8-KOther Events

FREEPORT-MCMORAN INC 8-K Report, Corporate Update (May 24, 2016)

Filed May 24, 2016For Securities:FCX

Summary

Freeport-McMoRan Inc. (FCX) filed an 8-K on May 23, 2016, to report the termination and settlement of a drilling rig contract between its subsidiary, Freeport-McMoRan Oil & Gas LLC (FM O&G), and Rowan Companies plc (Rowan). Under the settlement, FCX will pay Rowan $215 million in cash, plus up to $30 million in contingent payments based on crude oil prices over the next 12 months. This action releases FM O&G from approximately $0.3 billion in prior payment obligations. This is part of FCX's broader cost reduction strategy and follows earlier terminations of deepwater drill ship contracts, totaling about $350 million in reduced FM O&G commitments. The company also reiterated its ongoing efforts to strengthen its balance sheet through various debt management strategies.

Key Highlights

  • 1FCX has settled a drilling rig contract with Rowan Companies for $215 million cash plus up to $30 million in contingent oil price payments.
  • 2The settlement releases FCX's subsidiary (FM O&G) from approximately $0.3 billion in payment obligations.
  • 3This action is a continuation of FCX's cost reduction initiatives, particularly within its oil and gas operations.
  • 4Previous terminations of deepwater drill ship contracts resulted in aggregate commitment reductions of about $350 million for FM O&G.
  • 5FCX is actively evaluating strategies to strengthen its balance sheet.
  • 6Potential balance sheet strengthening measures include open market debt purchases, debt-for-debt exchanges, and debt-for-equity or equity-linked exchanges.

Frequently Asked Questions

This 8-K filing announces the termination and settlement of a drilling rig contract by Freeport-McMoRan's subsidiary, FM O&G, with Rowan Companies. It also highlights ongoing efforts by FCX to reduce costs and strengthen its balance sheet.

FCX will pay Rowan $215 million in cash. Additionally, there are contingent payments of up to $30 million tied to crude oil prices over the next 12 months.

This settlement is part of FCX's strategy to cut costs and reduce financial commitments in its oil and gas division. It signifies a move towards optimizing its operations and improving its financial position, following similar contract terminations.

FCX is actively exploring various transactions to strengthen its balance sheet. These include potentially buying back its debt in the open market, exchanging its existing debt for new debt, or exchanging debt for equity or equity-linked securities.