McMoRan to Buy Newfield Gulf Assets for $1.1 Billion (Update3)

McMoRan Exploration Co. agreed to buy oil and natural-gas properties in shallow waters of the Gulf of Mexico from Newfield Exploration Co. for $1.1 billion in cash, extending its operations in the region.

The properties include 125 fields on 146 offshore blocks with current daily oil and gas production equivalent to about 270 million cubic feet of gas, New Orleans-based McMoRan said in a statement today. Natural gas accounts for 70 percent of the output, the company said.

The acquisition would boost McMoRan's production of oil and gas in the Gulf almost fivefold from 70 million cubic feet of gas equivalent a day in the first quarter. The company would also get a 50 percent interest in Newfield's non-producing exploration leases in shallow Gulf waters and some of the company's interests associated with its deepwater Treasure Island prospect.

``It's going to be a whole new company,'' said Philip Dodge, an analyst at Stanford Group in Boca Raton, Florida, who rates McMoRan shares a ``buy'' and doesn't own any. ``It's an aggressive but smart move.''

Shares of McMoRan rose 43 cents to $15.05 in New York Stock Exchange composite trading. Newfield's shares gained $1.41 to $49.96.

Reserves

The Newfield properties would increase McMoRan's proved reserves more than fivefold to 403 billion cubic feet of natural- gas equivalent from 76 billion, McMoRan spokesman William Collier said in an interview. The transaction is expected to close in the third quarter, McMoRan said.

The properties represent all of Newfield's producing interests in shallow waters of the Gulf of Mexico. The Houston- based company on May 14 said it planned to sell assets in the U.S., China and the North Sea to help finance its $575 million acquisition of Rocky Mountain assets from Stone Energy Corp.

The assets are in waters of 700 to 1,200 feet, Newfield spokesman Keith Schmidt said in an interview. The company will continue to develop properties in deep waters of the Gulf, he said.

After the sale is completed, the Gulf of Mexico will account for about 2 percent of Newfield's reserves, down from about 15 percent currently, Schmidt said.

McMoRan said it intends to retain technical and operating personnel and contractors that have supported Newfield's operation of the acquired properties and will engage in joint exploration with Newfield. About 40 Newfield employees will be affected, Schmidt said.

The company said it received $1.6 billion in financing commitments from JPMorgan Chase & Co. and Merrill Lynch & Co. to finance the transaction, repay its existing $100 million term loan and provide working capital. JPMorgan and Merrill Lynch advised McMoRan on the acquisition.

source:www.bloomberg.com