Freeport-McMoRan 2014 Annual Report Download - page 95

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
93
The following table provides net income before income taxes
and net income attributable to FCX common stockholders for
Candelaria/Ojos:
January 1, 2014, Years Ended
to December 31,
November 3, 2014 2013 2012
Net income before
income taxes $ 2 70 $ 689 $ 547
Net income attributable to
FCX common stockholders 144 341 304
Eagle Ford Disposition. On June 20, 2014, FCX completed the sale
of its Eagle Ford shale assets to a subsidiary of Encana
Corporation for cash consideration of $3.1 billion, before closing
adjustments from the April 1, 2014, effective date. Under full cost
accounting rules, the proceeds were recorded as a reduction of
capitalized oil and gas properties, with no gain or loss recognition,
except for $84 million of deferred tax expense recorded in
connection with the allocation of $221 million of goodwill (for
which deferred taxes were not previously provided) to the Eagle
Ford shale assets. Approximately $1.3 billion of proceeds from
this transaction was placed in a like-kind exchange escrow and
was used to reinvest in additional oil and gas interests, as
discussed below. The remaining proceeds were used to repay debt.
Deepwater Gulf of Mexico (GOM) Acquisitions. On June 30, 2014,
FCX completed the acquisition of interests in the Deepwater
GOM from a subsidiary of Apache Corporation, including interests
in the Lucius and Heidelberg oil fields and several exploration
leases, for $918 million ($451 million for oil and gas properties
subject to amortization and $477 million for costs not subject to
amortization, including transaction costs and $10 million of asset
retirement costs). The Deepwater GOM acquisition was funded
by the like-kind exchange escrow.
On September 8, 2014, FCX completed the acquisition of
additional Deepwater GOM interests for $496 million, including
an interest in the Vito oil discovery in the Mississippi Canyon area
and a significant lease position in the Vito basin area. Based on
preliminary valuations, and including purchase price adjustments
and transaction costs, FCX recorded capitalized costs for oil and
gas properties not subject to amortization of $509 million. This
acquisition was funded in part with the remaining $414 million of
funds from the like-kind exchange escrow.
PXP and MMR Acquisitions. FCX acquired PXP on May 31, 2013,
and MMR on June 3, 2013. These acquisitions added a portfolio of
oil and gas assets to FCX’s global mining business, creating a
U.S.-based natural resources company. The portfolio of oil and
gas assets included oil production facilities and growth potential
in the GOM, oil production from the onshore Eagle Ford shale play
in Texas, oil production facilities onshore and offshore California,
onshore natural gas resources in the Haynesville shale play in
Louisiana, natural gas production from the Madden area in central
Wyoming, and a position in the emerging Inboard Lower
Tertiary/Cretaceous natural gas trend in the shallow waters of the
GOM and onshore in South Louisiana. The acquisitions have
been accounted for under the acquisition method, with FCX as
the acquirer. As further discussed in Note 8, FCX issued
$6.5 billion of unsecured senior notes in March 2013 for net
proceeds of $6.4 billion, which was used, together with
borrowings under a $4.0 billion unsecured five-year bank term
loan, to fund the cash portion of the merger consideration for
both transactions, to repay certain indebtedness of PXP and for
general corporate purposes.
In the PXP acquisition, FCX acquired PXP for per-share
consideration equivalent to 0.6531 shares of FCX common stock
and $25.00 in cash. FCX issued 91 million shares of its common
stock and paid $3.8 billion in cash (which included $411 million for
the value of the $3 per share special dividend paid to PXP
stockholders on May 31, 2013). Following is a summary of the
$6.6 billion purchase price for PXP:
Number of shares of PXP common stock acquired (millions) 132.280
Exchange ratio of FCX common stock for each PXP share 0.6531
86.392
Shares of FCX common stock issued for certain
PXP equity awards (millions) 4.769
Total shares of FCX common stock issued (millions) 91.161
Closing share price of FCX common stock at May 31, 2013 $ 31.05
FCX stock consideration $ 2,831
Cash consideration 3,725
a
Employee stock-based awards, primarily cash-settled
stock-based awards 83
Total purchase price $ 6,639
a. Cash consideration includes the payment of $25.00 in cash for each PXP share
($3.3 billion), cash paid in lieu of any fractional shares of FCX common stock, cash paid
for certain equity awards ($7 million) and the value of the $3 per share PXP special cash
dividend ($411 million) paid on May 31, 2013.
In the MMR acquisition, for each MMR share owned, MMR
stockholders received $14.75 in cash and 1.15 units of a royalty
trust, which holds a 5 percent overriding royalty interest in future
production from MMR’s Inboard Lower Tertiary/Cretaceous
exploration prospects that existed as of December 5, 2012, the
date of the merger agreement. MMR conveyed the royalty
interests to the royalty trust immediately prior to the effective
time of the merger, and they were “carved out“ of the mineral