Energy Business

Freeport-McMoRan Cancels Another Drill Ship Contract

Less than two weeks after cancelling contracts for two ultra-deepwater drill ships, Freeport-McMoRan Inc. (NYSE: FCX) announced late Monday that it has cancelled a third one. This one was with Rowan Companies PLC (NYSE: RDC), for an ultra-deepwater drill ship operating in the Gulf of Mexico.

According to a filing with the U.S. Securities and Exchange Commission, Freeport will pay Rowan $215 million in cash and has agreed to pay up to $30 million more, depending on crude prices for the next 12 months. The agreement releases Freeport from $300 million in further payments under the contract for the drill ship Rowan Relentless, a rig capable of drilling in water up to 12,000 feet deep to depths of 40,000 feet below the sea floor.

Earlier this month Freeport cancelled an $800 million contract with Noble Corp. PLC (NYSE: NE) by issuing $540 million in new shares and agreeing to pay up to $75 million more, depending on the price of crude.

In less than two weeks, then, Freeport has chopped about $350 million from its commitments for new drilling. The Rowan contract would have ended in June 2017 and the two contracts with Noble had been scheduled to run through July and November 2017.

Freeport had previously announced the sale of an African cobalt and copper mine for $2.65 billion, the sale of a 13% stake in its Morenci mine for $1 billion and the sale of a Serbian copper mine for $263 million.

Freeport has sold assets valued at $3.9 billion so far this year, against a target of $4 billion the company said it would use to pay down debt.

Last Friday, Freeport cancelled the planned spin-off of its oil and gas division into a separately traded company. In 2013, the company paid around $25 billion for the oil and gas assets, just in time to see the price of crude collapse.

Freeport’s shares closed up 2.7% on Monday at $11.38, and they traded up another 0.6% in Tuesday’s premarket session at $11.45. The stock’s 52-week range is $3.52 to $21.17.

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