Investors simply hate Freeport's $20bn oil-gas buy
Investors were taking chunks out of Freeport-McMoRan Copper & Gold Inc (NYSE:FCX) stock on Wednesday, after the company announced a $20 billion deal that would see the miner re-enter the oil and gas business.
Freeport is buying Plains Exploration Production, a shale and gulf oil player, for $6.9bn in cash and stock and is buying back McMoRan Exploration, a deep sea drilling company, which it spun off 18 years ago for $3.4bn in cash.
The acquisitions mean that next year the company – the largest publicly traded copper producer – would make almost 75% of its earnings from oil and gas.
By the close the Phoenix-based company traded down 16 at $32.16 in New York, near its lows for the day.
A staggering 152.5 million shares in the $30.5 billion company had changed hands compared to the daily average of 12 million.
Freeport is most closely associated with Grasberg, the world's largest copper and gold mine situated in Indonesia, which accounts for the bulk of its profits and has been a cash cow for the company since the 1970s.
Indonesia has been eyeing a bigger stake in the massive mine for a long time, while Freeport has experienced ongoing labour issues and clashes with a separatist movement at the remote site in the poor West Papua province of the Asian nation.
Today's deal may indicate a change in the status of Grasberg could be looming, pushing the company to quickly diversify out of copper and gold.