Freeport-McMoRan Inc., which made a $9 billion bet only three years ago to pump up its natural gas and oil business, has split the board of directors to prepare for a public offering, spinoff or joint venture for the bleeding enterprise.

The global mining conglomerate (FCX) in June said affiliate Freeport-McMoRan Oil & Gas Inc. (FM O&G) planned to raise $100 million by selling a minority stake through an initial public offering (see Daily GPI, June 25). FCX already was an exploration and production player, particularly in the Gulf of Mexico (GOM), before it bought frequent exploration partners McMoRan Exploration Co. and Plains Exploration & Production Co. in late 2012 (see Daily GPI, Dec. 6, 2012). FM O&G was formed once the deals were completed.

FCX now is reviewing “strategic alternatives” for FM O&G “following constructive discussions with many of its largest shareholders.” Corporate raider Carl Icahn this summer acquired an 8.46% stake and said he planned to have discussions concerning capital structure and production operations (see Daily GPI, Aug. 27).

The strategic review of FM O&G is to “evaluate alternative courses of action designed to enhance value to FCX shareholders and achieve self-funding of the oil and gas business from its cash flows and resources,” management said. On the news, FCX’s share price on Tuesday was up close to 5% in early trading.

Houston-based FM O&G, whose main prospects are in the U.S. onshore and Gulf of Mexico, was expected to be self-funding, but that has never been the case. In August the affiliate cut its capital spending plans by 31% through 2017 and deferred several projects (see Daily GPI, Aug. 5). It also has laid off more than 1,500 people.

FM O&G’s asset base, “substantial underutilized deepwater Gulf of Mexico infrastructure, large inventory of low risk development opportunities and talented and experienced personnel and management team provide alternatives to generate value,” FCX management said. “The previously announced potential public offering of a minority interest in FCX’s oil and gas business remains an alternative for future consideration, the timing of which is subject to market conditions.”

FM O&G’s portfolio includes U.S. oil and natural gas assets in the deepwater GOM, onshore and offshore California and in the Haynesville Shale. It also has a position in South Louisiana’s onshore Inboard Lower Tertiary/Cretaceous natural gas trend.

Other alternatives being considered for FM O&G include a spinoff to FCX shareholders, “joint venture arrangements and further spending reductions. The oil and gas strategic review is being undertaken with an objective of improving FCX’s financial position and enhancing long-term value for its shareholders.”

To prepare for a possible separation, five FCX directors have been appointed to a separate FM O&G board. FM O&G CEO Jim Flores, who was the former chief of Plains, has been named chairman. FCX’s reconstituted board has been reduced to nine members, with two of its former 16-member board retiring. FCX also has disbanded its office of the chairman management structure, which included Chairman Jim Bob Moffett, CEO Richard Adkerson and Flores.

“We have discussed as a board our proper and most effective size and make-up, consistent with the needs of the business going forward,” said FCX lead independent director Gerald J. Ford. “We have listened to and taken into account views and concerns from many of our largest shareholders.

“Our newly reconstituted board brings diverse and extensive professional, financial and business experience while balancing independence and tenure. The board represents a strong blend of institutional knowledge and fresh perspectives that will benefit shareholders as we address market challenges and position the company for long-term success.”

FCX, the world’s largest publicly traded copper producer, is returning to basics, management said. Near-term, this involves managing copper production activities, spending on capital projects and operations, and administering business to enhance cash flows and protect liquidity.

“While taking prudent near-term steps responsive to the currently weak market conditions, FCX remains confident about the longer term outlook for copper prices based on the global demand and supply fundamentals. A primary objective will be a significant reduction over time of FCX’s current debt level.”