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).