Freeport-McMoRan weighs up selling minority stake in oil unit

Freeport-McMoRan is eyeing selling a minority stake in its oil and gas subsidiary as the world's largest listed copper producer grapples with its large debt load and a commodities downturn.

A possible initial public offering of stock in the oil and gas business could take place late this year and would highlight the standalone value of the oil and gas business, Freeport said on Thursday.

The idea of an IPO follows previous declarations by Freeport that it would look at bringing in partners to part-fund capital spending, but the US-listed miner and petroleum producer said that it intended to retain control of the oil and gas business and would continue to explore alternative options.

Freeport joins some of the world's other large miners in considering radical restructuring in response to the commodities downturn. BHP Billiton is on the verge of spinning off unwanted assets into a new listed company, while Vale of Brazil is also considering an IPO of its base metals business.

Freeport on Thursday announced a $2.5bn quarterly loss for the three months to March 31, primarily because of impairment charges on oil and gas assets and deferred tax arrangements.

The first-quarter loss, which compares with $510m of net income in the same period a year ago, comes after Freeport slashed its dividend by more than 80 per cent in March. The company also posted a $2.9bn quarterly loss for the last three months of 2014.

Freeport spent heavily to bulk up its oil and gas business with two big acquisitions for a combined $20bn in 2012. Freeport had been vowing to cut its debt load last year, and made some divestments, before admitting that its targets were unachievable given the weakness in copper and oil markets.

Total net debt stood at almost $20bn at the end of March, Freeport said, slightly higher than at the same time a year earlier.

Freeport vies with Chilean state-owned miner Codelco as the world's largest copper producer, with operations in Africa, the Americas and Indonesia.

Revenue for the three months to March 31 came to $4.2bn, down from $5bn in the same period a year earlier, although Freeport's copper and gold output increased.

The average sales price during the quarter for Freeport's copper was 13 per cent lower than a year earlier. Gold was 9 per cent lower.

On the oil and gas side, Freeport's cash operating margin - its revenues less its cash production costs - more than halved.

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