Plains Exploration & Production Company (PXP) completed the sale of its Gulf of Mexico shallow water shelf properties to McMoRan Exploration Co. (MMR). McMoRan paid roughly $86 million in cash and 51 million shares of McMoRan common stock in exchange for all of PXP’s interests in the shallow Gulf of Mexico assets. McMoRan had agreed to buy these assets on September 20, 2010.
Apart from becoming a majority shareholder in McMoRan through this transaction, Plains Exploration also designated two directors James C. Flores, PXP’s Chairman of the Board, President and Chief Executive Officer, and John F. Wombwell, Executive Vice President, General Counsel and Secretary of PXP, to McMoRan’s board.
The Gulf of Mexico shallow water ultra-deep exploration program, located in less than 500 feet of water, continues to be a successful value creation strategy. The assets under sale include Plains E&P’s leaseholds located in the Flatrock field (30% interest), Hurricane Deep (30% interest), Blueberry Hill (47.9% interest), Blackbeard West (35% interest), Davy Jones (27.7% interest) and Blackbeard East. McMoRan already owns working interests in substantially all of the properties being acquired.
Furthermore, the companies have approved a unique operator/ownership structure, which will maximize value for both PXP and McMoRan shareholders, through the ultra-deep program’s current discoveries and exploration potential. Both the companies have agreed to operate the properties together.
The sale of these shallow water Gulf of Mexico assets represents Plains’ strategic planning of reducing its Gulf of Mexico exposure after the oil spill incident. While Plains focuses on onshore projects like Granite Wash, California and the Haynesville shale, it retains its interest in the Gulf of Mexico through its shareholding in McMoRan.
Plains E&P looks forward to its future participation in the assets as a significant McMoRan shareholder. Going forward, PXP shareholders will continue to maintain growth exposure to this dynamic and emerging play without substantial capital requirements, through PXP’s ownership position in the assets.
Based in Houston, Texas, Plains Exploration & Production Company is an independent oil and gas company with core operations located in North America. The company is primarily engaged in the activities of acquiring, developing, exploring and producing oil and gas. The company’s core areas of operation include oil and gas properties located in the Onshore and Offshore California; the Gulf of Mexico; the Gulf Coast Region, including the Haynesville Shale and South and East Texas; the Mid-Continent Region in Texas and Oklahoma; and the Rocky Mountains, as well as an interest in an exploration prospect offshore Vietnam.
We currently maintain our Neutral recommendation on the Zacks #3 Rank (short-term Hold) Plains Exploration & Production shares.
MCMORAN EXPLOR (MMR): Free Stock Analysis Report
PLAINS EXPL&PRD (PXP): Free Stock Analysis Report
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