Freeport-McMoRan (NYSE:FCX) had to respond quickly after commodity prices weakened over the past year. Some of that work began late last year when the company announced that its capital expenditures budget would fall from the $7.5 billion it spent in 2014 down to $6.3 billion in 2015. However, the company wasn't done with the spending cuts just yet, with some of the best moves it made in 2015 being further reductions to its capital spending plan.

A plan to make a plan
In late July, Freeport-McMoRan announced that it was putting together cost reduction plans to address its operating expenses as well as capital expenses in both its mining and oil and gas businesses. In commenting on the decision, the company's management team said:

We are responding aggressively to current market conditions affecting our primary products and to the uncertain global economic outlook. These initiatives are focused on maximizing cash flow in a weak commodity environment and on strengthening the company's financial position.

The company expected to complete its review quickly and put out a revised plan during the third quarter.

More oil now, less capex later
Within a week Freeport-McMoRan put out a revised spending plan for its oil and gas business, which would result in the deferral of investments in several long-term projects. While the company was sticking with its $2.8 billion capex budget for 2015, it was reducing its budgets for 2016 and 2017, with both decreasing from $2.9 billion to just $2 billion.

However, due to recent drilling successes the company was able to revise the start-up date of one of its projects from 2017 to 2016, thus pulling that production forward. This led the company to revise its 2016 production estimate from 151 MBOE per day to 163 MBOE per day. Further, despite spending $1.8 billion less than originally planned in 2016 and 2017, Freeport-McMoRan only lowered its 2017 production estimate by 3 MBOE per day to 170 MBOE per day, which is still pretty solid growth from its 2015 level.

Mining plan unveiled
Then, by late August, Freeport-McMoRan announced a new spending plan for its mining business, which would result in a 25%, or $700 million, reduction in its 2016 capex budget. Further, when combined with the reduction to its oil and gas spending, Freeport-McMoRan's total spending would be reduced by 29% next year.

That spending reduction, however, would come at a cost with the company expecting that its copper sales would be reduced by 150 million pounds per year in both 2016 and 2017. The output reduction is quite the opposite approach of rival Southern Copper (NYSE:SCCO). Despite the fact that Southern Copper's capex spending of $946.3 million through the first nine months of the year represented more than 140% of its net income, it isn't yet ready to pull back the reins on spending. Instead, Southern Copper plans to continue moving forward with its strategy to boost its copper production by 90% from its 2013 level by 2018.

Freeport-McMoRan, however, no longer has the luxury of outspending its cash flow due to its lofty debt level. That's why the net result of its revised spending plan is an expected significant improvement in its free cash flow next year. Given its commodity price assumptions, Freeport-McMoRan expects to generate $6.3 billion in cash flow next year, which is more than enough to cover its $4 billion in capex leaving the surplus to be used to repay debt. That's a big improvement from the $3.1 billion in operating cash flow it expects to produce this year, which wasn't nearly enough to fund its $6.3 billion in capex spending.

Investor takeaway
With the prices of the commodities that Freeport-McMoRan produces falling this year, it needed to make bold moves to reverse a growing gap between its cash flow and its spending. It did just that by unveiling a plan to reduce its spending while also boosting its cash flow. While these moves didn't solve all of the company's problems, it clearly is a step in the right direction.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold,. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.