Freeport-McMoRan Acquiring Two Oil and Gas Companies

Freeport-McMoRan Copper & Gold Inc. (FCX), Plains Exploration & Production Co. (PXP), and McMoRan Exploration Co. (MMR) announced December 5, 2012, the signing of definitive merger agreements under which FCX will acquire PXP for approximately $6.9 billion in cash and stock and MMR for approximately $3.4 billion in cash, or $2.1 billion net of the 36% of the MMR interests currently owned by FCX and PXP.

FCX is the world’s largest publicly traded copper producer, with assets that include the world-class Grasberg minerals district in Indonesia, the large-scale Morenci minerals district in North America, the Cerro Verde and El Abra operations in South America, the high-potential Tenke Fungurume minerals district in the Democratic Republic of Congo, and a leading global molybdenum business.

“The addition of a high-quality, U.S.-focused oil and gas resource base is expected to provide exposure to energy markets with positive fundamentals, strong margins and cash flows, exploration lever-age, and financially attractive long-term investment opportunities,” FCX said in announcing the transactions.

On a pro forma basis for 2013, mining is expected to generate approximately 74% and oil and gas 26% of the combined com-pany’s estimated EBITDA, with 48% of com-bined EBITDA coming from U.S. operations.

PXP’s major assets include established oil production facilities in California, a grow-ing production profile in the onshore Eagle Ford trend in Texas, significant production facilities and growth potential in the Gulf of Mexico, and large onshore resources in the Haynesville natural gas trend in Louisiana.

MMR is engaged in the exploration, development, and production of natural gas and oil in the shallow waters of the Gulf of Mexico shelf and onshore in the Gulf Coast area.

The corporate headquarters of the com-bined company will be located in Phoenix, Arizona, and the combined company will maintain offices in Houston, Texas, and New Orleans, Louisiana, to support its oil and gas operations and existing adminis-trative functions.

The investment community responded negatively to the announcement of the FCX transactions, and in the immediate after-math of the announcement, FCX shares sold off from above $38/share to under $31/share, before recovering to around $33.50/share on December 21.

As featured in Womp 2013 Vol 01 -