McMoRan To Double Interest In PXP's Gulf Of Mexico Properties

McMoRan Exploration Co. MMR is acquiring Plains Exploration & Production's Gulf of Mexico Shelf properties, effectively doubling McMoran's interest in the Gulf, according to Dahlman Rose. Dahlman writes "As a result of the transaction, MMR will effectively double its CAPEX commitments, but after a $900MM capital infusion, we estimate MMR can fully fund a three to four rig drilling program (heavily focused on the Ultra Deep Shelf) for at least two years. We estimate that MMR's fully diluted share count will increase to 223 MM shares, since all of the newly issued convertible securities have a conversion price of $16/share. Freeport McMoRan Copper and Gold (FCX) will purchase $500MM of the convertible preferred securities, which are convertible into 31.25MM share of MMR, or 14 of the fully diluted share count. Assuming full dilution, Plains Exploration will have an even larger interest in MMR at 23%." Dahlman Rose reiterates its Buy rating and raises the price target to $18 for McMoRan Exploration Co., which closed yesterday at $15.96.