In one of those “is the cup half full or half empty” quandaries, Freeport-McMoRan Inc. (NYSE: FCX) on Friday announced that it had reached an agreement with Noble Drilling, the U.S. subsidiary of Noble Corp. (NYSE: NE), to cancel two drilling rig contracts. The terms of the deal include a payment of $540 million in cash, Freeport common stock or Noble bonds due no later than December 19, 2019.

There is a limitation of $200 million on the use of Noble bonds and a limitation on the use of Freeport stock as payment. Noble will accept stock as payment, not to exceed 9.9% of Freeport’s outstanding shares of common stock.

Freeport also has agreed to pay Noble up to $75 million in contingent payments, depending on the price of crude oil over the next 12 months.

In exchange for the agreement, Noble has released Freeport from contract obligations of $800 million on the two contracts. The two vessels affected by the contract cancellations are the Noble Sam Croft and the Noble Tom Madden, both ultra-deepwater rigs positioned in the Gulf of Mexico. The contracts had been scheduled to run through July and November 2017, respectively, on three-year contracts with start dates in 2014.

While Freeport is saving around $250 million or more by buying out these contracts, investors won’t like the size of the payment. The company reported $224 million in cash at the end of the first quarter, which very likely means that it will have to issue more stock to pay Noble.

At the end of the first quarter, Freeport had 1.25 billion shares outstanding. At Thursday’s closing price of $11.03, Freeport’s market cap was around $13.8 billion, but Friday’s sell-off has shaved more than $500 million from the company’s valuation. Investors have no patience for dilution and are not waiting around to see what will happen. Hard to blame them.

Freeport’s stock traded down about 4.4% Friday afternoon, at $10.55 in a 52-week range of $3.52 to $22.96.

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