Freeport-McMoRan Copper & Gold Inc. (FCX): Will It Be Boosted By Its Energy Buys?

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), the world’s largest publicly traded copper producer, has reported reduced earnings for the first quarter of this year. But with copper sales surprising on the upside — albeit amid lower prices — the company was able to top the consensus per-share earnings estimate of the analysts who follow it.

For the quarter, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX)’s net income was $648 million, or $0.68 a share, a decline from $764 million, or $0.80 cents for the first quarter of 2012. However, without one-time items, the per-share figure for the most recent quarter was $0.73, two pennies higher than the analysts had anticipated. Revenues were $4.58 billion, a slight dip year over year from $4.61 billion.

Copper’s prices slide but sales rise
Despite a slide in the price of copper from about $3.80 a pound in early October to approximately $3.15 in midday trading on Friday, the company was able to generate sales of 954 million pounds of the red metal during the quarter, a substantial increase from 827 million pounds for the comparable quarter of 2012. In the most recent quarter the company benefited from the completion of an expansion project at its Tenke Fungurume facility in the Democratic Republic of Congo. Also, with fewer disruptions than it experienced a year ago in Indonesia, copper sales from its the Grasberg operations rose by fully 48%.

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) operates seven open-pit copper mines in Arizona and New Mexico, and another four in Peru and Chile. Sales from the U.S. mines reached 353 million pounds, compared with 338 million pounds a year earlier. Product from the South American mines totaled 285 million pounds, down very slightly from 286 million pounds last year. And while gold sales were down year over year by 26% to 214 thousand ounces, molybdenum sales increased by 4 million pounds to 25 million pounds.

The pending purchases
Aside from its current core metals operations, Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is in the process of acquiring a pair of independent oil and gas producers, Plains Exploration & Production Company (NYSE:PXP) and Mcmoran Exploration Co (NYSE:MMR). In December, Freeport announced that it would pay 0.6531 shares of its common stock and $25 in cash for each outstanding share of Plains. In addition, for Mcmoran Exploration Co (NYSE:MMR) it stated that it would pay $14.75 in cash and 1.15 units of a royalty trust that will hold a 5% overriding royalty interest in McMoRan’s shallow water and ultra-deepwater prospects.

The pending acquisitions were met with an at best lukewarm response when they were announced. Oil and gas is a technical departure for Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX). I say “technical” because therein was the second rub: The three companies were replete with overlapping board and other relationships. For instance, James R. Moffett serves as both co-chairman of McMoRan and chairman of Freeport. And Kathleen Quirk, while serving as CFO of Freeport, is also treasurer of Mcmoran Exploration Co (NYSE:MMR).