Anadarko Petroleum Corporation, one of the TEN field partners in Ghana, has entered into a conclusive agreement to acquire the deepwater Gulf of Mexico assets of Freeport McMoRan Oil & Gas for $2.0 billion.
It will pay for the acquisition through a new stock offering of 40.54-million shares, including an overallotment option, which is valued at $2.34-billion at Monday’s closing price of $57.79 a share.
The deal doubles Anadarko’s ownership in the Lucius development to about 49% and will boost output by 80 000 bbl/d of oil equivalent, of which more than 80% is crude.
Anadarko expects to generate $3-billion in additional free cash flow, helping to fund further investment in its Delaware and DJ basin assets, the company advised.
The deal also provides for contingent payments of up to $150-million in over time, as Anadarko realises future cash flows in connection with McMoRan Oil & Gas’ (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 that had a book value of about $500-million at June 30.
President and CEO Richard Adkerson 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.”
Freeport expanded into the oil and gas sector in 2013, having acquired Plains Exploration and McMoRan Exploration for $19-billion, including debt. The deals proved unpopular with investors owing to the big contributions to the company’s heavy debt load, while oil prices at about $46/bl on Monday had declined by about 58% since 2013.
Freeport, saddled with about $20-billion in debt, had previously stated that it planned to sell a minority stake in its oil and gas subsidiary to raise funds for project development. Adkerson had earlier this year advised that the company would aim at getting its debt level down to around $10-billion in the next two to three years “if the market opens the door for us”.
The company is cleaning up its balance sheet through asset sales, the most significant of which was the sale of its 56% interest in the Tenke Fungurume copper mine, in the Democratic Republic of Congo, for $2.65-billion. It has also stated its willingness to sell up to 20% of the company’s Indonesian subsidiary, which controls the massive Grasberg copper mine.
“This immediately accretive, bolt-on transaction strengthens our industry-leading position in the Gulf of Mexico and is a catalyst for the company’s oil-growth objectives, with quality assets being acquired at an attractive price to create significant value,” said Anadarko chairperson, president and CEO Al Walker.
Anadarko advised that its current plans are to add two rigs in each of the Delaware and DJ basins later this year and to further increase activity thereafter, with an expectation of more than doubling output to at least 600 000 bbl/d collectively from these two basins over the next five years.
This increased activity would drive a companywide 10% to 12% compounded yearly growth rate in oil volumes over the same time, in a $50 to $60 oil-price environment, while investing within cash flows, Anadarko said.