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Freeport (FCX) Concludes Sale of Deepwater GOM Properties

Zacks Equity Research

Freeport-McMoRan Inc. FCX has concluded the earlier announced sale of its Deepwater Gulf of Mexico (GOM) properties to Anadarko Petroleum Corporation (APC) for $2 billion in cash, before closing adjustments.

Moreover, the mining giant settled a preferred stock obligation with its consolidated subsidiary, Plains Offshore Operations Inc., for $582 million. The deal includes up to $150 million in contingent payments that will be received over time as Anadarko realizes future cash flows in connection with Freeport’s completed third-party production handling agreement for the Marlin platform.

The transaction exhibits Freeport’s aim at allocating its capital and management resources to its global leading copper business and its commitment to pare debt. With the sale transactions announced by Freeport along with its cash flows from operations and previously announced at-the-market equity transactions, the company is on track to attain its stated balance sheet goals.

Moreover, the company expects to complete the previously announced sale of its onshore California oil and gas properties before year-end 2016. Following completion of this transaction, Freeport’s portfolio of oil and gas assets would include oil and natural gas production onshore in South Louisiana and on the GOM Shelf, oil production offshore California and natural gas production from the Madden area in Central Wyoming.

Freeport has outperformed the Zacks categorized Mining-Non Ferrous industry in the past three months. The company’s shares have gained around 45.9% in this period, compared with a 17.9% gain recorded by the industry.

Freeport is taking actions to manage costs and capital spending amid a challenging operating environment. Further, the company remains focused on deleveraging its balance sheet, partly through assets sale. It is also conducting exploration activities near its existing mines with a focus on opportunities to expand reserves that will support the development of additional future production capacity.

Zacks Rank & Key Picks

Freeport currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies in the basic materials space include Denison Mines Corp. DNN, Vale S.A. VALE and Fission Uranium Corp. FCUUF, all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Denison Mines has an expected earnings growth rate of 71.4% for the current year.

Vale has an expected earnings growth of 341.4% for the current year.

Fission Uranium has an expected earnings growth rate of 25% for the current year.




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