Anadarko Buys $2 Billion in Gulf of Mexico Oil Assets

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Image courtesy Anadarko

By MarEx 2016-09-12 21:25:37

Anadarko Petroleum announced Monday that it has bought $2 billion in deepwater Gulf of Mexico oil and gas assets from Freeport McMoran, greatly increasing its footprint in the region and adding roughly $3 billion in cash flow over the coming five years. Freeport says that the sale is motivated by a plan to refocus its capital on its core copper-mining business.

The acquisition will add 80,000 BOE per day to Anadarko's production, the great majority of it in oil, doubles the firm's ownership stake in the Lucius development and "enables accelerated investment in Anadarko's Delaware and DJ basin assets."

Chairman, president and CEO Al Walker said that the "bolt-on" transaction will allow Anadarko to add two rigs in each of the Delaware and DJ basins later this year in expectation "of more than doubling [the basins'] production to at least 600,000 BOE per day collectively."

In addition, the firm says that it will soon issue 35 million more shares of its common stock, plus an additional 5 million for the underwriter, J.P. Morgan Securities. The funds will finance the McMoran acquisition.

Freeport McMoran said in a statement that in addition to the $2 billion cash purchase price, it is set to receive up to $150 million in contingent payments if Anadarko receives certain expected cash flows. 

Anadarko is also assuming about $500 million in future decommissioning liabilities. 

"[This transaction] brings our total 2016 asset sale transactions to over $6 billion and reflects our commitment to debt reduction and our focus on dedicating our capital and management resources to our global leading copper business," said Richard C. Adkerson, Freeport's president and CEO. "With our announced asset sale transactions combined with cash flows from operations and previously announced at-the-market equity transactions, we are on track to achieve our stated balance sheet objectives."

$500 million will go to a minority shareholder in Freeport's GoM oil and gas portfolio and the remainder will be used to pay down debt. 

Freeport's balance sheet has been impacted by falling commodity prices; it sold $4 billion in assets over the course of the first half of the year and has been working with its creditors to exchange debt for equity.