Freeport-McMoRan (FCX) paid out a US$540 million settlement to Noble Corp. after canceling two rig contracts operating in the Gulf of Mexico in May.
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The Noble Sam Croft. Image from Noble Corp. |
Noble confirmed it received $540 million in cash through the receipt of Freeport shares, which were immediately resold by Noble under a previously disclosed distribution agreement. In addition, Noble can receive additional contingent payments from FCX of $25 million and $50 million depending upon the average price of West Texas Intermediate crude oil over a 12-month period beginning 30 June 2016.
FCX terminated its contracts for both the Noble Sam Croft and Noble Tom Madden drillships on 10 May 2016, which were originally scheduled to end in July and November 2017, respectively. The Noble Tom Madden had been working for Freeport since November 2014 at a day rate of $635,000, and the Noble Sam Croft had been working for Freeport since July 2014 at a day rate of $641,000.
Noble is currently in the process of warm stacking both rigs, while contract opportunities are evaluated. While warm stacked, operating costs are expected to decline by an estimated $100,000 a day for each rig, the company said.
For Q2 2016, Noble expects revenues to be about $431 million for both rigs, which includes a $348 million termination fee, $52 million related to Q2 operations through the date of termination, and $31 million for the accelerated recognition of other deferred contractual items.
With the FCX settlement, Noble said its cash and cash equivalents balance is some $865 million. The company's available revolver capacity remains undrawn at $2.445 billion, resulting in a present liquidity position of approximately $3.3 billion, before a final payment of an estimated $410 million is made for the delivery of the Noble Lloyd Noble jackup. The payment is expected to be made in July 2016.
FCX troubles
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Image from FCX. |
It’s been a slippery slope for Freeport-McMoRan since the beginning of the decline of oil prices two years ago.
Weeks after canceling Noble’s two drillship deals, Freeport announced it was terminating a rig contract for the Rowan Relentless with Rowan Companies, resulting in FCX paying $215 million.
The Arizona-based company has revealed several struggles since late-2014, reducing expenditure budgets by billions of dollars.
In April 2016, FCX subsidiary Freeport-McMoRan Oil & Gas (FM O&G) went through a reorganization with four top executives departing the company in efforts to reduce costs, streamline functions, and enhance capital allocation. The shake up resulted in the elimination of FM O&G executive management roles and the integration of financial and administrative roles with FCX corporate functions. FCX also announced at the time, its plans to further reduce its costs and capital expenditures.
At the beginning of the year, the company’s Q4 2015 report disclosed a net loss of $4.1 billion, and a $12.2 billion loss for full year 2015. FCX also deferred its exploration and development activities in the Gulf of Mexico by idling three deepwater drillships.
Read more:
Freeport-McMoRan to pay Noble $540 million for rigs cancellations
Freeport-McMoRan axes top execs
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