NEW YORK, January 22, 2013 /PRNewswire/ --
Increased oil and
natural gas drilling in the US could make the country the world's
leading oil producer in coming years, and companies like FCX are
looking to pursue entry in an effort to leverage growth while
opting to diversify its revenue.
Toward the end of last year, shares of mining giant
Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) [Full
Research Report](1) plunged by 16 percent after
announcing plans to acquire McMoRan Exploration Co. (NYSE: MMR)
[Free Research Report](2) for $3.4 billion and $6.9
billion respectively, in an attempt to expand to its energy
sector.
Exposing the company to the high-risk oil and gas markets played
a role in the stock price reduction, but it bounced back shortly
after speculators saw the potential of diversification compensating
for short-term integration uncertainties.
A study conducted by the International Energy Agency shows that
the US could overtake global leader Saudi
Arabia as the world's leading oil producer in 2017 and could
become a net oil exporter by 2030. Increased oil production and new
policies for improving energy efficiency would help the US become
just that in two decades, a "dramatic reversal of the trend," the
report added.
The acquisitions basically look like Freeport is jostling to carve out its market
share in the US's newfound growth in domestic oil production,
despite its declining cash levels. A report from Seeking Alpha
indicates that Freeport lost more
than $1 billion from $4.8 billion in 2011 to just $3.7 billion in September last year.
Despite these losses, Freeport
looks to take a $4 billion term loan
and a $5.5 billion bridge to bonds.
They also want to refinance a $1.5
billion, five-year revolver facility. All these plus
existing debts would put the total debt amount at a staggering
$20 billion.
However, the acquisitions would also put Freeport's existing strategy in trouble as
they would be forced to enter the exploration and production
business - which counters the former. Earnings are likely to get
hurt, considering that Freeport
will be assuming $10.6 billion in
debt. McMoRan Exploration Co. lost $116
million last year, or negative $0.72 per share. Fortunately, Plains Exploration
earned $185.5 million, or
$1.44 per share.
Reference Links:
(1) The Full Research Report on Freeport-McMoRan
Copper & Gold Inc. - including full detailed breakdown,
analyst ratings and price targets - is available to download
free of charge at:
[http://www.nationaltradersassociation.org/r/entire_report/07a2_FCX]
(2) The Free Research Report on McMoRan
Exploration Co. - including full detailed breakdown, analyst
ratings and price targets - is available to download free
of charge at:
[http://www.nationaltradersassociation.org/r/entire_report/13a7_MMR]
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