FBR Weighs in on Freeport-McMoRan Inc (FCX) Following Agreement with Andarko Petroleum Corporation
Yesterday, Freeport-McMoRan Inc (NYSE:FCX) announced that FM O&G had agreed to a purchase and sale deal with Anadarko Petroleum Corporation for the sale of its deepwater GOM properties for total cash consideration in the amount of $2.0 billion with up to $150 million in contingent payments. Additionally, the agreement includes the assumption of future abandonment obligations, containing a book value of around $0.5 billion at the end of the second quarter of the fiscal year of 2016.
In light of this agreement, FBR analyst Lucas Pipes reiterates a Market Perform rating on FCX without listing a price target.
FCX has indicated plans for debt repayment with the net proceeds that remain after the $582 million transaction for “preferred” shareholders in Plain Offshore Operations.
Pipes asserts, “From a sentiment perspective, we believe the transaction will likely be viewed as a major positive development for the company, following management’s year-long quest to reduce debt, reduce spending in the O&G division especially, and focus on its mining assets, even as some major mining assets had to be divested. The GOM valuation is generally in line with our dual NAV and DCF valuation of the company’s O&G assets (including the California assets FCX will retain) at $2.5B. After the company had explored various monetization efforts for its GOM assets without results, we believe that yesterday’s announcement beat expectations in terms of the likelihood of a sale as well as valuation.”
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, one-star analyst Lucas Pipes is ranked #3,544 out of 4,124 analysts. Pipes has a 43% success rate and faces a loss of 3.4% in his yearly returns. When recommending FCX, Pipes loses 44.0% in average profits on the stock.
TipRanks analytics exhibit FCX as a Hold. Based on 9 analysts polled in the last 3 months, 2 rate a Buy on FCX, while 7 maintain a Hold. The consensus price target stands at $12.09, marking a 9% upside from where the stock is currently trading.