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.
The Woodlands, Texas based Anadarko Petroleum Corporation is the largest publicly held oil and gas production and exploration company in the world.
Anadarko has been involved in serious environmental issues, including the 2010 Deepwater Horizon oil rig explosion and oil spill in the Gulf of Mexico.
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.
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