Plains Exploration & Production (PXP) (NYSE: PXP) has agreed to divest its interests in shallow water properties located in the Gulf of Mexico to McMoRan Exploration (MMR) (NYSE: MMR) in a cash and stock deal worth $818 million in total.
Under the terms of the transaction, PXP will receive $75 million in cash and 51 million shares of McMoRan common stock in exchange for PXP's interests in all of its Gulf of Mexico leasehold located in less than 500 feet of water. PXP will also have the right to designate two directors to McMoRan's board.
Currently, the properties sold produce approximately 45 million cubic feet of natural gas equivalents per day and include estimated proved reserves of about 63.9 billion cubic feet of natural gas equivalents as of June 30, 2010.
McMoRan has already secured $900 million from investors for its exploration and development activities.
In connection with the PXP transaction, international mining company Freeport-McMoRan Copper & Gold (NYSE: FCX), the world's largest producer of molybdenum, agreed to purchase $500 million of 5 3/4% convertible perpetual preferred stock of McMoRan.
MMR has also raised additional monies from a group of institutional invsetors that agreed to purchase $400 million in convertible securities at the same time, including a portion of preferred stock.
The preferred stock is convertible into MMR common stock at a price of $16 per share.
The new funds, which are subject to the completion of MMR's property acquisition from PXP, will allow MMR to finance its North American exploration and development activities, including the oil and natural gas play in the shallow waters of the Gulf of Mexico.
The PXP shallow water deal is expected to close by year-end, subject to McMoRan shareholder approval and customary closing conditions.
Separately, PXP has also begun the process of marketing for the sale of its Gulf of Mexico deepwater assets.
The main assets in the deepwater portfolio include Friesian and Lucius, two oil discoveries, as well as interests in 107 blocks, 9 well defined prospects and an additional 22 prospects or leads in Pliocene, Miocene and Lower Tertiary reservoirs.
The data room process is underway with final bids expected in late-October to mid-November, the company said, and it expects the deepwater transaction to also close by year-end.
PXP plans to provide updated financial and operating guidance after the McMoRan deal is closed.