Houston-based Plains Exploration & Production Co. will become part of mining conglomerate Freeport-McMoRan Copper & Gold Inc. after a majority of shareholders voted to approve the $6.6 billion merger.

Freeport, based in Phoenix, in December offered close to $9 billion total to buy Plains, as well as to bring back into the fold McMoRan Exploration Co., which it had spun off in 1994 (see Daily GPI, Dec. 6, 2012). McMoRan shareholders are scheduled to vote June 3 on the merger, comprised of about $2.4 billion cash and a share of future royalties on some assets.

Some Plains shareholders had worked to block the deal because they claimed conflicts of interest; six directors would have overlapping roles at Freeport and McMoRan. Plains also owns about 31.5% of McMoRan. However, votes tallied Monday gave the vote to Freeport once directors sweetened the offer.

The approval, which had not been guaranteed last week, came after Freeport and Plains agreed to give Plains shareholders $3.00/share in a one-time special cash dividend and another $1.00 for each Freeport share when the merger is completed. The one-time dividend will cost Freeport an estimated $1 billion.

The dividend “in no way changes our commitment to reduce debt on completion of the pending acquisitions,” stated Freeport Chairman Jim Bob Moffett and CEO Richard C. Adkerson. “The planned asset sales, combined with our significant cash flows and disciplined approach to investing in capital projects, will enable us to meet our target of reducing debt to $12 billion over a three-year period.”

Assuming the merger is completed as scheduled by May 31, Freeport plans to also complete $1.5 billion in asset sales from the combined company as a way to reduce capital spending.

Freeport claims that it would become the fifth-largest U.S.-based natural resource company by enterprise value once the mergers are complete, trailing ExxonMobil Corp., Chevron Corp., ConocoPhillips and Occidental Petroleum Corp.

With Plains, Freeport would gain an estimated 575 million boe of proved reserves and include entry in North America’s onshore. It also would have a substantial inventory in the deep and shallow waters of the Gulf of Mexico (see Daily GPI, Dec. 3). Plains has an estimated 1.52 billion boe of proved, probable and possible reserves. Plains expects in 2013 to produce 175,000 boe/d from its U.S. operations, with one-third from the deepwater and 23% from California. Other production is to come from, among other places, the Eagle Ford Shale (21%) and the Gulf of Mexico’s Outer Continental Shelf (11%).

Meanwhile, Freeport is dealing with what may be one of the worst mining accidents in history after a roof collapsed at an underground mining site in Indonesia, killing up to 28 people. The site is below the surface of Freeport’s remote mining operations in the mountains of Papua. According to Freeport, 38 employees were in a training room at the Big Gossan underground mine last week when the roof caved in; 10 people were safely evacuated.

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