Ecopetrol to Concentrate on Oil and Gas while Freeport-McMoRan wants to exit, this signals varying corporate reactions to the slump in crude oil price.
Ecopetrol SA, Colombia’s state-controlled oil producer, has taken initial steps toward the sale of a plastics unit, the move is part of the Bogota-based company’s strategy to divest non-core assets and focus on the production of oil and natural gas, in another development Freeport-McMoRan Inc., the mining company that bought back its oil and natural gas business two years ago, is now exploring spinning off the unit amid slumping prices.
Last month, Ecopetrol’s board said management may explore the sale of several assets including the unit formerly known as Propilco, provided the right price is offered, one of the people said. The unit makes materials used in the plastics industry, according to its website.
An Ecopetrol press official declined to comment on the potential sale when contacted by telephone.
Colombia’s largest oil producer outlined a new 2020 strategy in May that includes cost cuts and plans to divest company stakes and oil blocks. The company announced a farm-in with Parex Resources Inc. last month to develop the Aguas Blancas field.
Ecopetrol gained 3.2 percent to 1,435 pesos at 2:10 p.m. in Bogota. Shares are down 54 percent over the past year.
The sale of Ecopetrol’s stakes in Interconexion Electrica SA ESP, Empresa de Energia de Bogota SA ESP and Invercolsa could total roughly $1 billion, Chief Executive Officer Juan Carlos Echeverry said last month.
Freeport-McMoRan Inc., under pressure from activist shareholder Carl Icahn and weak commodity prices, said on Tuesday it is slashing its board size and exploring a return to its roots as a copper-focused mining company.
Freeport, the biggest listed U.S. copper producer, said it is looking at separating its oil and gas business from its mining operations – potentially unravelling an expensive oil and gas acquisition made in 2013 that has proved unpopular with shareholders.
Splitting the Phoenix-based company could be done through a spin-off of the oil and gas business to shareholders, Freeport said. It repeated that it was also considering joint ventures or an initial public offering for the business.
Freeport’s shares rose 4.1 per cent to $11.83 (U.S.) in New York.
Splitting up the company “is definitely what shareholders want,” said Adrian Day, chief executive of Maryland-based Adrian Day Asset Management, which owns shares in Freeport.
“As a copper company, it is a world-leading copper company. It is definitely not a world-leading oil and gas company. They should focus on what they are doing best,” Mr. Day said.
Freeport’s energy unit includes assets in the Deepwater Gulf of Mexico, onshore and offshore assets in California and in the Haynesville natural gas shale formation, along with other natural gas assets in Louisiana.
The company said it has cut the size of its board from sixteen to nine members, with five of those departing joining a board focused on the oil and gas unit.
The separation of the oil and gas segment would leave Freeport with mainly copper and gold mining assets. Roughly 60 per cent of Freeport’s $21-billion of revenue in 2014 came from copper, with about 20 per cent from oil.
Freeport’s big foray into oil and gas came in 2013 with the acquisitions of Plains Exploration and McMoRan Exploration for $9-billion – moves that were big contributors to the company’s heavy debt load of $20.9-billion. Since the purchase, oil prices have slid some 50 per cent.
The acquisition also raised eyebrows because McMoRan’s largest individual shareholder and chief executive, James Moffett, was also the chairman of Freeport.
Freeport agreed in January to pay $137.5-million to resolve a shareholder lawsuit alleging the acquisitions were overpriced and tainted.
Finding partners for its oil and gas assets in today’s weak energy market could be tough.
“Their asset base is not one that a lot of people are looking to grab,” said one Houston-based investment banker.
“California has been a poison pill. Deepwater Gulf of Mexico has been a capital sucking endeavor,” he said, referring to tough regulations in the U.S. state.
At the same time, copper prices have slumped over 28 per cent in the last two years, hurt by slowing demand from world’s top consumer of the metal, China.