re: MMR & PXP purchased by Freeport Copper.......

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A $20 billion splurge by Freeport-McMoRan Copper & Gold on two oil exploration companies lives up to the worst standards of the energy resources sector. The mining company’s convoluted plans to buy Plains Exploration and Production and McMoRan Exploration swiftly erased some $5 billion of market value.

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In addition to presiding over Freeport’s board, Mr. Moffett is chief executive and co-chairman of McMoRan, and owns stakes in both companies. Though the 14 percent decline in Freeport shares on Wednesday cost him some money, it was more than offset by the rich 74 percent premium being paid for McMoRan’s shares. According to Breakingviews calculations using Thomson Reuters data, he’s personally up on the day by about $19 million.

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The recent troubles at the New Orleans-based McMoRan give the deal the whiff of a bailout. McMoRan has been plagued by delays in a Gulf of Mexico well, causing shares to plunge 40 percent over the last two months. The company also has been burning cash at a rapid rate.

The cross-holdings create other bad optics, too. James Flores, the boss of Plains Exploration, also sits on McMoRan’s board, and the deal has netted him about $12 million, on paper, for his Plains stake. What’s more, the fiendish complexity of the deal has Freeport partly paying for McMoRan using units of a royalty trust, which are difficult to value.

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