Freeport-McMoRan Copper & Gold Inc.’s management team said Tuesday it expects to complete its splash into the oil and natural gas pool in March, which should immediately move it ahead of many of the largest U.S. explorers.
The world’s largest copper producer in December agreed to pay a combined $9 billion, excluding debt, to move back into the exploration and production sector in a deal to acquire related companies Plains Exploration & Production Co. and McMoRan Exploration Co. (see Daily GPI, Dec. 6, 2012). Chairman Jim Bob Moffatt co-chairs and is CEO of McMoRan; Freeport CEO Richard Adkerson is co-chair of McMoRan. PXP holds a 31.5% stake in McMoRan (see Daily GPI, Sept. 21, 2010).
The bid has been slammed by some of the investors as an unnecessary distraction from Freeport’s copper and gold mining business. Last Friday McMoRan reported a big loss in 4Q2012 on impairments and a sharp revenue decrease related in part to its gassy shallow-water operations (see Daily GPI, Jan. 22).
However, Adkerson said the rambunctious deal opens up new opportunities now and down the road.
“It gives us a platform for looking for growth opportunities across a broader range of assets,” he said during a conference call. “We are going to be disciplined about it, our business plan of delevering and where we commit capital, but it will give us an opportunity to consider where to invest for the highest returns. There is not a plan to make acquisitions either in the oil and gas business or in the mining business, but we are going to be a cognizant of opportunities across the set of assets that we will have and we will make decisions based on our assessments and those opportunities and the discipline factor.”
The exploration and production companies would reshape Freeport from its current 100% mining focus to about 75%. “And we’ll go from a situation where North America, the U.S., which currently represents about 30% of our business, goes to 50% of our business…Credit rating agencies consider this positive in terms of maintaining our investment grade credit ratings,” said Adkerson.
Freeport also would “leapfrog” over some major global producers, including Anadarko Petroleum Corp. and Apache Corp, Moffett added. “We’ve got a resource here now…that can compete with the majors worldwide.”
Freeport’s share price plunged 16% on Dec. 5, the day the dual merger was announced, but since then it’s recovered most of its losses.
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