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General Information (Unaudited) | 9 Months Ended
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Sep. 30, 2016
General Information [Abstract] |
General Information | GENERAL INFORMATION The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and disclosures required by generally accepted accounting principles (GAAP) in the United States (U.S.). Therefore, this information should be read in conjunction with Freeport-McMoRan Inc.'s (FCX) consolidated financial statements and notes contained in its annual report on Form 10-K for the year ended December 31, 2015, as recast in the Form 8-K filed on November 9, 2016, for the presentation of TF Holdings Limited (TFHL) as discontinued operations. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported. With the exception of the accounting for discontinued operations, and the oil and gas properties impairment discussed below and the related tax charges to establish a deferred tax valuation allowance (refer to Note 5), all such adjustments are, in the opinion of management, of a normal recurring nature. As a result of FCX's second-quarter 2016 agreement to sell its interest in TFHL, FCX has reported TFHL as discontinued operations for all periods presented in the unaudited consolidated financial statements (refer to Note 2). Operating results for the nine-month period ended September 30, 2016, are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. Oil and Gas Properties. Under the U.S. Securities and Exchange Commission's (SEC) full cost accounting rules, FCX reviews the carrying value of its oil and gas properties in the full cost pool for impairment each quarter on a country-by-country basis. Under these rules, capitalized costs of oil and gas properties (net of accumulated depreciation, depletion, amortization and impairment, and related deferred income taxes) for each cost center may not exceed a “ceiling” equal to:
• | the present value, discounted at 10 percent, of estimated future net cash flows from the related proved oil and gas reserves, net of estimated future income taxes; plus
• | the cost of the related unproved properties not being amortized; plus
• | the lower of cost or estimated fair value of the related unproved properties included in the costs being amortized (net of related tax effects).
These rules require that FCX price its future oil and gas production at the twelve-month average of the first-day-of-the-month historical reference prices as adjusted for location and quality differentials. FCX's reference prices are West Texas Intermediate (WTI) for oil and the Henry Hub spot price for natural gas. Such prices are utilized except where different prices are fixed and determinable from applicable contracts for the remaining term of those contracts. The estimated future net cash flows also exclude future cash outflows associated with settling asset retirement obligations included in the net book value of the oil and gas properties. The rules require an impairment if the capitalized costs exceed this “ceiling.” In addition, following the evaluation of alternatives for the oil and gas business and the then-current limitations and cost of capital available for future drilling, FCX Oil & Gas LLC (FM O&G, a wholly owned subsidiary of FCX formerly known as FCX Oil & Gas Inc.) determined in first-quarter 2016 that the carrying values of certain of its unevaluated properties were impaired. For the first nine months of 2016, FM O&G transferred $3.2 billion of costs (including $3.1 billion in first-quarter 2016) associated with unevaluated properties to the full cost pool, mostly reflecting impairment of the carrying values of unevaluated properties. Combined with the impact of the reduction in twelve-month historical prices and reserve revisions, net capitalized costs exceeded the related ceiling test limitation under full cost accounting rules, which resulted in the recognition of a $239 million impairment charge in third-quarter 2016 and $4.3 billion for the first nine months of 2016. The twelve-month average price (using WTI as the reference oil price) was $41.68 per barrel at September 30, 2016, compared with $43.12 per barrel at June 30, 2016.

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