McMoRan Exploration Co. announced an agreement to acquire Plains Exploration & Production Company’s shallow water Gulf of Mexico (GOM) shelf assets for a combination of stock and cash.
Under the terms of the transaction, McMoRan will issue 51 million shares of McMoRan common stock and $75 million in cash to acquire all of PXP’s interests and exploration rights in the shallow waters of the shelf of the GOM.
McMoRan currently owns working interests in substantially all of the properties being acquired. The properties being acquired include PXP’s 27.7% interest in the significant ultra-deep discovery at Davy Jones, PXP’s 35% interest in Blackbeard West and all of PXP’s interests in deep gas and ultra-deep exploration prospects on the shelf of the GOM, including Blackbeard East which is currently being drilled; PXP’s 30.0% working interest in the multi-well Flatrock field, 47.9% interest in Blueberry Hill and 30.0% working interest in Hurricane Deep. Independent reserve estimates for the proved reserves being acquired, excluding the significant reserve potential from Davy Jones and recent results from Blueberry Hill,
approximated 60 billion cubic feet of natural gas equivalents as of June 30, 2010 and current production rates approximate 45 million cubic feet of natural gas equivalents per day. The effective date of the transaction will be August 1, 2010.
The transaction will increase McMoRan’s scale of operations on the GOM shelf, consolidate its ownership in core focus areas, expand its participation in future production from its deep gas and ultradeep exploration and development programs and increase current reserves and production. In addition, McMoRan will continue to benefit from its positive relationship with PXP through PXP’s significant shareholding position in McMoRan. PXP will have the right to designate two nominees to McMoRan’s Board of Directors.
James R. Moffett and Richard C. Adkerson, Co-Chairmen of McMoRan said: “We are pleased to announce this important transaction which will enable us to effectively double our participation in our key exploration and production projects in the shallow waters of the GOM. Our multi-year efforts have enabled us to confirm the presence of hydrocarbons at deeper horizons in the shallow waters of the Gulf, define and de-risk the significant geologic potential of this exciting new exploration frontier and develop substantial expertise in executing our drilling and development program. We are pleased to have the continued support and confidence of PXP as we work to create asset values and build on our success.”
James C. Flores, Chairman, President and CEO of PXP said: “This transaction is consistent with our objective of restructuring our GOM ownership while enabling our shareholders to continue to participate in the significant potential of these opportunities. Under Jim Bob Moffett’s leadership, McMoRan has been successful in redefining the potential of the GOM shelf and as a significant shareholder of McMoRan, we look forward to future success and value creation that this consolidated and focused portfolio provides.”
The closing of the acquisition is subject to McMoRan shareholder approval of the issuance of common stock to PXP, as required by New York Stock Exchange (NYSE) rules, the completion of financing transactions, receipt of regulatory approvals and other customary closing conditions. Closing of the acquisition is expected to occur by year-end 2010.
Source: McMoran,September 21, 2010,