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SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED) SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED) | 12 Months Ended
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Dec. 31, 2016
Oil and Gas Exploration and Production Industries Disclosures [Abstract] |
Oil and Gas Exploration and Production Industries Disclosures [Text Block] | SUPPLEMENTARY OIL AND GAS INFORMATION (UNAUDITED) Costs Incurred. A summary of the costs incurred for FCX's oil and gas acquisition, exploration and development activities for the years ended December 31 follows:
| 2016 |  | 2015 |  | 2014 |
Property acquisition costs: |  |  |  |  |  |
Proved properties | $ | — |  |  | $ | — |  |  | $ | 463 |  |
Unproved properties | 7 |  |  | 61 |  |  | 1,460 |  |
Exploration costs | 22 |  |  | 1,250 |  |  | 1,482 |  |
Development costs | 749 |  |  | 1,442 |  |  | 1,270 |  |
| $ | 778 |  |  | $ | 2,753 |  |  | $ | 4,675 |  |
These amounts included increases (decreases) in AROs of $37 million in 2016, $(80) million in 2015 and $(27) million in 2014, capitalized general and administrative expenses of $78 million in 2016, $124 million in 2015 and $143 million in 2014, and capitalized interest of $7 million in 2016, $58 million in 2015 and $88 million in 2014. Capitalized Costs. The aggregate capitalized costs subject to amortization for oil and gas properties and the aggregate related accumulated amortization as of December 31 follow:
| 2016 |  | 2015 |  | 2014 |
Properties subject to amortization | $ | 27,507 |  |  | $ | 24,538 |  |  | $ | 16,547 |  |
Accumulated amortization | (27,433 | ) | a | (22,276 | ) | a | (7,360 | ) | a
| $ | 74 |  |  | $ | 2,262 |  |  | $ | 9,187 |  |
a. | Includes charges of $4.3 billion in 2016, $13.1 billion in 2015 and $3.7 billion in 2014 to reduce the carrying value of oil and gas properties pursuant to full cost accounting rules.
The average amortization rate per barrel of oil equivalents (BOE) was $17.58 in 2016, $33.46 in 2015 and $39.74 in 2014. Costs Not Subject to Amortization. Including amounts determined to be impaired, FCX transferred $4.9 billion of costs associated with unevaluated properties to the full cost pool in 2016. Sales of unevaluated properties totaled $1.6 billion in 2016. Following FCX's disposition of its Deepwater GOM and onshore California oil and gas properties in fourth-quarter 2016, the carrying value of all of FCX's remaining oil and gas properties is included in the amortization base at December 31, 2016. Results of Operations for Oil and Gas Producing Activities. The results of operations from oil and gas producing activities for the years ended December 31, 2016, 2015 and 2014, presented below exclude non-oil and gas revenues, general and administrative expenses, goodwill impairment, interest expense and interest income. Income tax benefit was determined by applying the statutory rates to pre-tax operating results:
| 2016 |  | 2015 |  | 2014
Revenues from oil and gas producing activities | $ | 1,513 |  |  | $ | 1,994 |  |  | $ | 4,710 |
Production and delivery costs | (1,829 | ) | a | (1,215 | ) |  | (1,237 | )
Depreciation, depletion and amortization | (839 | ) |  | (1,772 | ) |  | (2,265 | )
Impairment of oil and gas properties | (4,317 | ) |  | (13,144 | ) |  | (3,737 | )
Income tax benefit (based on FCX's U.S. federal statutory tax rate) | — |  | b | 5,368 |  |  | 958 |
Results of operations from oil and gas producing activities | $ | (5,472 | ) |  | $ | (8,769 | ) |  | $ | (1,571 | )
a. | Includes $926 million in charges related to drillship settlements/idle rig and contract termination costs.
b. | FCX has provided a full valuation allowance on losses associated with oil and gas activities in 2016.
Proved Oil and Natural Gas Reserve Information. The following information summarizes the net proved reserves of oil (including condensate and natural gas liquids (NGLs)) and natural gas and the standardized measure as described below. All of FCX's oil and natural gas reserves are located in the U.S. Management believes the reserve estimates presented herein are reasonable and prepared in accordance with guidelines established by the SEC as prescribed in Regulation S-X, Rule 4-10. However, there are numerous uncertainties inherent in estimating quantities and values of proved reserves and in projecting future rates of production and the amount and timing of development expenditures, including many factors beyond FCX's control. Reserve engineering is a subjective process of estimating the recovery from underground accumulations of oil and natural gas that cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data and of engineering and geological interpretation and judgment. Because all oil and natural gas reserve estimates are to some degree subjective, the quantities of oil and natural gas that are ultimately recovered, production and operating costs, the amount and timing of future development expenditures, and future crude oil and natural gas sales prices may all differ from those assumed in these estimates. In addition, different reserve engineers may make different estimates of reserve quantities and cash flows based upon the same available data. Therefore, the standardized measure of discounted future net cash flows (Standardized Measure) shown below represents estimates only and should not be construed as the current market value of the estimated reserves attributable to FCX's oil and gas properties. In this regard, the information set forth in the following tables includes revisions of reserve estimates attributable to proved properties acquired from PXP and MMR, and reflect additional information from subsequent development activities, production history of the properties involved and any adjustments in the projected economic life of such properties resulting from changes in product prices. Decreases in the prices of crude oil and natural gas could have an adverse effect on the carrying value of the proved reserves, reserve volumes and FCX's revenues, profitability and cash flows. FCX's reference prices for reserve determination are the WTI spot price for crude oil and the Henry Hub price for natural gas. As of February 2017, the twelve-month average of the first-day-of-the-month historical reference price for crude oil has increased from $42.75 per barrel at December 31, 2016, to $45.99 per barrel, while the comparable price for natural gas has increased from $2.48 per MMBtu at December 31, 2016, to $2.65 per MMBtu. The market price for GOM crude oil differs from WTI as a result of a large portion of FCX's production being sold under a Heavy Louisiana Sweet based pricing. Approximately 59 percent of FCX's December 31, 2016, oil and natural gas reserve volumes are attributable to properties in the GOM where oil price realizations are generally higher because of these marketing contracts. Estimated Quantities of Oil and Natural Gas Reserves. The following table sets forth certain data pertaining to proved, proved developed and proved undeveloped reserves, all of which are in the U.S., for the years ended December 31, 2016, 2015 and 2014.
|  | Oil |  | Gas |  | Total
|  | (MMBbls)a,b |  | (Bcf)a |  | (MMBOE)a
2016 |  |  |  |  |  |
Proved reserves: |  |  |  |  |  |
Balance at beginning of year |  | 207 |  |  | 274 |  |  | 252 |
Extensions and discoveries |  | — |  |  | — |  |  | — |
Acquisitions of reserves in-place |  | — |  |  | — |  |  | — |
Revisions of previous estimates |  | 1 |  |  | — |  |  | 1 |
Sale of reserves in-place |  | (168 | ) |  | (118 | ) |  | (187 | )
Production |  | (36 | ) |  | (69 | ) |  | (48 | )
Balance at end of year |  | 4 |  |  | 87 |  |  | 18 |
Proved developed reserves at December 31, 2016 |  | 4 |  |  | 87 |  |  | 18 |
Proved undeveloped reserves at December 31, 2016 |  | — |  |  | — |  |  | — |
|  | Oil |  | Gas |  | Total
|  | (MMBbls)a,b |  | (Bcf)a |  | (MMBOE)a
2015 |  |  |  |  |  |
Proved reserves: |  |  |  |  |  |
Balance at beginning of year |  | 288 |  |  | 610 |  |  | 390 |
Extensions and discoveries |  | 11 |  |  | 43 |  |  | 17 |
Acquisitions of reserves in-place |  | — |  |  | — |  |  | — |
Revisions of previous estimates |  | (54 | ) |  | (287 | ) |  | (102 | )
Sale of reserves in-place |  | — |  |  | (2 | ) |  | — |
Production |  | (38 | ) |  | (90 | ) |  | (53 | )
Balance at end of year |  | 207 |  |  | 274 |  |  | 252 |
Proved developed reserves at December 31, 2015 |  | 129 |  |  | 245 |  |  | 169 |
Proved undeveloped reserves at December 31, 2015 |  | 78 |  |  | 29 |  |  | 83 |
2014 |  |  |  |  |  |
Proved reserves: |  |  |  |  |  |
Balance at beginning of year |  | 370 |  |  | 562 |  |  | 464 |
Extensions and discoveries |  | 10 |  |  | 35 |  |  | 16 |
Acquisitions of reserves in-place |  | 14 |  |  | 9 |  |  | 16 |
Revisions of previous estimates |  | (10 | ) |  | 140 |  |  | 13 |
Sale of reserves in-place |  | (53 | ) |  | (54 | ) |  | (62 | )
Production |  | (43 | ) |  | (82 | ) |  | (57 | )
Balance at end of year |  | 288 |  |  | 610 |  |  | 390 |
Proved developed reserves at December 31, 2014 |  | 184 |  |  | 369 |  |  | 246 |
Proved undeveloped reserves at December 31, 2014 |  | 104 |  |  | 241 |  |  | 144 |
a. | MMBbls = million barrels; Bcf = billion cubic feet; MMBOE = million BOE
b. | Includes NGL proved reserves of 1 MMBbls (all developed) at December 31, 2016, 9 MMBbls (6 MMBbls of developed and 3 MMBbls of undeveloped) at December 31, 2015, and 10 MMBbls (7 MMBbls of developed and 3 MMBbls of undeveloped) at December 31, 2014.
For the year ended December 31, 2015, FCX had a total of 17 MMBOE of extensions and discoveries, including 14 MMBOE in the Deepwater GOM, primarily associated with the continued successful development at Horn Mountain and 3 MMBOE in the Haynesville shale assets resulting from continued successful drilling that extended and developed FCX's proved acreage. For the year ended December 31, 2014, FCX had a total of 16 MMBOE of extensions and discoveries, including 8 MMBOE in the Deepwater GOM, primarily associated with the continued successful development at Horn Mountain and 5 MMBOE in the Haynesville shale resulting from continued successful drilling that extended and developed FCX's proved acreage. For the year ended December 31, 2015, FCX had net negative revisions of 102 MMBOE primarily related to lower oil and gas price realizations. For the year ended December 31, 2014, FCX had net positive revisions of 13 MMBOE primarily related to improved gas price realizations in both the Haynesville shale assets and Madden field, as well as continued improved performance in the Eagle Ford shale assets prior to the disposition, partially offset by the downward revisions of certain proved undeveloped reserves resulting from deferred development plans, as well as lower oil price realizations and higher steam-related operating expenses resulting from higher natural gas prices at certain onshore California properties. Excluding the impact of crude oil derivative contracts, the average realized sales prices used in FCX's reserve reports as of December 31, 2016, were $34.26 per barrel of crude oil and $2.40 per one thousand cubic feet (Mcf) of natural gas. As of December 31, 2015, the average realized sales prices used in FCX's reserve report were $47.80 per barrel of crude oil and $2.55 per Mcf. For the year ended December 31, 2014, FCX acquired reserves in-place totaling 16 MMBOE from the acquisition of interests in the Deepwater GOM, including interests in the Lucius and Heidelberg oil fields. For the year ended December 31, 2016, FCX sold reserves in-place totaling 187 MMBOE primarily representing all of its Deepwater GOM, onshore California and Haynesville properties. For the year ended December 31, 2014, FCX sold reserves in-place totaling 62 MMBOE primarily related to its Eagle Ford shale assets. Standardized Measure. The Standardized Measure (discounted at 10 percent) from production of proved oil and natural gas reserves has been developed in accordance with SEC guidelines. FCX estimated the quantity of proved oil and natural gas reserves and the future periods in which they are expected to be produced based on year-end economic conditions. Estimates of future net revenues from FCX's proved oil and gas properties and the present value thereof were made using the twelve-month average of the first-day-of-the-month historical reference prices as adjusted for location and quality differentials, which are held constant throughout the life of the oil and gas properties, except where such guidelines permit alternate treatment, including the use of fixed and determinable contractual price escalations (excluding the impact of crude oil derivative contracts). Future gross revenues were reduced by estimated future operating costs (including production and ad valorem taxes) and future development and abandonment costs, all of which were based on current costs in effect at December 31, 2016, 2015 and 2014, and held constant throughout the life of the oil and gas properties. Future income taxes were calculated by applying the statutory federal and state income tax rate to pre-tax future net cash flows, net of the tax basis of the respective oil and gas properties and utilization of FCX's available tax carryforwards related to its oil and gas operations. The Standardized Measure related to proved oil and natural gas reserves as of December 31 follows:
| 2016 |  | 2015 |  | 2014
Future cash inflows | $ | 345 |  |  | $ | 10,536 |  |  | $ | 29,504 |
Future production expense | (175 | ) |  | (4,768 | ) |  | (10,991 | )
Future development costsa | (439 | ) |  | (4,130 | ) |  | (6,448 | )
Future income tax expense | — |  |  | — |  |  | (2,487 | )
Future net cash flows | (269 | ) |  | 1,638 |  |  | 9,578 |
Discounted at 10% per year | 32 |  |  | (246 | ) |  | (3,157 | )
Standardized Measure | $ | (237 | ) |  | $ | 1,392 |  |  | $ | 6,421 |
a. | Includes estimated asset retirement costs of $0.4 billion at December 31, 2016, $1.9 billion at December 31, 2015, and $1.8 billion at December 31, 2014.
A summary of the principal sources of changes in the Standardized Measure for the years ended December 31 follows:
|  | 2016 |  | 2015 |  | 2014
Balance at beginning of year |  | $ | 1,392 |  |  | $ | 6,421 |  |  | $ | 9,417 |
Changes during the year: |  |  |  |  |  |
Sales, net of production expenses |  | (831 | ) |  | (928 | ) |  | (3,062 | )
Net changes in sales and transfer prices, net of production expenses |  | (341 | ) |  | (7,766 | ) |  | (2,875 | )
Extensions, discoveries and improved recoveries |  | — |  |  | 45 |  |  | 194 |
Changes in estimated future development costs, including timing and other |  | 146 |  |  | 1,287 |  |  | (498 | )
Previously estimated development costs incurred during the year |  | 295 |  |  | 985 |  |  | 982 |
Sales of reserves in-place |  | (1,049 | ) |  | — |  |  | (1,323 | )
Other purchases of reserves in-place |  | — |  |  | — |  |  | 487 |
Revisions of quantity estimates |  | 12 |  |  | (1,170 | ) |  | 399 |
Accretion of discount |  | 139 |  |  | 797 |  |  | 1,195 |
Net change in income taxes |  | — |  |  | 1,721 |  |  | 1,505 |
Total changes |  | (1,629 | ) |  | (5,029 | ) |  | (2,996 | )
Balance at end of year |  | $ | (237 | ) |  | $ | 1,392 |  |  | $ | 6,421 |

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