In one of those “is the cup half full or half empty” quandaries, Freeport-McMoRan Inc. (NYSE: FCX) on Friday announced that it had reached an agreement with Noble Drilling, the U.S. subsidiary of Noble Corp. (NYSE: NE), to cancel two drilling rig contracts. The terms of the deal include a payment of $540 million in cash, Freeport common stock or Noble bonds due no later than December 19, 2019.
There is a limitation of $200 million on the use of Noble bonds and a limitation on the use of Freeport stock as payment. Noble will accept stock as payment, not to exceed 9.9% of Freeport’s outstanding shares of common stock.
Freeport also has agreed to pay Noble up to $75 million in contingent payments, depending on the price of crude oil over the next 12 months.
In exchange for the agreement, Noble has released Freeport from contract obligations of $800 million on the two contracts. The two vessels affected by the contract cancellations are the Noble Sam Croft and the Noble Tom Madden, both ultra-deepwater rigs positioned in the Gulf of Mexico. The contracts had been scheduled to run through July and November 2017, respectively, on three-year contracts with start dates in 2014.
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