$1.2B bet on a dry hole along Louisiana coast led to ‘Jim Bob’ Moffett’s fallout at Freeport
Freeport-McMoRan Inc. co-founder James “Jim Bob” Moffett’s last big gamble as head of the world’s largest copper miner was a $1.2 billion wrong-way bet six miles beneath the Louisiana coastline.
Bloomberg reports Moffett, a legendary wildcatter and geologist whose credits include the gigantic Grasberg copper deposit in Indonesia, is stepping down as chairman and director at Freeport as the minerals, oil and gas producer turns to cutbacks and cash preservation amid a deepening commodities meltdown.
The 77-year-old Moffett in 2007 staked much of the company’s future on an obscure cluster of gas-soaked rocks, hidden beneath coastal Louisiana oil fields, that had been discarded by bigger operators including Exxon Mobil Corp. After seven years of drilling, Freeport in January suspended work on fields with names like Davy Jones and Blackbeard.
As recently as 2012, Moffett’s briefings at industry conferences drew standing-room only crowds. Oil generated one-fifth of Freeport’s sales last year, almost double the 2013 contribution. Now, with oil down 66% in the past 18 months, his successors are grappling with how to make Moffett’s legacy pay.
“There is no grand solution to the energy business,” Lucas Pipes, an analyst at FBR Capital Markets & Co., tells Bloomberg. “There are no good options for the energy business in this price environment.”
Moffett’s appetite for risk led him to undertake a seven-year effort to harvest gas and oil from a field Exxon abandoned in 2006 for fear of a blowout. With pressure at the bottom of the six-mile deep well approaching 28,000 pounds per square inch—or twice the force required to crush a pickup truck—Exxon quit the Blackbeard project in 2006 after spending $200 million on the hole.
Under Moffett’s leadership, McMoRan obtained control of Blackbeard in 2007 as part of a $1.1 billion acquisition. The following year, Moffett announced that the discovery contained the equivalent of billions of barrels of crude.
But the project was plagued for the next six years by mechanical difficulties. In late 2014, attempts to pump gas and oil from the discovery yielded mostly saltwater, prompting the company to plug the hole with concrete and suspend work.
“The board approached Jim Bob about stepping down, and Jim Bob and the board mutually agreed that he would step down,” Freeport says in an email to Bloomberg. Moffett declined to be interviewed by Bloomberg through a spokesman.