SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997
Commission File Number: 1-9164
Freeport-McMoRan Resource Partners, Limited Partnership
Organized in Delaware 72-1067072
(IRS Employer
Identification No.)
1615 Poydras Street, New Orleans, Louisiana 70112
Registrant's telephone number, including area code: (504) 582-4000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes[X] No
<PAGE> 1
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
TABLE OF CONTENTS
Page
Part I. Financial Information
Financial Statements:
Condensed Balance Sheets 3
Statements of Operations 4
Statements of Cash Flow 5
Notes to Financial Statements 6
Remarks 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information 13
Signature 14
Exhibit Index E-1
<PAGE> 2
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
CONDENSED BALANCE SHEETS (Unaudited)
<CAPTION>
September 30, December 31,
1997 1996
---------- ----------
(In Thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,681 $ 19,395
Accounts receivable 78,157 70,598
Inventories 166,400 141,158
Prepaid expenses and other 33,019 4,845
---------- ----------
Total current assets 283,257 235,996
Property, plant and equipment, net 509,804 919,237
Other assets 49,850 44,545
---------- ----------
Total assets $ 842,911 $1,199,778
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities $ 125,568 $ 146,939
Long-term debt, less current portion 482,919 403,030
Reclamation and mine shutdown reserves 97,425 96,135
Accrued postretirement benefits and
other liabilities 193,326 194,026
Partners' capital (deficit) (56,327) 359,648
---------- ----------
Total liabilities and partners' capital $ 842,911 $1,199,778
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 3
<TABLE>
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
(In Thousands, Except Per Unit Amounts)
<S> <C> <C> <C> <C>
Revenues $ 196,243 $ 222,554 $ 636,840 $ 721,903
Cost of sales:
Production and delivery 142,707 153,602 450,088 495,768
Depreciation and
amortization 388,257 9,523 412,337 29,298
---------- ---------- ---------- ----------
Total cost of sales 530,964 163,125 862,425 525,066
Gain on IMC-Agrico
investment - - - (11,917)
Exploration expenses 9,119 2,000 15,341 2,000
General and
administrative expenses 13,775 11,033 39,027 40,999
---------- ---------- ---------- ----------
Total costs and
expenses 553,858 176,158 916,793 556,148
---------- ---------- ---------- ----------
Operating income (loss) (357,615) 46,396 (279,953) 165,755
Interest expense, net (9,166) (8,468) (26,155) (25,243)
Other income (expense),
net 191 (74) (657) (460)
---------- ---------- ---------- ----------
Net income (loss) $ (366,590) $ 37,854 $ (306,765) $ 140,052
========== ========== ========== ==========
Net income (loss) per unit $(3.54) $.37 $(2.96) $1.35
====== ==== ====== =====
Average units outstanding 103,466 103,466 103,466 103,466
======= ======= ======= =======
Distributions paid per
publicly held unit $.33 $.60 $1.24 $1.835
==== ==== ===== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
<TABLE>
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOW (Unaudited)
<CAPTION>
Nine Months Ended
September 30,
------------------------
1997 1996
---------- ----------
(In Thousands)
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ (306,765) $ 140,052
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 412,337 29,298
Gain on IMC-Agrico investment - (11,917)
Oil and gas exploration expenses 15,341 2,000
Cash distributions from IMC-Agrico
in excess of interest in capital 34,712 36,610
Reclamation and mine shutdown
expenditures (20,441) (9,321)
(Increase) decrease in working capital:
Accounts receivable 2,039 33,752
Inventories (30,079) (22,629)
Prepaid expenses and other (427) (2,427)
Accounts payable and accrued
liabilities (1,961) (10,328)
Other 6,100 12,917
---------- ----------
Net cash provided by operating activities 110,856 198,007
---------- ----------
Cash flow from investing activities:
Capital expenditures (51,678) (33,009)
Assets held for sale (45,321) -
Sale of assets and other - 4,000
---------- ----------
Net cash used in investing activities (96,999) (29,009)
---------- ----------
Cash flow from financing activities:
Distributions to partners (109,209) (173,906)
Proceeds from debt 196,768 -
Repayments of debt (115,130) (144,033)
Proceeds from sale of 7% Senior Notes - 147,831
---------- ----------
Net cash used in financing activities (27,571) (170,108)
---------- ----------
Net decrease in cash and cash equivalents (13,714) (1,110)
Cash and cash equivalents at beginning
of year 19,395 22,508
---------- ----------
Cash and cash equivalents at end of
period $ 5,681 $ 21,398
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE> 5
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. FTX MERGER AGREEMENT
In August 1997, Freeport-McMoRan Inc. (FTX), the administrative
managing general partner and owner of a 51.6% interest in Freeport-
McMoRan Resource Partners, Limited Partnership (FRP), and IMC Global
Inc. (IGL), FRP's joint venture partner, announced that they had
executed an Agreement and Plan of Merger for FTX and IGL, with IGL
as the surviving entity. As a result of the merger, IGL will
acquire control of FTX and FRP and will become the administrative
managing general partner of FRP. The merger, which is subject to
several conditions including approval by the stockholders of FTX and
IGL, is expected to be completed by the end of 1997. In connection
with the merger, FRP's sulphur business and certain oil and gas
operations, including its 58.3 percent interest in the Main Pass 299
sulphur and oil property, together with IGL's 25 percent interest in
Main Pass 299, will be transferred to a new entity whose common
stock will be distributed pro rata to FRP's unitholders, including
FTX. As a result of the transactions, FRP unitholders will continue
to hold their proportionate ownership in FRP and will receive their
proportionate ownership in the new entity.
2. IMPAIRMENT ASSESSMENT OF SULPHUR ASSETS
In 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121 (SFAS 121),
which requires an assessment of the carrying value of long-lived
assets and a reduction of such carrying value to fair value when
events or changes in circumstances indicate that the carrying amount
may not be recoverable. As a result of its most recent review of
its sulphur assets at September 30, 1997, FRP concluded that the
carrying value of its Main Pass sulphur assets exceeded the
undiscounted estimated future net cash flows, such that an
impairment writedown of $375.5 million was required. A similar
analysis of the Culberson sulphur assets, based on a reassessment of
recoverable reserves utilizing recent production history, also
indicated an impairment writedown of $9.0 million was required.
Fair values were determined using discounted estimated future cash
flows related to these assets and the writedowns are reflected in
the accompanying financial statements as additional depreciation and
amortization charges.
3. OIL AND GAS EXPLORATION INVESTMENT
In March 1997, FRP entered into an agreement with McMoRan Oil & Gas
Co. (MOXY), pursuant to which FRP acquired an interest in seven
leases awarded to MOXY at the OCS Lease Sale 166 held in March 1997
for $5.5 million. In July 1997, FRP and MOXY also agreed to a new
multi-year aggregate $200 million oil and gas exploration program
(MOXY/FRP Exploration Program) to explore and develop prospects
primarily offshore in the Gulf of Mexico and onshore in the Gulf
Coast area. FRP and MOXY have committed $200 million for
exploration expenditures, with most exploration expenditures being
shared 60 percent and 40 percent, respectively. Other costs and all
revenues will be shared equally.
In August 1997, FRP purchased from MCN Energy Group Inc. (MCN),
MCN's 60 percent interest in the MOXY/MCN offshore exploration
program (MOXY/MCN Program) which includes two producing oil and gas
fields, an inventory of eight exploration prospects in the offshore
Gulf of Mexico and MOXY's program debt to MCN of approximately
$12.5 million ($17.5 million in accounts receivable at September 30,
1997) for a total of $43.5 million, subject to adjustment. Subject
to completion of MOXY's recapitalization described below, MOXY will
acquire the two producing properties from FRP for $26.0 million,
subject to certain adjustments ($27.8 million in prepaid expenses
and other at September 30, 1997), and repay MOXY's program debt. FRP
and MOXY will contribute their interests in the MOXY/MCN Program
exploration properties and their interests in the seven offshore
leases discussed above to the MOXY/FRP Exploration Program.
To provide capital for these transactions, MOXY has undertaken
a $100 million rights offering pursuant to which MOXY anticipates
issuing approximately 28.6 million shares of common stock. FRP has
agreed to purchase, at the $3.50 per share subscription price, all
shares that are available but not purchased by rights holders. Upon
closing of the MOXY rights offering, FRP will receive from MOXY a
fee of $6 million for participating in the rights offering,
acquiring and holding the MCN producing properties and agreeing to
enter into the MOXY/FRP Exploration Program. Additionally, if FRP
does not acquire at least 30 percent of MOXY's outstanding common
stock in the rights offering, FRP will have the option to purchase
at $3.50 per share up to a 30 percent ownership interest in MOXY.
The merger between FTX and IGL, discussed in Note 1, will have
no effect on the oil and gas exploration program and other
transactions between FRP and MOXY.
<PAGE> 6
4. NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive
Income," and SFAS 131, "Disclosures About Segments of an Enterprise
and Related Information." SFAS 130 establishes standards for the
reporting and display of comprehensive income in the financial
statements. Comprehensive income is the total of net income and all
other non-owner changes in equity. SFAS 131 requires that companies
disclose segment data based on how management makes decisions about
allocating resources to segments and measuring their performance.
SFAS 130 and 131 are effective for 1998. Adoption of these
standards is not expected to have an effect on FRP's financial
position or results of operations.
5. RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for the first nine months of
1997 resulted in a shortfall of $306.8 million and was 6.0 to 1 for
the first nine months of 1996. For this calculation, earnings are
income from continuing operations before fixed charges. Fixed
charges include interest and that portion of rent deemed
representative of interest.
-------------------
Remarks
The information furnished herein should be read in conjunction with
FRP's financial statements contained in its 1996 Annual Report to
unitholders included in its Annual Report on Form 10-K.
The information furnished herein reflects all adjustments which are,
in the opinion of management, necessary for a fair statement of the
results for the periods. All such adjustments are, in the opinion
of management, of a normal recurring nature.
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
OVERVIEW
Freeport-McMoRan Resource Partners, Limited Partnership (FRP),
through its subsidiaries and joint venture operations, is one of the
world's leading integrated phosphate fertilizer producers. FRP is a
joint venture partner in IMC-Agrico Company, the world's largest and
one of the world's lowest cost producers, marketers and distributors
of phosphate fertilizers. IMC-Agrico's business also includes the
mining and sale of phosphate rock and the production, marketing and
distribution of animal feed ingredients. FRP's Main Pass sulphur
mine, offshore Louisiana in the Gulf of Mexico, and its Culberson
mine in Texas also make FRP the largest producer of Frasch sulphur
in the world. Main Pass also contains proved oil reserves that FRP
produces and sells for the Main Pass joint venture.
The combined sulphur, phosphate mining and fertilizer
production operations provide FRP with the competitive advantages of
vertical integration and operating efficiencies and reduce the
sensitivity of FRP's phosphate fertilizer costs to changes in raw
material prices. FRP also believes that the strategic location of
IMC-Agrico's fertilizer operations, both in Florida and on the
Mississippi River, provide it with a competitive advantage over
other fertilizer producers. Additionally, through its oil and gas
exploration programs with McMoRan Oil & Gas Co. (MOXY), FRP seeks to
complement its natural gas purchase requirements in the fertilizer
business as well as provide additional growth potential.
RECENT DEVELOPMENTS
FTX Merger Agreement - In August 1997, Freeport-McMoRan Inc. (FTX),
the administrative managing general partner and owner of a 51.6%
interest in FRP, and IMC Global Inc. (IGL), FRP's joint venture
partner, announced that they had executed an Agreement and Plan of
Merger for FTX and IGL, with IGL as the surviving entity. As a
result of the merger, IGL will acquire control of FTX and FRP and
will become the administrative managing general partner of FRP. The
merger, which is subject to several conditions including approval by
the stockholders of FTX and IGL, is expected to be completed by the
end of 1997. In connection with the merger, FRP's sulphur business
and certain oil and gas operations, including its 58.3 percent
interest in the Main Pass 299 sulphur and oil property, together
with IGL's 25 percent interest in Main Pass 299, will be transferred
to a new entity whose common stock will be distributed pro rata to
FRP's unitholders, including FTX. As a result of the transactions,
FRP unitholders will continue to hold their proportionate ownership
in FRP and will receive their proportionate ownership in the new
entity.
Oil & Gas Exploration Investment - In August 1997, FRP purchased
from MCN Energy Group Inc. (MCN), MCN's 60 percent interest in the
MOXY/MCN offshore exploration program (MOXY/MCN Program) which
includes two producing oil and gas fields, an inventory of eight
exploration prospects in the offshore Gulf of Mexico and MOXY's
program debt to MCN of approximately $12.5 million ($17.5 million in
accounts receivable at September 30, 1997, for a total of $43.5
million, subject to adjustments. Subject to completion of MOXY's
recapitalization described below, MOXY will acquire the two
producing properties from FRP for $26.0 million, subject to certain
adjustments ($27.8 million in prepaid expenses and other at
September 30, 1997), and repay MOXY's program debt. Upon completion
of MOXY's recapitalization discussed below, FRP and MOXY will
contribute their interests in the MOXY/MCN Program exploration
properties and their interests in the seven offshore leases awarded
to MOXY at the OCS Lease Sale 166 held in March 1997 for $5.5
million to a multi-year aggregate $200 million oil and gas
exploration program (MOXY/FRP Exploration Program) to explore and
develop prospects primarily offshore in the Gulf of Mexico and
onshore in the Gulf Coast area. FRP and MOXY have committed $200
million for exploration expenditures, with most exploration
expenditures being shared 60 percent and 40 percent, respectively.
Other costs and all revenues will be shared equally.
To provide capital for these transactions, MOXY has undertaken
a $100 million rights offering pursuant to which MOXY anticipates
issuing approximately 28.6 million shares of common stock. FRP has
agreed to purchase, at the $3.50 per share subscription price, all
shares that are available but not purchased by rights holders. Upon
closing of the rights offering, FRP will receive from MOXY a fee of
$6 million for participating in the rights offering, acquiring and
holding the MCN producing properties and agreeing to enter into the
MOXY/FRP Exploration Program. Additionally, if FRP does not acquire
at least 30 percent of MOXY's outstanding common stock in the rights
offering, FRP will have the option to purchase at $3.50 per share up
to a 30 percent ownership interest in MOXY.
The merger between FTX and IGL, discussed above, will have no
effect on the oil and gas exploration program and other transactions
between FRP and MOXY.
<PAGE> 8
RESULTS OF OPERATIONS
Third Quarter Nine Months
------------------------ ----------------------
1997 1996 1997 1996
--------- ---------- --------- --------
(In Millions)
Revenues $ 196.2 $ 222.6 $ 636.8 $ 721.9
Operating income (loss) (357.6) 46.4 (280.0) 165.8
Net income (loss) (366.6) 37.9 (306.8) 140.1
FRP's operating results for the third quarter of 1997 compared
with the third quarter of 1996 were affected by lower average
realizations on its phosphate fertilizer and oil sales, as well as
reduced sales volumes for all products. For the nine-month 1997
period, FRP experienced lower average realizations on all of its
products, combined with reduced production and sales volumes. The
three- and nine-month 1997 periods include the non-cash writedown of
the sulphur assets discussed below as well as charges of $9.1
million and $15.3 million, respectively, for oil and gas exploration
costs. The nine-month 1997 period also includes a $2.9 million
credit for reimbursement of previously incurred expenses as a result
of IMC-Agrico's participation in a potential phosphate mine and
upgrading project in Sri Lanka. The nine-month 1996 period included
an $11.9 million gain from the increase in FRP's ownership of IMC-
Agrico and charges totaling $3.0 million for asset valuations at
IMC-Agrico.
In 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121 (SFAS 121),
which requires an assessment of the carrying value of long-lived
assets and a reduction of such carrying value to fair value when
events or changes in circumstances indicate that the carrying amount
may not be recoverable. As a result of its most recent review of
its sulphur assets at September 30, 1997, FRP concluded that the
carrying value of its Main Pass sulphur assets exceeded the
undiscounted estimated future net cash flows, such that an
impairment writedown of $375.5 million was required. A similar
analysis of the Culberson sulphur assets, based on a reassessment of
recoverable reserves utilizing recent production history, also
indicated an impairment writedown of $9.0 million was required.
Fair values were determined using discounted estimated future cash
flows related to these assets and the writedowns are reflected in
the accompanying financial statements as additional depreciation and
amortization charges.
Before the impairment assessment of sulphur assets,
depreciation and amortization for the current quarter decreased $5.8
million from the 1996 period amount. This decline is attributable
primarily to a $5.5 million decrease related to FRP's
disproportionate interest in the IMC-Agrico cash distributions and a
decrease in unit-of-production depreciation of $0.4 million from
Main Pass oil operations primarily because of lower production
volumes, partially offset by downward revisions to estimated
recoverable oil reserves. For the nine-month 1997 period before the
impairment assessment of sulphur assets, depreciation and
amortization declined $1.5 million primarily because of a $2.2
million decrease related to FRP's disproportionate interest in the
IMC-Agrico cash distributions, $3.7 million in nonrecurring charges
from IMC-Agrico and a reduction of $3.8 million from Main Pass oil
operations.
Third-quarter 1996 general and administrative expenses include
a $2.1 million reduction related to stock appreciation rights.
General and administrative expenses for the nine-month 1997 period
declined $2.0 million from the 1996 period primarily because of
lower employee costs.
Agricultural Minerals Operations - FRP's agricultural minerals
operations, which include its fertilizer and phosphate rock
operations (conducted through IMC-Agrico) and its sulphur business,
reported a third-quarter 1997 operating loss of $341.7 million on
revenues of $189.6 million compared with operating income of $48.3
million on revenues of $213.3 million for the 1996 period. The
operating loss for the first nine months of 1997 was $257.0 million
on revenues of $613.9 million compared with operating income of
$174.6 million on revenues of $693.5 million for the year-ago
period. Significant items impacting operating income follow (in
millions):
<PAGE> 9
Third Quarter Nine Months
---------- -----------
Agricultural minerals operating
income -1996 $ 48.3 $ 174.6
---------- ----------
Increases (decreases):
Sales volumes (22.3) (40.7)
Realizations (2.3) (39.3)
Other 0.9 0.4
---------- ----------
Revenue variance (23.7) (79.6)
Cost of sales a (366.2) (341.3)
Gain on IMC-Agrico investment - (11.9)
General and administrative (0.1) 1.2
---------- ----------
(390.0) (431.6)
---------- ----------
Agricultural minerals operating
income -1997 $ (341.7) $ (257.0)
========== ==========
a. Includes a reduction to depreciation of $11.9 million and $6.4
million for the third quarter of 1997 and 1996, respectively, and
$24.4 million and $22.2 million for the nine-month period of 1997
and 1996, respectively, caused by FRP's disproportionate interest in
IMC-Agrico cash distributions. These adjustments to depreciation
ended after the third quarter of 1997, when FRP received its final
disproportionate cash distribution from IMC-Agrico. The 1997
periods include charges totaling $384.5 million for the impairment
of sulphur assets and the nine-month 1996 period includes $3.0
million of asset valuation charges from IMC-Agrico.
FRP's third-quarter 1997 phosphate fertilizer sales volumes
declined by 7 percent from the year-ago quarter, with lower North
American shipments partially offset by slightly increased export
business. IMC-Agrico continues to ship significant tonnage to China
under its 1997/1998 sales agreement. Average realized prices for
phosphate fertilizers for the quarter were slightly lower than the
prior-year period and the previous quarter. IMC-Agrico resumed full
production at its New Wales, Florida facility in April 1997 in
response to strengthened demand associated with the domestic spring
season and new sales to the international market. Unit production
costs for diammonium phosphate (DAP), IMC-Agrico's principal
fertilizer product, were slightly higher compared with the year-ago
quarter primarily as a result of higher sulphur and phosphate rock
costs partially offset by lower ammonia costs. Lower production
volumes also contributed to higher per unit costs.
With very low phosphate fertilizer producer inventories, the
near-term market outlook appears favorable. Even with current
expectations of good crop yields in North America, world grain
stocks should remain at historically low levels. Long-term
projected demand growth, especially in the developing countries of
Asia and Latin America, is expected to require additional supplies
of fertilizer beyond the current production capability of existing
facilities. Additionally, FRP believes higher prices and operating
margins are required before new major phosphate projects are
initiated. However, weather and government policies will continue
to cause annual fluctuations in the overall agricultural and
fertilizer supply and demand situation.
FRP's third-quarter and nine-month 1997 phosphate rock sales
volumes declined 49 percent and 30 percent, respectively, over year-
ago levels, as IMC-Agrico continued to limit third-party sales in
order to maximize the long-term value of its reserves through
internal use. This strategy is expected to result in lower sales
volumes of phosphate rock for the remainder of 1997. Reduced sales
volumes contributed to decreased earnings from phosphate rock
operations.
Sulphur realized prices for the 1997 third quarter were 8
percent higher than the comparable 1996 period because of improved
market conditions, but remained 4 percent lower on a year-to-date
basis in 1997 than the same period in 1996. Sulphur sales volumes
for the 1997 third quarter were 6 percent lower than the 1996
period, primarily because of decreased sales to customers other than
IMC-Agrico. Production levels at the Main Pass and Culberson sulphur
mines were reduced in early 1996 in response to lower domestic
demand for sulphur, and these mines continue to operate at curtailed
levels. Combined production from the two mines averaged 7,600 tons
per day for the nine-month 1997 period compared with 8,000 tons per
day for the 1996 period. Future sulphur sales realizations and
volumes will continue to depend on the level of demand from the
domestic phosphate fertilizer industry and the availability of
competing supplies from recovered sources. Pursuant to a Sulphur
Supply Agreement, FRP's sulphur business has the preferential right
to provide sulphur to IMC-Agrico for as long as IMC-Agrico's
phosphate fertilizer business has an operational need for sulphur.
<PAGE> 10
Third Quarter Nine Months
------------------------ -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
Phosphate fertilizers -primarily DAP
Sales (short tons) 729,700 783,400 2,262,600 2,383,000
Average realized price a
All phosphate
fertilizers $169.74 $175.55 $171.90 $182.49
DAP 174.86 180.65 176.38 188.59
Phosphate rock
Sales (short tons) 357,600 706,000 1,549,100 2,198,500
Average realized
price a $25.95 $24.73 $23.84 $26.12
Sulphur
Sales (long tons) b 690,100 738,000 2,167,000 2,141,800
a. Represents average realization f.o.b. plant/mine.
b. Includes internal consumption of 195,100 tons and 189,600 tons
for the third quarter of 1997 and 1996, respectively, and 593,300
tons and 544,600 tons for the nine-month period of 1997 and 1996,
respectively.
Main Pass Oil Operations - Main Pass oil operations achieved the
following:
Third Quarter Nine Months
----------------------- ------------------------
1997 1996 1997 1996
---------- --------- ---------- ----------
Sales (barrels) 380,100 463,000 1,247,600 1,507,500
Average realized price $17.44 $19.94 $18.37 $18.82
Operating income (loss)
(in millions) $(0.2) $3.5 $4.0 $8.2
The Main Pass operating income (loss) for the 1997 periods
reflects lower average realizations and reduced production levels.
Net production for 1997 is expected to decline from 1996 levels, as
increased drilling activities at Main Pass are expected to generate
production sufficient to partially offset declining reservoir
production.
Oil and Gas Exploration Activities - As noted above, FRP intends
to significantly expand its oil and gas activities through a new
multi-year aggregate $200 million exploration program, and
potentially significant equity investment, with MOXY. Until
commencement of the MOXY/FRP Exploration Program following
completion of the MOXY rights offering, FRP's exploration activities
will take place through its recently purchased interest in the
MOXY/MCN Program. Recent activities within the MOXY/MCN Program
follow:
* During the third quarter of 1997, the MOXY/MCN Program
initiated drilling of the West Cameron Block 616 #3 exploratory
well. In October 1997, the well encountered 263 feet of net gas pay
in four sands. MOXY, the operator of the well, believes that these
results indicate commercial quantities of reserves that can be
recovered by conventional platform techniques. MOXY is drilling the
well deeper to evaluate additional objectives. The West Cameron 616
#2 well, drilled in 1996 and located approximately one mile
southeast of the #3 well, encountered 190 feet of net gas pay in a
different fault block.
* During the 1997 third quarter, exploratory wells drilled at the
Eugene Island Block 19, Vermilion Block 159 and Grand Isle Block 65
prospects did not discover commercial hydrocarbons, resulting in
$9.1 million of the related drilling costs being expensed.
In April 1997, FRP's 25 percent owned oil and gas exploration
joint venture with Phillips Petroleum Company and MOXY completed
drilling of an exploratory well on the North Bay Junop prospect. The
well reached total depth but did not encounter commercial
hydrocarbons in the primary objective zones, resulting in a $6.2
million charge to first-quarter 1997 exploration expense. The well
was completed in a shallower zone with approximately 25 feet of net
gas pay. The well was flow tested at a rate of 5.3 Mmcf of gas and
93 barrels of condensate per day. Production is expected to
commence during the fourth quarter of 1997. Other leads within
the project area that have been identified by 3-D seismic survey
continue to be evaluated.
CAPITAL RESOURCES AND LIQUIDITY
As discussed above, FTX has announced its agreement to merge with
IGL, with IGL as the surviving entity. If the merger transaction is
consummated, IGL will assume FTX's role as administrative managing
general partner of FRP and would become the owner of 51.6% of FRP.
Additionally, FRP's sulphur business, including FRP's 58.3% interest
in the Main Pass 299 sulphur and oil joint venture will be
transferred to a subsidiary of FRP whose shares would be distributed
pro rata to FRP's unitholders,
<PAGE> 11
including FTX. As part of the
merger, FTX stockholders will receive a proportionate number of
shares in the new entity. As such, following the merger FRP's
assets will consist of its interests in the IMC-Agrico Company joint
venture and in the MOXY/FRP Exploration Program. Other changes in
FRP's capital resources, organizational structure and operations may
result from the merger.
On October 21, 1997, FRP declared a distribution of 10 cents
per unit. This cash distribution represents the third distribution
following the end of the public unitholders' preference period in
early 1997. FRP's distributable cash is now shared ratably by FRP's
public unitholders and its administrative managing general partner,
except that the administrative managing general partner will be
entitled to receive unpaid cash distributions from previous quarters
($431.3 million unpaid at October 21, 1997) from one-half of the
quarterly distributable cash after the payment of 60 cents per unit
to all FRP unitholders.
FRP's future distributions will depend on the distributions
received from IMC-Agrico, on the cash flow generated from FRP's
sulphur and Main Pass oil operations (until consummation of the
merger), the cash requirements of its expanding oil and gas
exploration activities (discussed above) net of any cash flows from
production of discovered reserves once developed, and the level and
methods of financing its capital expenditure needs, including
reclamation and growth projects. FRP's distributable cash in
October 1997 included $29.2 million from IMC-Agrico which reflects
the reduction in FRP's share of cash distributions from IMC-Agrico
from 54.35 percent to 41.45 percent effective July 1, 1997. For the
third quarter of 1997 that reduction equates to approximately $9
million. Future distributions from IMC-Agrico will depend primarily
on the phosphate fertilizer market and FRP's share of IMC-Agrico
cash distributions.
Net cash provided by operating activities during the first nine
months of 1997 was $110.9 million, compared with $198.0 million in
the 1996 period, primarily reflecting lower earnings. Capital
expenditures for the 1997 period were up from the year-ago level,
and are currently estimated to approximate $70 million for 1997.
FRP believes that its short-term cash requirements, including its
obligations pursuant to the MOXY rights offering and the possible
exercise of its option to purchase up to a 30 percent ownership
interest in MOXY discussed above, will be met from internally
generated funds and borrowings under its credit facility ($182.0
million of additional borrowings available at October 20, 1997).
CAUTIONARY STATEMENT
Management's discussion and analysis contains forward-looking
statements including statements regarding sales and production
volumes, capital expenditures and product markets. Important
factors that might cause future results to differ from these
projections include economic and business conditions, product market
conditions, agricultural conditions and other factors, many of which
are beyond the control of FRP. Further information regarding these
and other factors are described in more detail under the heading
"Cautionary Statement" in FRP's Form 10-K for the year ended
December 31, 1996.
-------------------------------
The results of operations reported and summarized above are not
necessarily indicative of future operating results.
<PAGE> 12
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits to this report are listed in the Exhibit
Index appearing on page E-1 hereof.
(b) No reports on Form 8-K were filed by the registrant
during the quarter for which this report is filed.
<PAGE> 13
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FREEPORT-McMoRan RESOURCE PARTNERS,
LIMITED PARTNERSHIP
(A Limited Partnership)
By: /s/ Nancy D. Parmelee
------------------------
Nancy D. Parmelee
Vice President and Controller
(Authorized signatory and
Principal Accounting Officer)
Date: November 13, 1997
<PAGE> 14
FREEPORT-McMoRan RESOURCE PARTNERS, LIMITED PARTNERSHIP
EXHIBIT INDEX
-------------
Exhibit
Number
3.1 Amended and Restated Agreement of Limited Partnership of FRP
dated as of May 29, 1987 (the "FRP Partnership Agreement") among
FTX, Freeport Phosphate Rock Company and Geysers Geothermal Company,
as general partners, and Freeport Minerals Company ("FMC"), as
general partner and attorney-in-fact for the limited partners, of
FRP. Incorporated by reference to Exhibit B to the Prospectus dated
May 29, 1987 included in FRP's Registration Statement on Form S-1,
as amended, as initially filed with the Commission on May 29, 1987
(Registration No. 33-13513).
3.2 Amendment to the FRP Partnership Agreement dated as of December
16, 1988 effected by FMC, as Administrative Managing General
Partner, and FTX, as General Partner of FRP. Incorporated by
reference to Exhibit 3.2 to the Annual Report on Form 10-K of FRP
for the fiscal year ended December 31, 1994.
3.3 Amendment to the FRP Partnership Agreement dated as of March
29, 1990 effected by FMC, as Administrative Managing General
Partner, and FTX, as Managing General Partner, of FRP. Incorporated
by reference to Exhibit 19.2 to the Quarterly Report on Form 10-Q of
FRP for the quarter ended March 31, 1990 (the "FRP 1990 First
Quarter Form 10-Q").
3.4 Amendment to the FRP Partnership Agreement dated as of April 6,
1990 effected by FTX, as Administrative Managing General Partner of
FRP. Incorporated by reference to Exhibit 19.3 to the FRP 1990
First Quarter Form 10-Q.
3.5 Amendment to the FRP Partnership Agreement dated as of January
27, 1992 between FTX, as Administrative Managing General Partner,
and FMRP, as Managing General Partner, of FRP. Incorporated by
reference to Exhibit 3.3 to the Annual Report on Form 10-K of FRP
for the fiscal year ended December 31, 1991 (the "FRP 1991 Form 10-
K").
3.6 Amendment to the FRP Partnership Agreement dated as of October
14, 1992 between FTX, as Administrative Managing General partner,
and FMRP, as Managing General Partner, of FRP. Incorporated by
reference to Exhibit 3.4 to the Annual Report on Form 10-K of FRP
for the fiscal year ended December 31, 1992 (the "FRP 1992 Form 10-
K").
3.7 Amended and Restated Certificate of Limited Partnership of FRP
dated June 12, 1986 (the "FRP Partnership Certificate").
Incorporated by reference to Exhibit 3.3 to FRP's Registration
Statement on Form S-1, as amended, as initially filed with the
Commission on June 20, 1986 (Registration No. 33-5561).
3.8 Certificate of Amendment to the FRP Partnership Certificate
dated as of January 12, 1989. Incorporated by reference to Exhibit
3.6 to the Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (the "FRP 1993 Form 10-K").
3.9 Certificate of Amendment to the FRP Partnership Certificate
dated as of December 29, 1989. Incorporated by reference to Exhibit
19.1 to the FRP 1990 First Quarter Form 10-Q.
3.10 Certificate of Amendment to the FRP Partnership
Certificate dated as of April 12, 1990. Incorporated by reference
to Exhibit 19.4 to the FRP 1990 First Quarter Form 10-Q.
4.1 Deposit Agreement dated as of June 27, 1986 (the "Deposit
Agreement") among FRP, The Chase Manhattan Bank, N.A. ("Chase") and
Freeport Minerals Company ("Freeport Minerals"), as attorney-in-fact
of those limited partners and assignees holding depositary receipts
for units of limited partnership interest in FRP ("Depositary
Receipts"). Incorporated by reference to Exhibit 28.4 to the
Current Report on Form 8-K of FTX dated July 11, 1986.
4.2 Resignation dated December 26, 1991 of Chase as Depositary
under the Deposit Agreement and appointment dated December 27, 1991
of Mellon Bank, N.A. ("Mellon") as successor Depositary, effective
January 1, 1992. Incorporated by reference to Exhibit 4.5 to the
FRP 1991 Form 10-K.
4.3 Service Agreement dated as of January 1, 1992 between FRP and
Mellon pursuant to which Mellon serves as Depositary under the
Deposit Agreement and Custodian under the Custodial Agreement.
Incorporated by reference to Exhibit 4.6 to the FRP 1991 Form 10-K.
4.4 Amendment to the Deposit Agreement dated as of November 18,
1992 between FRP and Mellon. Incorporated by reference to Exhibit
4.4 to the FRP 1992 Form 10-K.
4.5 Form of Depositary Receipt. Incorporated by reference to
Exhibit 4.5 to the FRP 1992 Form 10-K.
4.6 Custodial Agreement regarding the FRP Depositary unit
Reinvestment Plan among FTX, FRP and Chase, effective as of April 1,
1987 (the "Custodial Agreement"). Incorporated by reference to
Exhibit 19.1 to the Quarterly Report on Form 10-Q of FRP for the
quarter ended June 30, 1987.
4.7 FRP Depositary Unit Reinvestment Plan. Incorporated by
reference to Exhibit 4.4 to the FRP 1991 Form 10-K.
4.8 Second Amended and Restated Credit Agreement dated as of
November 14, 1996 (the "FTX/FRP Credit Agreement") among FTX, FRP,
the various financial institutions that are parties thereto (the
"Banks"), The Chase Manhattan Bank (successor by merger to Chemical
Bank) and The Chase Manhattan Bank (National Association), as
Administrative Agent, FRP Collateral Agent, FTX Collateral Agent and
Documentary Agent. Incorporated by reference to Exhibit 4.8 to the
Annual Report on Form 10-K of FRP for the fiscal year ended December
31, 1996.
4.9 Subordinated Indenture as of October 26, 1990 (the
"Subordinated Indenture") between FRP and Manufacturers Hanover
Trust Company ("MHTC") as Trustee. Incorporated by reference to
Exhibit 4.11 to the FRP 1993 Form 10-K.
4.10 First Supplemental Indenture dated as of February 15, 1994
between FRP and Chemical Bank, as Successor to MHTC, as Trustee, to
the Subordinated Indenture providing for the issuance of
$150,000,000 of aggregate principal amount of 8 3/4% Senior
Subordinated Notes due 2004. Incorporated by reference to Exhibit
4.12 to the FRP 1993 Form 10-K.
4.11 Form of Senior Indenture (the "Senior Indenture") from FRP
to Chemical Bank, as Trustee. Incorporated by reference to Exhibit
4.1 to the Current Report on Form 8-K of FRP dated February 13, 1996.
4.12 Form of Supplemental Indenture dated February 14, 1996
from FRP to Chemical Bank, as Trustee, to the Senior Indenture
providing for the issuance of $150,000,000 aggregate principal
amount of 7% Senior Notes due 2008. Incorporated by reference to
Exhibit 4.1 to the Current Report on Form 8-K dated February 16,
1996 of FRP.
27.1 Financial Data Schedule
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<FISCAL-YEAR-END> DEC-31-1997
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