The board directed them to get their debt down over a year ago. So, they sold Eagle Ford properties and bought more leases in the GOM. Debt stayed the same. They said they have about $3B liquidity right now. Any asset purchase would be corporate suicide. In the CC they laid out exactly what their plan is....develop the deep water and get their indo property developed if and when they get their agreements. If not, I surmise they will divest it. They could not possibly commit to many more billions there if the future is hostile. Obviously the NG operation they were so high on 3 months ago is now back burner to beyond 2017 and probably in the IPO they are going to float out. Even so, quality assets are already on the market which is flooded with great prospects so don't expect top dollar in any IPO. If the commodity prices don't come around, they will have to cut everything out of the budget except enough to service their debt, which is $1B a year in a favorable rate environment. Lastly, China is a mess so any help on the demand side for copper is sunk. They rolled the dice and managed to throw craps an almost record number of rolls. IMO if they could get some dope to take over the MMR and PXP acquisitions for just the debt, they would do it.
There is a nice example of a company making a costly acquisition at the wrong time and almost getting sunk: Dow Chemical. Circa 08 Dow decided to buy Roam and Hass. They leveraged in exactly at the top of the market. At the same time, a sale of some assets fell through, credit markets dried up, and it became knowledge they had spurned being taken over. The firm was so leveraged there were concerns it would go BK. Stock sank from about 45 to under 10. Obviously they survived and have recovered almost 5 fold. So, it can happen. Of course there are some differences i.e. they had a broader product mix and a few assets they could sell for decent money. The obvious key to this company surviving is a rebound in the commodity prices. They have no way to effect those but in a similar vein, Dow had no control over when the credit markets would unfreeze in 08. Bet your money and take your chances here but recognize it is not an investment, it is a gamble.
Last year they planned on selling California. Rumored asking price was in the 5B range and most here figured they would be lucky to see 3B. They eventually pulled it...due to no buyers. Their problem is not just the quality of the assets for sale, it is the number of quality assets for sale elsewhere...the market is flooded. Looks to me like Haynesville is part of the package as they plan NO CAP EX there. Debt equity now is 1.3 to 1, horrendous. Remember the original plan was to be at $12B debt in 2016 with debt equity in the 40% range. Anywhere else the executive office would be vacant now.
I see, so you know the divestiture may now include the whole mining operation. I guess all those who dumped the stock beginning exactly when the issue of Grasberg arose on the CC probably were just a bunch of ill informed dolts too who just happened to control about 15 million shares they dumped. But be happy, it might get back to 40 again and make you happy, in the mean time don't take your frustrations out on me.
Actually things were going pretty well considering UNTIL someone dropped that bombshell question about the status of Grasberg. The follow up question about how a divestiture would go pointed out the matter is on the front burner as they had all the answers. If it were not a possibility, I don't think one would have been familiar enough to talk about all the ins and outs of how it would go. They were. Jim Bob is over there now pleading his case and he has some status as a good guy there but I did not walk away with any feeling they are well situated in this matter. The collapse in the commodities prices along with the huge debt has left them with little avenues of escape IMO. No they are not going BK but their vision of being an OandG and copper behemoth are not looking good.
Now the question is do they divest by way of the indo stock market or by fiat from the government. Pity them a bit because Jim Bob is over there now talking terms with them. Now with almost 21B in debt, how much debt will go with this mine when it gets listed on the indo exchange? One thing will be resolved, no more cash flow going into the ground over there. With the IPO divestiture of some OandG assets, looks like the company will have two main copper operations, a moly operation, and OandG in Cal and in the gulf. My guess is the onshore former MMR properties are a goner too in the IPO. All IMHO of course but I have been mentioning the divestiture in Indo for quite some time and I suspect it will happen.
Looking at FCX's cap ex going forward, looks like zero planned for NG drilling. My guess is it will be packaged in the IPO they are trying to dump onto the public. The good news there is whoever buys it will develop the field so things are looking up for next year.
I'd pay particular attention to those "negotiations" about Grasberg. It has been hinted for more than a year the local government, provincial, wants their hands on this mine and it looks like they are in line to get it.
When this stock has an up day it is like having had someone hitting you over the head with a board and stopping, you feel well then. It broke 15 today...fwiw many never thought it would get below 18...17...16...15. Someone recently said 8. Who knows but if their products are selling for nil and they have a huge debt load and they do business in a not so friendly area, what can one expect?
I wonder if Jim Bob was eyeing the pluto fly by recently and wondering how he could get a drilling rig up there to set the solar system record for drilling in inner space. Who knows. All I can think of is taking on $16B to buy two oil companies at the top of the market is not the best example of good timing. If these guys ran a mortuary, no one would die.
I know the rumor is they have an asset sale pending. I wonder though, given their debt indentures, do they not have to get permission to sell assets before they do the sale?? I hope this is not a case of someone giving one of the participants at the conference a few K to talk up a deal to hype the stock.
American? Actually yes and a vet too. You sound like a sunshine patriot tainted by a socialist upbringing. Meanwhile, to go back to my first comment, if you don't rely upon the numbers as a beginning point of evaluation, what does one use, tea leaves? BTW, greed is a subjective value. Just wondering, when did you lose your porter's job on this railroad?
Well, that is of course correct. They also have no influence over whether the economy is expanding or contracting. As long as the net numbers are fine, I can live with that unless you believe they should begin selling their trackage and rolling stock now.
The imbalances posted at 3.40 were 2 million for sale. They could not even clear them during normal trading as the final NYSE price was a tad over .76. Since then it has bid .74. Part of that was the announcement it was to be dropped from the mid caps. Then SandP dropped its bomb and the rout was on. Monday it could open at anything from 40 cents to a buck, but I would not count on much above 65 cents.
On the news plus leaving the mid cap index, it drops 10% on 3+ million shares too.
Don't forget to add to your quote my desire to see a rebound in the price of the commodities first. Success or not, they are losing money in the oandg business when capital costs are included. Meanwhile with copper hovering around 2.55 things are not good. For the foreseeable future, the company is a interest paying machine.
Well, you are correct, the assets have value...the question is can they produce enough revenues to pay interest, fund an active, and almost unrewarding, cap ex program, and build the smelter required while negotiating a new labor contract in Indo along with a new contract there too all in the face of a declining commodity environment? If not, $20B in debt could easily over run any intrinsic value in the company and demolish the stock price further. Do I think that will happen, probably not but it is a concern, enough so, some are still shorting and if not shorting, just selling into small pools of buyers.
I bought around 18.50 and road it up before doing the round trip back when I sold. I never believed that would happen. At that time I said it could go to $12 if it broke below $18. So, I am not rebuying this plug unless I see some success in drilling or better in the price of the commodities even if it crosses $12.