Freeport-McMoRan Inc (NYSE:FCX) announced that its oil and gas subsidiary, Freeport-McMoRan Oil & Gas (FM O&G), has entered into a purchase and sale agreement with Anadarko Petroleum Corporation (NYSE:APC) for the sale of its Deepwater Gulf of Mexico (GOM) properties for total cash consideration of $2.0 billion and up to $150 million in contingent payments.
The contingent payments would be received over time as Anadarko realizes future cash flows in connection with FM O&G’s recently completed third-party production handling agreement for the Marlin platform. Anadarko will also assume future abandonment obligations associated with the properties which had a book value of approximately $0.5 billion at June 30, 2016.
Richard C. Adkerson, President and Chief Executive Officer, said, “We are pleased to announce this transaction which brings our total 2016 asset sale transactions to over $6 billion and reflects our commitment to debt reduction and our focus on dedicating our capital and management resources to our global leading copper business. With our announced asset sale transactions combined with cash flows from operations and previously announced at-the-market equity transactions, we are on track to achieve our stated balance sheet objectives. We congratulate our Deepwater GOM team on developing a strong portfolio of assets that will enable Anadarko to build on our success. We look forward to closing both the Deepwater GOM transaction and the previously announced Tenke transaction during 2016 and to continuing to execute our plans to enhance long-term value for shareholders.”
The transaction has an effective date of August 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 FM O&G’s Deepwater GOM properties averaged approximately 73 thousand barrels of oil equivalents (MBOE). Over this period, revenues totaled $1.0 billion, cash production costs (before G&A) totaled $0.3 billion and capital expenditures totaled $1.6 billion.
Preferred shareholders in FM O&G’s consolidated subsidiary, Plains Offshore Operations Inc., are entitled to receive $582 million in connection with the transaction. The remaining net proceeds will be used for debt repayment.
FCX does not expect to record a material gain or loss on the transaction.
FCX also announced today it is commencing a consent solicitation to obtain approval from holders of five series of FM O&G Notes to align covenants to those in the existing Notes previously issued by FCX. FCX is the guarantor of FM O&G Notes with aggregate principal amounts totaling $2.3 billion. Prior to completing the Deepwater GOM sale transaction, FCX plans to merge FM O&G into FCX, or alternatively amend the FM O&G Notes to conform the indentures to FCX’s Senior Notes. In either scenario, there is no requirement to redeem the FM O&G Notes in connection with this transaction.
FCX is a premier U.S.-based natural resources company with an industry-leading global portfolio of mineral assets. FCX is the world’s largest publicly traded copper producer.
FCX’s portfolio of assets includes the Grasberg minerals district in Indonesia, one of the world’s largest copper and gold deposits; significant mining operations in the Americas, including the large-scale Morenci minerals district in North America and the Cerro Verde operation in South America. Additional information about FCX is available on FCX’s website at “fcx.com.” (Original Source)
Shares of Freeport-McMoRan closed today at $11.08, up $0.81 or 7.89%. FCX has a 1-year high of $14.20 and a 1-year low of $3.52. The stock’s 50-day moving average is $11.72 and its 200-day moving average is $11.07.
On the ratings front, FCX has been the subject of a number of recent research reports. In a report issued on August 15, Morgan Stanley analyst Evan Kurtz maintained a Hold rating on FCX, with a price target of $9.00, which implies a downside of 10% from current levels. Separately, on August 1, Argus’ Bill Selesky reiterated a Hold rating on the stock.
According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Evan Kurtz and Bill Selesky have a total average return of -0.9% and 3.5% respectively. Kurtz has a success rate of 51.4% and is ranked #2886 out of 4124 analysts, while Selesky has a success rate of 61.0% and is ranked #930.
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.