cost of capital aspect if copper is generating $5 billion of excess cash flow a year and so forth, then you would be having to measure oil and gas returns against other shareholder initiatives and so forth.

But right now the best initiative for us is to run our business balanced like Richard talked about and make sure that we take advantage of the market and the project financing and accelerate our oil and gas business for the benefit of all of the FCX shareholders.

Okay.

Thanks very much.

I appreciate your time.

Nathan, will just say one thing 2008 has taught us and one thing this current environment has taught us, if you are in these commodity businesses, diversification within commodities is not going to pull you out when these broader scale things happen to you.

So we are focused on what are the best assets, what are the best returns for our shareholders, how do we manage our balance sheet to allow us to take advantage of this great asset base and that is what we are focused on.

Absolutely.

This is Jim Bob.

I want to make a couple of general comments.

Earlier someone mentioned Rio Tinto financing (technical difficulty).

Financing was so optimistic for us there was no production that was taken from the existing reserve.

Rio Tinto only participated 60/40 in the new reserves with the (inaudible) 38.

That is what we had in the deepwater we acquired from BP.

BP has taken years trying to put those platforms in the right place.

That is why there is so much oil and gas (inaudible).

What you need to understand is the existing wells that we have, existing reserves, (inaudible) by the investor (inaudible) participation in the additional wells that we drill.

So that is exactly like the Grasberg deal that we structured.

The reason why the Grasberg did so on such a promoted basis is because of the great asset that was found out there.

For the same reason, what you are seeing with these big platforms (technical difficulty) throughout the deepwater trend, I want to emphasize again that all those studies and geological work that went into putting those platforms in the right place (technical difficulty).

Secondly, we've got -- we have been talking about a (inaudible) and we have been looking for (technical difficulty) a well that was tested in Tuscaloosa is the single largest well that we have ever tested onshore.

That rock was (inaudible) a day rate would have been the biggest well for the deep sub salt structure.

We finally found a formation that had the right topography to give us the entire flow rates and we control that whole sand onshore.

(inaudible) prospect had the same as Tuscaloosa formation as the primary target (inaudible) Tuscaloosa trend to the North and (inaudible) to the East, which is a major asset if you get a chance to look at it.

So we can show some huge amounts of reserves that are going to be drilled in the future.

So it is not an ordinary portfolio.

In fact, our last portfolio wasn't ordinary.

We have already started working on the financing at the Grasberg (inaudible) you can't promote a mining asset the way you do oil and gas.

You have got the asset, we had the right assets and you just got to give a little time to do what is necessary to make the assets have some [national] value.

Thanks again.

I appreciate all the color.

Thanks, guys.

Steve Bristo, RBC Capital Markets.

Thanks for taking my question.

I just wanted to come back to this $900 million in project financing.

You were mentioning that if you do that $900 million, that is turning the growth back on so if you do actually get the $900 million, how much is that actually impacted the $2.3 billion you are currently forecasting that doesn't really have the growth built into it?

You bring up a good point, Steve.

It adds a couple hundred million of growth capital back into the $2.3 billion.

So it is probably a net $600 million or $700 million of net reduction in CapEx.

So we had $200 million or $300 million back of growth spending that we have to do to execute on that plan.

Can you just walk me again how you went from that $40 per BOE down to $20 for your share of I guess capital spending?

It is directionally from the standpoint you have to add additional joint ventures, you can't just do it with 900, you've got to continue to do the Marlin King joint venture and then the subsequent joint ventures after that on all of the development we go forward.

So basically you take a half to 60% of our CapEx spending and do it in third-party development but third-party joint ventures for development and you can get to that number.

But it is going to take some more inputs that I can go through at a later date with you.

I can't just do them all right now.

So the 20 was a target then?

You are currently at 40?

It is a target because if we get our cost down to 25 and our CapEx investments down to $20, that is $45 in a $50 environment.

That is what it is.

You kind of back into the target and then you have to do what you have to do to get there.

And would the $900 million be fully just in 2015 or is there any of that that really impacts 2016?

That is in 2015 so it would be a net $600 million, $700 million in 2015.

Let's think about it that way.

Okay, thank you.

Jeremy Sussman, Clarkson.

Good morning.

Obviously there has been a lot of discussions about JVs and farming out some of the oil and gas reserves.

Can you give us a sense, I think you talked about over a two-year timeframe but it sounds like you have had some discussions.

When can we maybe expect an update from you guys in terms of obviously the ability to update our numbers in terms of production etc.?

Sometime this summer.

We will be updating as we go.

We will give you a status report at our next quarterly call.

We are coming up on the time of year of metals and mining conferences so as always we are going to be transparent and give our investors the current status of things.

Okay, great.

But it sounds like we should have some clarity by the summer on some of this.

Well, we would hope to.

It all depends a lot on commodity prices.

If commodity prices stay low, then probably happen sooner rather than later because investors will be a little bit more hungry where if they get diverted, they get a little less hungry as oil prices recover.

And as Jim talked about, this is not like it is going to be one fell swoop deal.

We are going to make steps, it is going to be an ongoing process so it is just things happen very quickly as I keep saying over and over and we are responding to it and we started this process of talking with potential third-party investors and we are going to advance that as quickly as we are able to.

And Jeremy, the big deal is it is maximizing the returns to the FCX stakeholders.

That is the key objective here.

And sure it offsets CapEx in a low price environment and everything else.

This is Jim Bob.

I want to be sure and invite everybody at these joint ventures we are talking about on the platforms that we have, the existing platforms.

We are not participating in current production and current reserves, all the additional reserves, the new reserves that were down by the subsequent (inaudible).

Identically, we have referred to the (inaudible) financing.

None of the initial production is included in the Rio Tinto deal.

It all will depend upon speculation for finding new reserves and their participation in supporting (inaudible).

So remember you have a lot of investments put in these major hubs out there.

Nobody else has these hubs and for that reason any production the is down near the hubs may be drilling wells on a wildcat basis we will bring production to you (inaudible).

All of these platforms are under capacity so you have the ability to sell development wells off a promoted basis and you also have the advent of people drilling discoveries out there that they know they can't build an outstanding platform that would be bringing the reserves to you.

That is articulated on page 41 of the slide presentation where it talks about our reserves and excludes Highlander and Holstein Deep and the Holstein Deep reserves and growth of what we are talking about doing in the joint venture.

That will give you a representation of when we talk about net amounts they are already in the joint ventures.

That is great.

Thank you very much for all the color.

Garrett Nelson, BB&T Capital Markets.

Good morning.

Could you remind us what the annual maintenance CapEx is for the mining business?

On the CapEx guidance slide, is that $1.2 billion number for other mining CapEx in 2015 a good number to use or perhaps that $1.2 billion is not entirely maintenance CapEx?

That is a good number to use in the range of $1 billion to $1.5 billion but the $1.2 billion that we have got in 2015 is a good kind of run rate to use.

We have taken steps to defer things when we can but on an ongoing basis, it is in that range.

And then again on that slide, the $2.5 billion of major CapEx on the mining side for 2015, you footnote that that primarily includes Cerro Verde in Grasberg underground development.

Cerro Verde will obviously drop off after this year.

But if you would, how much CapEx specifically is budgeted here both for Grasberg underground development and for Cerro Verde in each year 2015, 2016, 2017?

The Cerro Verde CapEx is split between 2015 and 2016.

We had $3.1 billion incurred through 2014 and most of that difference will be spent in 2015 with some trailing into 2016.

We also have the Grasberg underground which as Richard said will average $700 million a year net to our interest.

We do have a couple of years where it is higher than the $700 million average and some that are lower than the $700 million average but that is about what we are spending on average for the Grasberg underground.

We've also got some other projects in 2016.

We have got in 2017, we are expanding the Miami smelter and then as you get into 2017, we start the development of extension of the Safford mine so that we have some CapEx in 2017 for the Safford extension as well as the Miami smelter.

But the bulk of the Cerro Verde spending is completed in 2015.

By far the bulk.

I think it is roughly $500 million left in 2016.

But I do want to point out that this is a project that is scheduled to finish right at the end of the year.

So it is a big construction project.

I said we've got 12,000 to 14,000 people there and we will update you as we go through the year.

There is a possibility that some of these costs may go over into the next year but right now things are looking very good.

Okay.

Thanks a lot, Richard and Kathleen.

Thank you, Garrett.

I will now turn the call over to management for any closing remarks.

We have given you a lot of information today.

Someone mentioned it is a complicated world and indeed it is.

We are going to respond to it as we have historically in a prudent and thoughtful way and we appreciate all of your interest in the Company.

We are available to respond to follow-up questions that you may have.

Just let David know and we will answer your questions as we go forward.

Good luck in the Northeast and we look forward to talking to you again.

Ladies and gentlemen, that concludes our call for today.

Thank you for your participation.

You may now disconnect.