NEW YORK Freeport-McMoRan
Copper & Gold Inc.s plan to spend billions of dollars
to enter the oil and gas market offers very attractive
opportunities going forward, despite the claims of critics,
president and chief executive officer Richard Adkerson
Phoenix-based Freeport came
under fire after announcing Dec. 5 that it would purchase
Plains Exploration & Production Co., Houston, and McMoRan
Exploration, New Orleans, for $9 billion. Critics raised
concerns about issues ranging from incompatible assets to the
companys alleged lack of disclosure to shareholders (
amm.com, Dec. 6).
However, given the limited
amount of copper resources in the world, this opportunity was
one Freeport couldnt pass over, Adkerson told analysts in
a Jan. 22 earnings call.
"The board was faced with the
situation about limited opportunities to invest in copper
beyond our brownfield expansions," Adkerson said. "Over the
years, weve been tracking opportunities to invest outside
the company in the mining business and have not found
opportunities that were attractive to us."
Freeport will acquire Plains
Explorations oil and gas assets in the United States,
including deepwater wells in the Gulf of Mexico, onshore
production of the Eagle Ford Shale in Texas and in Haynesville,
La., and oil production facilities in California.
While some claim there are no
obvious synergies between copper, oil and gas, Adkerson insists
the "growth in oil and gas is complimentary to the growth in
mining" and these acquisitions "will allow the company to
maintain a strong balance sheet."
The deals, expected to close by
the second quarter, not only will allow Freeport to diversity
its commodities assets and enhance its exploration
capabilitiesAdkerson highlighted McMoRans ultradeep
gas drilling program and Plains deepwater exploration
expertisebut it gives Freeport "an important position in
(the) U.S. natural gas market for the long term," he said.
Freeport will still receive most
of its profits from copper, Adkerson noted.
"After those transactions, I
want to point out that 75 percent of our business will be
represented by our global mining business, and copper will
continue to be the driver of our cash flows and profitability,"
"This is not a question of
having an old Freeport and a new Freeport," Adkerson said later
in the call. "This is going to be the long-term tradition of
Freeport going forward in terms of the way we run this
business. This is not any kind of transformation transaction
thats going to change traditions that have been part of
this company for a long period of time."
Freeport has also set up a
"special committee of independent and unaffiliated directors
who considered this transaction and negotiated the terms," he