Anadarko Petroleum (APC) to Pay Freeport-McMoRan $2B for Gulf Assets

Shares of Anadarko Petroleum Corp. (APC) were trading down -2.78 or -4.81 percent to $55.01 per share in Tuesday’s premarket after news broke late yesterday that the company would buy deepwater Gulf of Mexico assets from Freeport-McMoRan (FCX) for $2 billion. Anadarko Petroleum stock closed at $57.79 per share, up +0.07 or +0.12 percent in Monday’s regular trading session.

Stock Analysis

The Woodlands, Texas based Anadarko Petroleum Corporation is the largest publicly held oil and gas production and exploration company in the world.
The company began as a subsidiary of Panhandle Eastern Corp after the discovery of natural gas in the Anadarko Basin, made up of the Texas and Oklahoma panhandles. The subsidiary became an independent company in 1986 and currently employs more than 4,000 people worldwide.

Anadarko has been involved in serious environmental issues, including the 2010 Deepwater Horizon oil rig explosion and oil spill in the Gulf of Mexico.
Anadarko Petroleum (APC) to Pay Freeport-McMoRan $2B for Gulf Assets
Image by generatorpowerproducts / Pixabay
Anadarko owned a 25 percent non operating minority interest in the Macondo Prospect oil rig. In April of 2014, Anadarko agreed to pay $5.15 billion to the U.S. Department of Justice and the Environmental Protection Agency to clean up toxic waste sites across the United States. The settlement stemmed from the Tronox subsidiary of Kerr-McGee, which it purchased in 2005. Tronox dumped toxic waste in 22 states for over 50 years beginning in the 1920s.

The deal with Freeport-McMoRan will double the company’s ownership of the deepwater Lucius development to about 49 percent and boost crude oil production by 80,000 barrels per day of oil equivalent with about 80 percent of it in crude. The acquisition of the assets will generate $3 billion in additional free cash flow for Anadarko over the next five years.

Anadarko Chairman, President and Chief Executive Officer, Al Walker stated in the company’s press release that, “This immediately accretive, bolt-on transaction strengthens our industry-leading position in the Gulf of Mexico and is a catalyst for the company's oil-growth objectives, with quality assets being acquired at an attractive price to create significant value. We expect these acquired assets to generate substantial free cash flow, enhancing our ability to increase U.S. onshore activity in the Delaware and DJ basins.”

Anadarko plans to fund the transaction by selling 35.3 million shares of common stock to raise approximately $1.9 billion. The offering is expected to close by the end of this week, according to a separate SEC filing on Monday with a unit of JPMorgan Chase & Co. acting as sole underwriter for the offering with Jeffries Group LLC and Latham & Watkins LLP serving as advisor on the acquisition.

Anadarko expects to increase its full 2016 year capital guidance, with the exclusion of the transaction to a range of $2.8 billion to $3.0 billion, which are a reflection of increased activity in the DJ and Delaware basins. Anadarko stock has sold off significantly over the last two years of declining oil prices. The stock traded as high as $73 earlier this year, but will probably continue under pressure as long as weakness persists in oil prices.

Other News About APC

Anadarko receives vote of confidence

optionMONSTER’s monitoring system showed a sale of 2,000 Sept 50 puts late last month.

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Robin Fielder will become Vice President of Investor Relations effective November 1st, 2016.

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Published on Sep 13, 2016
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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