Freeport McMoran FCX bought Plains Exploration for $16b in May of 2013, along with McMoran Exploration for another $3.4b. Freeport had been a mining company until then, though it owned a minority stake in McMoran Exploration. The founder and former CEO of FCX, James Moffet, had moved on to become the CEO of McMoran Exploration, and continued to be a major shareholder in FCX. So this whole transaction smacked of self dealing. When the deal was announced in late 2012, the stock dropped from about $39 to $32 and continued to drift downward until after the deal closed, hitting a low of $27.30 in early July of 2013. I bought some in the $28-29 range and am still holding. It's in a taxable account and I'll probably wait until a year is up before I sell it.
The constituent components of Plains Exploration, were Eagleford Oil assets, California on-shore oil assets, Haynesville Louisiana gas assets, and Gulf of Mexico offshore oil prospects. At the time of the transaction they had just bought $5.5b in offshore deepwater GOM assets from Shell and BP as BP shed assets after the Horizon disaster. McMorran Exploration held GOM assets. FCX seems most interested in the offshore projects.
Today FCX announced the sale of Eagleford assets to Encana for $3.1b. It's producing 53mboed of oil and gas and 45,000 net acres. Production appears to be almost 90% oil. That's $58,000 per flowing barrel, though it may be pretty fast-declining. This seems like a bit of a low price On a company-wide basis, the lowest any E&P is trading on a production basis is in the $80-85k per flowing barrel range (discounting gas production by 2/3 and NGLs by 1/2). On a per barrel of reserves basis the price looks more attractive with $54/ 1P barrel, or $46/2P barrel. But I doubt this is the best metric to look at, since if we know anything about the Eagleford, those reserves will likely increase as they drill more and down-space. Encana shares are up 4.5% right now on the deal.
The constituent components of Plains Exploration, were Eagleford Oil assets, California on-shore oil assets, Haynesville Louisiana gas assets, and Gulf of Mexico offshore oil prospects. At the time of the transaction they had just bought $5.5b in offshore deepwater GOM assets from Shell and BP as BP shed assets after the Horizon disaster. McMorran Exploration held GOM assets. FCX seems most interested in the offshore projects.
Today FCX announced the sale of Eagleford assets to Encana for $3.1b. It's producing 53mboed of oil and gas and 45,000 net acres. Production appears to be almost 90% oil. That's $58,000 per flowing barrel, though it may be pretty fast-declining. This seems like a bit of a low price On a company-wide basis, the lowest any E&P is trading on a production basis is in the $80-85k per flowing barrel range (discounting gas production by 2/3 and NGLs by 1/2). On a per barrel of reserves basis the price looks more attractive with $54/ 1P barrel, or $46/2P barrel. But I doubt this is the best metric to look at, since if we know anything about the Eagleford, those reserves will likely increase as they drill more and down-space. Encana shares are up 4.5% right now on the deal.
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