Wheeling, Dealing Energy Stocks to Buy #3 — Freeport-McMoRan (FCX)
After gold and copper prices cratered the last few years, leading miner Freeport-McMoRan (FCX) went back to its roots and decided to become an integrated natural resource firm. That meant adding a serious dose of natural gas and oil exposure to its portfolio. To that end, it bought energy companies Plains Exploration & Production and McMoRan Exploration back in June of 2013.
However, its latest deal strengthens its strategy of drilling in the Gulf of Mexico.
FCX is paying $1.4 billion for several of Apache’s (APA) deepwater blocks in the Gulf of Mexico. Those blocks contain roughly 55 million barrels’ worth of oil-equivalent (BoE). More importantly, those blocks fit in perfectly with the assets it acquired when it bought Plains & McMoRan.
Already, Freeport’s Gulf assets have been a boon to the energy stock’s bottom line. For the latest reported quarter, FCX saw revenues of $1.2 billion for its energy gas operations as the firm sold roughly 16 million BoE. That helped drive an impressive earnings beat because the energy division’s margins are 22% higher than its copper/gold mining operations. And with the fields being predominately oil-based, the new Gulf deal will only add to that production.
And at a forward P/E of just 12.7, FCX stock is pretty cheap.