Freeport-McMoRan to acquire oil, gas assets in $20 billion deal
Copper-mining giant Freeport-McMoRan will purchase two oil and gas companies, which could rescue a venture by McMoRan Exploration Co. to drill one of the deepest offshore oil wells on record.
Copper-mining giant Freeport-McMoRan will purchase two oil and gas companies, which could rescue a venture by McMoRan Exploration Co. to drill one of the deepest offshore oil wells on record.
Freeport-McMoRan Copper & Gold Inc., one of the聽world鈥檚 largest copper producers, announced Wednesday it will purchase a pair of oil and gas companies in a deal totaling $20 billion.
The Phoenix-based mining company will pay聽$3.4 billion in cash to purchase its聽sister company,聽McMoRan Exploration Co., which was spun off from Freeport-McMoRan in the 1990s.聽Also, Plains Exploration, a聽Houston-based聽oil and gas company,聽will be acquired for about $6.9 billion in cash and stock.聽Freeport-McMoRan will assume an additional $11 billion in debt as part of the deal.
The move is the second attempt at diversification beyond metals for Freeport-McMoRan and a lifeline for McMoRan Exploration, which has been struggling to persuade investors that its clogged, ultra-deep oil well in the Gulf of Mexico will soon come online. McMoRan聽shares have fallen聽46 percent in the past year and dropped 9.7 percent early Monday as the company announced the well was聽restricted by skin or formation damage.聽
"The聽transaction offers significant values to the [McMoRan] and [Plains Exploration] shareholders and will enable [Freeport-McMoRan] to build聽on these values through a much larger, well capitalized platform,"聽James R. Moffett, chairman of the board of Freeport-McMoRan, said in a statement.聽
Some see the purchase as a bold move at a time when many companies are cautiously tiptoeing around the fiscal cliff.
"Wednesday鈥檚 deals are a clear bet that demand for natural resources around the world will continue to rise,"聽Steve Schaefer wrote in Forbes.聽
The US Energy Information Administration expects聽domestic natural gas production to be up nearly 4 percent this year from 2011's record levels.聽The US is projected to become the world's leading oil producer by 2020, according to the International Energy Agency.
McMoRan stock soared 75 percent and Plains Exploration shares jumped by a quarter in response to the acquisition,聽but Freeport-McMoRan investors were less impressed.
Freeport-McMoRan will be among only a handful聽of major miners that have expanded beyond core metals and bulk commodities.聽Shares of the company's stock fell聽15 percent on news of the purchase.
鈥淚f you own Freeport-McMoRan, you own it for the gold and copper assets, not for oil and gas,鈥� Kevin Kaiser, an energy analyst with Hedgeye Risk Management, told MarketWatch.
Richard Adkerson, Freeport-McMoRan鈥檚 president and CEO, said on a conference call with analysts that the company's goal is to diversify while retaining a strong position in mining, according to Reuters.