Freeport-McMoRan Inc. is marketing up to $5 billion of onshore assets in the United States to concentrate resources on Gulf of Mexico opportunities, the company said Wednesday.
In late 2012 Freeport transformed its U.S. portfolio — and increased its debt load — after buying Plains Exploration & Production Co. and related entity McMoRan Exploration Co. in a $9 billion cash-and-stock deal (see Daily GPI, Dec. 12, 2012). The transactions brought an array of offshore leaseholds to add to an already strong portfolio. As well, the merger added a lot of onshore assets.
Those onshore assets don’t hold the same long-term opportunities that Freeport sees in the shallow and deepwater, said Freeport CEO Richard Adkerson.
Since then, the operator has been paring its oil and gas targets in the onshore, Adkerson said during a conference call. He was joined by former Plains chief Jim Flores, who leads FM O&G, the company’s oil and gas unit.
In May, Freeport sold its Eagle Ford Shale portfolio to Encana Corp. for about $3 billion (see Shale Daily, May 7). That’s just the beginning, said Flores.
“It’s been a long time coming since the acquisition in 2012,” he said. “That’s…the genesis of our combination, to be able to accelerate the development activity going forward on these properties and at the same point in time, [make] further investments in the Gulf of Mexico.
“So we project that we’ll have $4 billion to $5 billion more of onshore asset sales to further accelerate the debt paydown, debt reduction plan here at the company. At the same point in time, we will be buying additional interest in the deepwater Gulf of Mexico to complement our portfolio in the hundreds of millions of dollars.”
Most of the onshore assets are in California’s Los Angeles and San Joaquin basins; the Haynesville Shale in Louisiana and Texas; a gas trend onshore in South Louisiana; and the Madden Deep Unit, a federal unit in the Wind River Basin of Wyoming.
In the Haynesville, FM has the rights to about 81,000 net acres, including close to 51,000 also prospective for the Bossier play. The operator also owns a 14% interest in the Madden unit and adjacent Lost Cabin Gas Plant. The onshore South Louisiana holdings extend into the Outer Continental Shelf, an area that Freeport is less likely to sell because of its ongoing shallow water exploration.
As to how Freeport is considering what assets to sell, Adkerson said the Eagle Ford was a “great example” of future plans.
“This was a very good asset,” with a “very strong market” of interested buyers…as many companies are transitioning from a natural gas orientation to an oil orientation.
“We are looking at other assets where good assets but assets that don’t have the growth profiles that our other assets have, and seeing if there are aggressive buyers who will step up and pay good prices for them, as we then focus on our assets that have good growth potential.”
Freeport management looks at assets and tests the market to decide which assets “make sense to sell,” Adkerson said. “This is a dynamic process. We are focused on debt reduction. And if we find assets that don’t undermine our ability to grow in the future and where we have buyers that will pay reasonable prices in relation to cash flows they generate, we will execute those transactions.”
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