Mining giant Freeport-McMoRan (FCX) said Friday it has sold its onshore California oil and gas properties to Sentinel Peak Resources California LLC for a total consideration of $742 million.
The purchase price includes contingent consideration, FCX said.
Sentinel Peak Resources is a private energy company focused on acquisitions and development primarily in California.
Sentinel Peak is backed by Quantum Energy Partners.
Under the terms of the agreement, FCX will receive a cash consideration of $592 million at closing and additional consideration of $50 million per year in 2018, 2019 and 2020 if the price of Brent crude oil averages $70 per barrel or higher in that calendar year.
Sentinel Peak will also assume future abandonment obligations associated with the properties, that had a book value of about $100 million as of June 30, 2016.
The transaction has an effective date of July 1, 2016, and is expected to close in the fourth quarter of 2016, subject to customary closing conditions.
For the twelve month period ended on June 30, net daily sales volumes from the properties averaged 28.6 thousand barrels of oil per day.
Over the same period, revenues totaled $0.4 billion, cash production costs before general and administrative expenses totaled $300 million and capital expenditures totaled $40 million.
FCX said net cash proceeds from the deal will be used for debt repayment.
FCX does not expect to record a material gain or loss on the transaction.
Following completion of the transaction and the company’s previously announced Deepwater Gulf of Mexico (GOM) sale, FCX’s portfolio of oil and gas assets will include oil and natural gas production in onshore South Louisiana and on the shelf of the GOM as well as oil production in offshore California and natural gas production from the Madden area in Central Wyoming.
In the second quarter of 2016, FCX said those properties produced an average of 8.6 thousand barrels of oil and natural gas liquids per day and 78 million cubic feet of natural gas per day.