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.

|
Gerald Herbert/AP/File
An oil rig is seen in the Gulf of Mexico near the Chandeleur Islands, off of Louisiana in this April 2010 file photo. Freeport-McMoRan's acquisition of McMoRan Exploration comes as McMoRan Exploration struggles to unclog its ultra-deep oil well in the Gulf of Mexico.

Freeport-McMoRan Copper & Gold Inc., one of the world’s 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 $3.4 billion in cash to purchase its sister company, McMoRan Exploration Co., which was spun off from Freeport-McMoRan in the 1990s. Also, Plains Exploration, a Houston-based oil and gas company, will be acquired for about $6.9 billion in cash and stock. 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 shares have fallen 46 percent in the past year and dropped 9.7 percent early Monday as the company announced the well was restricted by skin or formation damage. 

"The transaction offers significant values to the [McMoRan] and [Plains Exploration] shareholders and will enable [Freeport-McMoRan] to build on these values through a much larger, well capitalized platform," James R. Moffett, chairman of the board of Freeport-McMoRan, said in a statement. 

Some see the purchase as a bold move at a time when many companies are cautiously tiptoeing around the fiscal cliff.

"Wednesday’s deals are a clear bet that demand for natural resources around the world will continue to rise," Steve Schaefer wrote in Forbes

The US Energy Information Administration expects domestic natural gas production to be up nearly 4 percent this year from 2011's record levels. 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, but Freeport-McMoRan investors were less impressed.

Freeport-McMoRan will be among only a handful of major miners that have expanded beyond core metals and bulk commodities. Shares of the company's stock fell 15 percent on news of the purchase.

“If you own Freeport-McMoRan, you own it for the gold and copper assets, not for oil and gas,” Kevin Kaiser, an energy analyst with Hedgeye Risk Management, told MarketWatch.

Richard Adkerson, Freeport-McMoRan’s 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.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Freeport-McMoRan to acquire oil, gas assets in $20 billion deal
Read this article in
https://www.csmonitor.com/Environment/Energy-Voices/2012/1205/Freeport-McMoRan-to-acquire-oil-gas-assets-in-20-billion-deal
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe