8-KOther EventsExhibits & Filings

FREEPORT-MCMORAN INC 8-K Report, Corporate Update (May 12, 2016)

Filed May 12, 2016For Securities:FCX

Summary

Freeport-McMoRan Inc. (FCX) reported an 8-K filing on May 11, 2016, detailing a significant settlement agreement regarding its oil and gas subsidiary, FM O&G. The company negotiated the termination of two drilling rig contracts with Noble Drilling (U.S.) LLC, a subsidiary of Noble Corporation plc. This settlement involves a total value of $540 million, payable at FCX's discretion in cash, FCX common stock, or Noble bonds. Additionally, FCX agreed to potential contingent payments of up to $75 million tied to crude oil prices. Importantly, this agreement releases FM O&G from approximately $0.8 billion in outstanding payment obligations under the original contracts, demonstrating a move to reduce liabilities within its oil and gas segment.

Key Highlights

  • 1FCX settled two drilling rig contracts for its subsidiary FM O&G with Noble Drilling for a total value of $540 million.
  • 2Payment for the settlement can be made in cash, FCX common stock, or Noble bonds, offering flexibility to FCX.
  • 3A portion of the settlement can be paid in bonds with maturities through December 31, 2019, up to a limit of $200 million.
  • 4FCX agreed to contingent payments of up to $75 million based on future crude oil prices over the next 12 months.
  • 5The settlement releases FM O&G from approximately $0.8 billion in prior payment obligations under the terminated contracts.
  • 6The common stock used for settlement is registered under FCX's existing shelf registration statement (Form S-3).

Frequently Asked Questions

The primary reason for the settlement is to terminate two drilling rig contracts for FCX's oil and gas subsidiary, FM O&G, thereby reducing its payment obligations and liabilities in that segment.

FCX has the option to pay the $540 million settlement value in cash, its own common stock, or bonds issued by Noble or its affiliates. There's a cap of $200 million for the bond portion.

The settlement eliminates approximately $0.8 billion in payment obligations for FM O&G, while costing FCX $540 million in value. Additionally, there's a potential for up to $75 million in contingent payments tied to oil prices.

Yes, FCX has agreed to provide contingent payments of up to $75 million to Noble, dependent on the price of crude oil over the next 12 months.