Freeport's Misguided Buyouts
Freeport McMoRan (FCX) wants back into the energy business, and on Wednesday it announced agreements to buy McMoRan Exploration (MMR) and Plains Exploration (PXP) for $20 billion. The question is whether this is good for Freeport, and whether there's an opportunity for you. In both cases, the answer is: probably not.
Looking over the palette of Gulf of Mexico offshore assets and the deals that have been made in the last several months, you see the picture clearly: Exploration-and-production costs continue to increase, and the risks associated with individual projects continue to rise with them. Look at the acquired McMoRan, for example. It recently disappointed on its Davy Jones project, and is now seeing a 30% drop in its shares. With every big risk you take in the Gulf now, you can bankrupt yourself or get massively hurt. (See ATP Oil and Gas, which is now nearly bankrupt.)...296 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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