The Houston-based oil and gas arm of conglomerate Freeport-McMoRan Inc. is slashing its capital spending by close to one-third over the next two years and deferring several long-term projects to stanch the bleeding from low commodity prices.

Freeport-McMoRan Oil and Gas (FM O&G) is cutting capital expenditures (capex) by 31% in 2016 and 2017 to $2 billion from $2.9 billion as it works toward a “leaner, longer” strategy longer term. Capex this year is estimated at $2.8 billion, down from an estimate of $3.5 billion issued in late 2014.

“The steps we are taking are necessary under current market conditions to strengthen our financial position and preserve our large resource base for improved future market conditions,” said said FCX Chairman Jim Bob Moffett, Vice Chairman Richard C. Adkerson, FM O&G CEO Jim Flores in a joint statement.

“Our ‘leaner, longer’ plan at FM O&G will enhance near-term cash flow while preserving long-term growth opportunities.”

Despite the cutbacks in capex, U.S. oil and gas production still is expected to trend higher, but as high as originally planned. Full-year 2015 output now is forecast at 143,000 boe/d, down from 145,000 boe/d. In 2016, output is expected to be 151,000 boe/d, versus an earlier estimate of 163,000 boe/d, while in 2017, output is forecast to hit 170,000 boe/d versus 173,000 boe/d.

The exploration arm is one of big operators in the Gulf of Mexico, both deep and shallow water. It also has an extensive portfolio offshore and onshore California, onshore South Louisiana, as well as gas-rich opportunities in the Haynesville Shale and the Madden area in Wyoming.

“The revised plans, together with the previously announced potential initial public offering of a minority interest in FM O&G and potential other actions, will be pursued as required to fund oil and gas capital spending within cash flow for 2016 and subsequent years,” the company said. The potential offering was announced in June (see Daily GPI, June 25).

The Phoenix-based conglomerate said it would “continue to assess opportunities to partner with strategic investors potentially interested in investing capital…in the development of its oil and gas and its mining properties.” A review of operations for its global copper and molybdenum is nearly done that would involve cost cutting “to strengthen its financial position in a weak copper price environment…Production at certain operations challenged by low commodity prices will be curtailed.”