McMoRan buys $1.1 billion exploration property
Shares of McMoRan Exploration Co. (NYSE: MMR) are in positive territory following news the New Orleans-based oil and gas company has purchased Newfield Exploration Co.’s (NYSE: NFX) properties in the Gulf of Mexico for $1.1 billion.
The properties have proven reserves estimated at 327 billion cubic feet of natural gas equivalents as of July 1, 2007, McMoRan Exploration announced before the opening bell.
“It’s financially compelling,” company Co-Chairman James R. Moffett and Richard C. Adkerson said of the acquisition. “[It] provides significant current production and cash flows, and offers substantial exploration and exploitation upside in an area that our team knows well.”
McMoRan will gain control of 125 fields on 146 offshore blocks currently producing approximately 270 million cubic feet of natural gas equivalents per day. The purchase also includes offshore leases totaling about 1.3 million gross acres.
Additionally, the company will acquire a 50% interest in Newfield’s non-producing exploration leases.
The two oil and natural gas producers will jointly pursue exploration activities. McMoRan reported that it expects to retain the contractors and technical and operating personnel that have worked on the properties.
The transaction was funded with financial commitments of $1.6 billion from heavyweights JPMorgan Chase & Co. (NYSE: JPM) and Merrill Lynch & Co. (NYSE: MER). The funds will also be used to repay an existing loan of $100 million and provide working capital. McMoRan said that it expects to hedge a substantial portion of its production over the next two to three years to make ends meet.
The deal is effective July 1, but is expected to close in the third quarter of 2007.
At 1:59 p.m. ET shares were up $0.47, or 3%, to $15.09. The 52-week high is $19.42, achieved on Sept. 13, 2006. The 52-week low of $11.01 was set on Feb. 13.
