Energy

Freeport-McMoRan Cancels Oil & Gas Spin-Off

Paul Ausick

Published: May 23, 2016 11:45 am

Last Updated: January 13, 2020 7:41 am

Mining and energy company Freeport-McMoRan Inc. (NYSE: FCX) formally filed a notice with the U.S. Securities and Exchange Commission (SEC) withdrawing its proposed spin-off and initial public offering in its oil and gas business into a company that would have been named Freeport-McMoRan Oil & Gas. The company had originally filed for the registration statement in June 2015.

Freeport’s decision should be no big surprise. There are far more oil and gas producers filing for bankruptcies that filing for IPOs.

The company paid around $25 billion in 2013, barely before the bottom fell out of the crude oil market. When crude prices fell, Freeport’s debt load became overwhelming.

Enter activist investor Carl Icahn, who prodded Freeport to begin shedding assets, adding two Icahn affiliates to the board and getting founder and long-time chairman James R. Moffett to step down.

So far in 2016, Freeport has sold assets valued at $3.9 billion against a target of $4 billion the company said it would use to pay down debt. The company sold a 13% stake in its Morenci mine for $1 billion and a Serbian copper mine for $263 million. Earlier this month it announced the sale of an African cobalt and copper mine for $2.65 billion.

Freeport also canceled a contract with Noble Corp. PLC (NYSE: NE) for two deepwater drilling rigs. Even accounting for a cancellation fee, that could rise to around $600 million, the company saved about $200 million over the remaining contract period.

Freeport’s stock initially traded lower Monday morning, but the shares then traded up about 0.7% to $11.15, in a 52-week range of $3.52 to $21.17.