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.