After gaining access earlier this year to a big bundle of onshore and offshore opportunities in the United States, Freeport-McMoRan Copper & Gold Inc. now is reworking its strategy to relieve the cost burden and increase production, top executives said last week.

Sales are being contemplated for shallow-water assets in the Outer Continental Shelf of the Gulf of Mexico. The 2013 budget for the Eagle Ford Shale has been reduced to $300 million from $600 million. And partners are being pursued to take on some of the costs, executives told analysts during a conference call to discuss 2Q2013 performance.

“We have a treasure trove of assets,” said Chairman Jim Bob Moffett. Now the company has to calm investors’ nerves by reducing costs and providing some value from the natural resources conglomerate’s revamped portfolio. About $1.9 billion in capital costs are being reduced from the worldwide portfolio. Total capital expenditures were $1.2 billion in 2Q2013 and should hit about $5.5 billion total this year.

“We are taking measures to execute prudent capital management in an uncertain global economic environment and are committed to pursuing additional divestitures and capital cost reductions as required to maintain a strong balance sheet while preserving a strong resource position and a portfolio of assets with attractive long-term growth prospects,” read a joint statement by Moffett, CEO Richard C. Adkerson and newly installed President Jim Flores, who is in charge of the exploration and production division.

Freeport this year completed a friendly transaction estimated at about $20 billion including debt to buy Plains Exploration and Production Co. and affiliate McMoRan Exploration Co. (see NGI, Dec. 10, 2012). About $190 million already has been invested in new assets, which led to about 16,000 boe/d, or 5 million boe in gas and oil, at a cost of $16.58/boe. The production was sold in 2Q2013 on average for $74.37/boe, executives said.

Plains gave Freeport a compelling portfolio that includes stakes in California, the Haynesville and Eagle Ford shales, as well as a strong deepwater basket. McMoRan, a GOM shallow driller, of late had been concentrating on finding natural gas in ultra-deep wells. The mega-purchase, criticized by many of the company’s copper and gold investors, will pay off, but it will take some reconfiguring, said Flores, who formerly chaired Plains.

“We’ve got a tremendous oil and gas business, lots of free cash flow and low maintenance,” Flores said. “California will continue to get an ample amount of capital to maintain its stable base of production…In the Eagle Ford, which has been developed over the past five years, we’ve seen a tremendous growth rate on rig activities…We had two rigs and now we have over eight…” But it’s time to “reduce the rig fleet and reap the large cash flows…The wells are producing near-term cash flow, but it’s coming at the peril of the rig count.”

Plains once-prized Haynesville properties hold more than 5 Tcf of gas attributed now to Freeport. All of the acreage “has been drilled, plumbed and is held by production…We’ve also got shallower Bossier reserves,” Flores said. The Haynesville Shale, where drilling has been stunted on low gas prices, “is going to be the cornerstone of our gas business for a long time to come and it’s going to be an important part of the country’s gas business.”

A lot of offshore work is planned for 2014, where the company has a “large exploratory inventory,” Flores explained. “Now we’re looking for ways to manage the exploration expense,” whether it be a joint venture or luring partners to participate. Most of the interest in joining up should come from “very large operations.”

The company is “right in the beginning of the sales process,” he said, and he couldn’t disclose any potential agreements. “But we are looking for $500,000 to $700,000 in Shelf business” to be sold. The shallow water hasn’t been a “primary growth target” but others may “see opportunities…We want to focus on a high quality asset base and prune off ones that don’t fit our profile.”

Net income was down year/year at $482 million (49 cents/share) from $710 million (74 cents), as the company suffered from the collapse of its Indonesian gold mine which was out of operation from May to July. Revenue declined by 4% to $4.29 billion, below consensus forecasts of $4.45 billion. Freeport expects to produce 35 million boe of oil and gas this year.

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