Freeport-McMoRan Inc (NYSE:FCX) announced a purchase and sale agreement to sell its onshore California oil and gas properties to Sentinel Peak Resources California LLC for total consideration of $742 million, including contingent consideration.
Under the terms of the agreement, FCX will receive cash consideration of $592 million at closing and additional consideration of $50 million per annum in each of 2018, 2019 and 2020 if the price of Brent crude oil averages $70 per barrel or higher in that calendar year. The purchasers will also assume future abandonment obligations associated with the properties, which had a book value of approximately $0.1 billion at June 30, 2016.
The transaction has an effective date of July 1, 2016, and is expected to close in fourth-quarter 2016, subject to customary closing conditions.
For the twelve month period ended June 30, 2016, net daily sales volumes from these properties averaged 28.6 thousand barrels of oil per day. Over this period, revenues totaled $0.4 billion, cash production costs (before G&A) totaled $0.3 billion and capital expenditures totaled $0.04 billion.
Net cash proceeds will be used for debt repayment. FCX does not expect to record a material gain or loss on the transaction.
Following completion of this transaction and the previously announced Deepwater Gulf of Mexico (GOM) sale, FCX’s portfolio of oil and gas assets would include oil and natural gas production onshore in South Louisiana and on the Shelf of the GOM, oil production offshore California and natural gas production from the Madden area in Central Wyoming. In the second quarter of 2016, these properties produced an average of 8.6 thousand barrels of oil and natural gas liquids per day and 78 million cubic feet of natural gas per day. (Original Source)
Shares of Freeport-McMoRan closed yesterday at $9.64, down $0.41 or -4.08%. FCX has a 1-year high of $14.06 and a 1-year low of $3.52. The stock’s 50-day moving average is $10.50 and its 200-day moving average is $11.26.
On the ratings front, FCX has been the subject of a number of recent research reports. In a report issued on September 26, Morgan Stanley analyst Evan Kurtz reiterated a Sell rating on FCX, with a price target of $7.00, which reflects a potential downside of -27% from last closing price. Separately, on September 14, Macquarie’s Anthony Young maintained a Hold rating on the stock and has a price target of $10.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Evan Kurtz and Anthony Young have a total average return of -0.5% and -9.6% respectively. Kurtz has a success rate of 50% and is ranked #2887 out of 4182 analysts, while Young has a success rate of 41% and is ranked #3737.
The street is mostly Neutral on FCX stock. Out of 8 analysts who cover the stock, 5 suggest a Hold rating , 2 suggest a Buy and one recommends to Sell the stock.
Freeport-McMoRan, Inc. engages as copper, gold and molybdenum mining company. It operates through the following segments: North America Copper Mines, South America Copper Mines, Africa Mining, Indonesia Mining, and Molybdenum Mining. The North America Copper Mines segment operates seven open-pit copper mines in North America- Morenci, Bagdad, Safford, Sierrita and Miami in Arizona, and Chino and Tyrone in New Mexico. The South America Copper Mines segment has two copper mines-Cerro Verde in Peru and El Abra in Chile. The Africa Mining segment operates in the Tenke Fungurume minerals district in the Katanga province of the Democratic Republic of Congo which produces copper and cobalt hydroxide. The Indonesia Mining segment includes copper and gold deposits at the Grasberg minerals district in Papua. The Molybdenum Mining segment operates at the Henderson and Climax primary molybdenum mines in Colorado.