(Adds analysts view of transaction value, debt reduction
target, total asset sale value)
By Susan Taylor
TORONTO Oct 14 Freeport-McMoRan said on
Friday it will sell onshore California oil and gas assets to
Sentinel Peak Resources California for up to $742 million, part
of a push by the world's biggest listed copper miner to reduce
its multi-billion dollar debt.
Hard hit in recent years by slumping commodity prices,
Phoenix-based Freeport is under pressure from activist investor
Carl Icahn, its third-largest shareholder, to reduce net debt of
$18.8 billion and boost valuation.
Under the transaction with private energy company Sentinel
Peak, Freeport said it will receive $592 million in cash at
closing and $50 million every year from 2018 to 2020 if the
price per barrel of Brent crude oil averages $70 or
more. Sentinel also assumes $100 million in future
abandonment costs for the properties.
Several analysts said that Freeport fetched a reasonable
price for the assets, which were likely challenging to sell due
to a small pool of potential buyers in the high-cost,
heavily-regulated California market.
Net cash from the deal with Sentinel, which is backed by
private equity firm Quantum Energy Partners, will help repay
debt, said Freeport.
Adding only the $592 million cash payment, the Sentinel deal
lifts the value of Freeport's 2016 asset sales to $6.62 billion,
said RBC Capital Markets analyst Fraser Phillips in a note to
clients. That puts Freeport on track to reach its debt reduction
target of $5 billion to $10 billion, he wrote.
Last month, Freeport announced the $2 billion sale of its
deepwater Gulf of Mexico oil and natural gas assets to Anadarko
That followed failed attempts to sell all or part of the oil
and gas business, and withdrawal of a planned initial public
Freeport debt ballooned with two ill-timed acquisitions of
oil and natural gas producers in 2013, as it diversified beyond
copper, gold and molybdenum mining.
In May, Freeport agreed to sell its prized majority stake in
the Tenke copper mine to China Molybdenum for $2.65
billion in cash.
After the Sentinel and Anadarko deals close, Freeport will
still own productive onshore assets in South Louisiana and the
shelf of the Gulf of Mexico, and offshore assets in California
and Central Wyoming.
Last quarter, these produced an average 8.6 thousand barrels
of oil and natural gas liquids and 78 million cubic feet of
natural gas per day.
(Additional reporting by Anet Josline Pinto in Bengaluru;
Editing by Frances Kerry and Andrew Hay)