Freeport McMoRan Inc said on Monday it will sell its deepwater Gulf of Mexico oil and natural gas assets to Anadarko Petroleum Corp for $2 billion as it looks to cut its heavy debt load.
The sale to Anadarko, which is betting the deal will help more than double its U.S. Gulf production within five years, comes after earlier attempts by Freeport to sell all or part of its oil and gas business failed. In May, Freeport withdrew plans to launch an initial public offering for that business.
Anadarko said it would offer 35.3 million shares to fund the deal. Secondary stock offerings tend to be unpopular with existing shareholders and shares of Anadarko fell 2.9 percent in after-hours trading to $57.79 per share.
Shares of Freeport gained 7.7 percent in Monday trading, closing at $11.08, though the stock was not trading in after-hours sessions.
After the deal closes, which is expected by the end of the year, Freeport's 2016 asset sales will exceed $6 billion, Freeport Chief Executive Richard Adkerson said in a statement.
Freeport, the world's biggest publicly listed copper miner, said in July it was confident of cutting its $18.8 billion of net debt to as low as $10.5 billion by the end of 2017 on the back of asset sales and cash earned.
The transaction comes as something of a surprise after Freeport failed to find a buyer for all or part of its oil assets last year and earlier this year, said Clarksons Platou Securities analyst Jeremy Sussman.
"It was probably a combination of stronger oil prices and better operational results that ultimately led to a transaction that was frankly better than expected," Sussman said.
The deal, which is effective Aug. 1 and is expected to close in the fourth quarter, will help Anadarko add about 80,000 net barrels of oil equivalent per day.
Anadarko said it expected to increase its 2016 full-year capital guidance, not including the acquisition, to a range of $2.8 to $3.0 billion, primarily reflecting the increased activity in the Delaware and DJ basins.
Anadarko plans to add two rigs in the U.S. Gulf by the end of the year, with more in 2017. Within five years, Anadarko said it expects its U.S. Gulf production to more than double to 600,000 barrels of oil equivalent per day.
(Reporting by Rachit Vats in Bengaluru, Nicole Mordant in Vancouver and Ernest Scheyder in Houston; Editing by Anil D'Silva and Cynthia Osterman)