The top executives at Freeport-McMoRan’s oil and gas segment, including CEO and longtime LSU benefactor Jim Flores, are leaving in a cost-cutting organizational shake-up announced Tuesday.
Some industry observers saw the restructuring as a sign of the parent company’s reduced focus on energy exploration and exploration amid slumping commodities prices.
The company said three other executives — President and Chief Operating Officer Doss Bourgeois; Executive Vice President and Chief Financial Officer Winston Talbert; and Executive Vice President and General Counsel John Wombwell — also are leaving Freeport-McMoRan Oil & Gas.
The group had served as the oil and gas segment’s executive management since Freeport-McMoRan acquired Houston-based Plains Exploration & Production Co. in 2013.
The departures come a few months after that of James R. Moffett, the executive chairman and co-founder of the parent company. Three years ago, Moffett oversaw Freeport-McMoRan’s largest investment in oil and gas — the Plains acquisition and the purchase of McMoRan Exploration Co. in New Orleans — for $19 billion, at a time when oil prices were twice what they are today.
“These changes reflect our focus on reducing costs throughout our global organization in response to a challenging commodity market environment,” Freeport-McMoRan President and CEO Richard Adkerson said.
Flores will receive a compensation package valued at $14.9 million, the payments and benefits due to him upon a termination of employment without cause, according to Securities and Exchange Commission filings. A Lafayette native, Flores helped propel LSU’s master of business administration program into national prominence. He and his wife, Cherie, have donated at least $5 million to the school, according to the LSU Foundation, the university’s main fundraising arm.
Plummeting oil prices over the past two years have caused mass layoffs throughout the U.S. and global energy industry. In turn, many exploration and production firms are facing tight financial pressures and can “no longer wait for something to happen with prices,” said Al Petrie, a longtime energy-industry investor relations consultant in New Orleans and Houston.
Freeport-McMoRan is no exception: The company said this year that it is working to cut its nearly $20 billion debt by as much as half.
“What you’re seeing is not unusual from what ... many companies are having to deal with,” Petrie said.
Freeport-McMoRan said its oil and gas segment will be restructured as an operating division, eliminating the executive management roles. Mark Kidder, who previously served as vice president of operations, will head the oil and gas business as executive vice president.
In 2007, Freeport-McMoRan — the world’s largest publicly traded copper producer — moved its headquarters from New Orleans to Phoenix following its $25.9 billion buyout of Phelps Dodge Corp. in Phoenix. The company has maintained an office in New Orleans.
To some industry observers, including Richard Tullis, an energy analyst with Capital One Southcoast in New Orleans, Freeport-McMoRan’s restructuring highlights its “diminishing focus on oil and gas assets.”
“The company is probably looking to focus on more of its legacy assets and operations, with oil and gas just becoming a smaller piece of the puzzle, especially in the current commodity downturn,” Tullis said.
Casting further uncertainty on the fate of the company, activist investor Carl Icahn last fall disclosed he was buying a large stake in it. Icahn urged cost-cutting strategies and ultimately reached a deal with the company to put his backers on the board.
Now, some experts believe the restructuring was driven at least partly by Icahn’s looming presence.
“These are the kinds of things you do to try to ward off those people, because you’ve basically proven you can do everything you can operationally,” said Peter Ricchiuti, a finance professor at Tulane University.
Freeport-McMoRan’s stock fell 8 cents, or nearly 1 percent, to $9.34 Tuesday. That’s down from a 52-week high of $23.66 in May.
Advocate staff writer Ted Griggs contributed to this report.