Wednesday, December 12, 2012

Freeport Turns Cheap On Complex Purchases

Last week, Freeport-McMoRan Copper & Gold Inc. (FCX) announced monumental mergers that sent the stock plunging 20% over the next two trading days. While the deals appear attractively priced compared to the assets obtained, the market clearly doesn't appreciate complex investments in the current environment.

For those investors living under a rock, the company agreed to purchase both Plains Exploration & Production Company (PXP) and McMoRan Exploration (MMR). Since both of these companies focus on oil and gas exploration, the purity of being a strictly copper focused producer attracted plenty of investors that might disappear now.

Another major issue is that investors actually don't understand the McMoRan Exploration potential. Too many investors focus squarely on the failures of the exploratory Davey Jones No. 1 well and miss all the other wells under drilling programs. These wells are drilled with the benefits learned from the failures of the original Ultra-Deep Shallow Water well.

Read the full article at Seeking Alpha.


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