The contracts were for Noble Sam Croft and Noble Tom Madden, which were scheduled to end in July and November 2017, respectively.
The contracts will be terminated, with operations ceasing as soon as practicable. FMOG’s parent company, Freeport-McMoRan, will provide Noble a payment of $540 million. Noble can also receive additional contingent payments from Freeport of $25 million and $50 million, respectively, depending upon the average price of oil over a 12-month period.
Noble said it also expects to realize more than $100 million in direct cost savings as a result of the contract terminations through crew reductions and stacking procedures.
Last month, Freeport announced a restructuring of its oil and gas business, which is operated through FMOG. Previously a stand-alone segment, under the new structure, it will be an operating division of its parent company, resulting in the elimination of several executive management roles and the integration of FMO&G’s financial and administrative roles with Freeport-McMoRan’s corporate functions.
David W. Williams, chairman, president, and CEO of Noble Corp., said: “This agreement represents a favorable resolution for Noble shareholders. By accelerating the contract value and removing counterparty risk and potential downtime exposure over the remaining term of the contracts, Noble will be able to secure the economic benefit of these contracts, particularly when factoring in the significant cost savings available.”
Freeport can make the $540 million payment through a combination of cash, Freeport shares, and up to $200 million in near-term Noble bonds. Through this arrangement, Noble expects to realize the full value of such payment.