Oil And Gas Division IPO Has Mixed Implications For Freeport-McMoRan
Freeport-McMoRan Inc. (NYSE:FCX) has signaled its intention to raise capital through the IPO of its oil and gas division, a move that has mixed implications for the company. [1] Though the company has not specified the exact amount that it intends to raise through the IPO, Freeport is looking to offload a minority stake in its oil and gas division in order to raise funds for capital expenditures and other business requirements without taking on additional debt. [2]
- Both copper and crude oil, the major commodities sold by Freeport, have been characterized by weak demand and pricing environments over the past year or so. London Metal Exchange (LME) copper prices are currently trading around 18% lower on a year-over-year basis. [3] Similarly, oil prices are currently 46% lower year-over-year. [4]
- Given weak market conditions and a ratings downgrade by S&P earlier in the year, Freeport has been looking to reduce its outstanding debt. [5]
- The oil and gas division IPO will enable Freeport to raise capital without increasing its debt burden. However, given the weak pricing environment for crude oil, as indicated by the average realized price forecasts for Freeport’s oil and gas division shown below, the company may not realize the best value for the sale of its equity stake. However, given the prevailing business environment, the company does not have better alternatives for raising capital.
- Will Freeport Stock Recover To Pre-Inflation Shock Highs Of $52 Per Share?
- What To Expect From Freeport’s Q2 Results
- How Is Freeport Stock Faring Amid Volatile Copper Prices?
- Copper Prices Have Recovered A Bit. Is Freeport Stock Worth A Look?
- Lower Copper Prices Will Weigh On Freeport’s Q3 Results
- What’s Happening With Freeport-McMoRan Stock?
See our forecasts for realized prices for the oil and gas division
See the links below for more information and analysis:
The Impact Of Copper Supply Side Constraints On Freeport’s Stock Price
The Impact Of Unwinding Copper Financing Deals On Freeport-McMoRan
Trends Driving our $21 Price Estimate For Freeport-McMoRan
How Freeport-McMoRan Would Benefit From A Recovery In Oil Prices
Notes:- Freeport-McMoRan Form S-1, SEC [↩]
- Freeport-McMoRan Oil & Gas Inc. Files Registration Statement For Initial Public Offering, Freeport-McMoRan News Release [↩]
- LME Copper Prices, LME [↩]
- Brent Crude Prices, Y Charts [↩]
- Freeport-McMoRan (FCX) Downgraded to ‘BBB-‘ by S&P, Street Insider [↩]