Freeport-McMoRan To Sell Its Eagle Ford Shale Assets To Encana Unit For $3.1 Bln

(RTTNews) - Mineral resource properties exploration company Freeport-McMoRan Copper & Gold, Inc. (FCX) said Wednesday that its oil and gas subsidiary, Freeport-McMoRan Oil & Gas, agreed to sell its Eagle Ford Shale assets for $3.1 billion to a subsidiary of Encana Corp. (ECA, ECA.TO). The deal, with effective date of April 1, is expected to close by the end of the second quarter of 2014.

Freeport-McMoRan said it estimates after tax net proceeds from the deal to be about $2.5 billion. The company added that no gain or loss is expected to be recorded on the deal.

The company added that about half of the proceeds from the sale will be used to repay outstanding indebtedness and the balance is expected to be used for investments in additional assets in the Deepwater Gulf of Mexico to accelerate its growth initiatives.

"This transaction represents an important step in our ongoing debt reduction plan while providing additional capital to enhance our portfolio of assets with superior margins and growth characteristics," the company said in a statement.

Freeport-McMoRan has been trying to overcome the declining metal prices and high costs of mining like many of the other leading mining companies in order to boost shareholder value.

The deal is part of Freeport-McMoRan's plan to monetize about $4 billion in energy assets to provide meaningful proceeds for debt repayment, while also enabling it to refocus its asset base and capital allocation on strategic growth areas in the Gulf of Mexico.

Phoenix, Arizona-based Freeport-McMoRan noted that the Gulf of Mexico is said to provide the industry leading margins, high impact long-term growth opportunities and superior investment returns.

The Eagle Ford assets about 45,500 net acres with estimated net proved reserves totaling 59 million barrels of oil equivalents. The estimated net proved and probable reserves was 69 million BOE at year-end 2013. Production from the field averaged 53,000 BOE per day in the first quarter of 2014.

FCX closed Tuesday's regular trading session at $33.84, down $0.21 on a volume of 6.74 million shares.