PHOENIX – Anadarko Petroleum Corp. has agreed to purchase Freeport-McMoRan Oil & Gas’ (FM O&G) deepwater Gulf of Mexico properties for a total cash consideration of $2 billion and up to $150 million in contingent payments.
The contingent payments would be received over time as Anadarko realizes future cash flows in connection with FM O&G’s recently completed third-party production handling agreement for the Marlin platform. Anadarko will also assume future abandonment obligations associated with the properties. FM O&G parent company Freeport McMoRan Inc. (FCX) says the properties had a book value of approximately $0.5 billion at June 30.
Under the terms of the transaction, Anadarko will increase its working interest in Lucius to approximately 49% from its previous 23.8% ownership.
The transaction has an effective date of Aug. 1, and is expected to close in 4Q, subject to customary closing conditions.
Richard C. Adkerson, president and CEO, said: “We are pleased to announce this transaction, which brings our total 2016 asset sale transactions to over $6 billion and reflects our commitment to debt reduction and our focus on dedicating our capital and management resources to our global leading copper business.
“With our announced asset sale transactions, combined with cash flows from operations, and previously announced at-the-market equity transactions, we are on track to achieve our stated balance sheet objectives.”
In FCX’s 2015 annual review, it revealed it had $20.4 billion in total debt and said it would be making moves to accelerate its previously announced debt reduction plans.
FCX’s foray into the deepwater market has been troubled. The company initially entered into the offshore oil and gas sector in December 2012 when it announced a merger agreement with Plains Exploration & Production Co. and McMoran Exploration Co.
In May 2014, it acquired for $1.4 billion certain interests from Apache Corp.’s deepwater Gulf of Mexico portfolio, including Apache’s interests in the Anadarko-operated Lucius and Heidelberg oil production developments and 11 exploration leases.
In late 2015, suffering from the depressed oil price environment still plaguing the industry, FCX cut its board of directors and announced it was reviewing alternatives for its oil and gas business. Reports began to surface at the end of last year that the mining conglomerate would exit the oil and gas sector altogether.
Then, in April 2016, amidst a clearing of the company’s executive team, FCX’s then-standalone FM O&G was restructured as an operating division. In June, the company settled with Noble Corp. plc for a full settlement value of $540 million stemming from terminating the contracts of the Noble Sam Croft and Noble Tom Madden drillships.
For the 12-month period ended June 30, 2016, net daily sales volumes from FM O&G’s deepwater GOM properties averaged around 73,000 boe. Over this period, revenues totaled $1 billion, cash production costs (before G&A) totaled $0.3 billion and capex totaled $1.6 billion.