Freeport-McMoRan to pay Noble $540 million for rigs cancellations

Noble Corp. struck an agreement with its client, Freeport-McMoRan Oil & Gas (FMOG), and FMOG's parent company, Freeport-McMoRan, in connection with the drilling contracts for the drillships Noble Sam Croft and Noble Tom Madden, which were scheduled to terminate in July and November 2017, respectively.

Pursuant to the agreement, the contracts will be terminated, with operations ceasing as soon as practicable, and Freeport will make a payment to Noble of $540 million. In addition, Noble can receive additional contingent payments from Freeport of $25 million and $50 million, respectively, depending upon the average price of oil over a 12 month period. Noble also expects to realize over $100 million in direct cost savings as a result of the contract terminations through crew reductions and stacking procedures.

Freeport recently announced a restructuring of its oil and gas business, which is operated through FMOG. As disclosed in Freeport's public filings, FMOG has substantial debt and has been negatively impacted by the crash in oil prices. 

Freeport can make the $540 million payment through a combination of cash, Freeport shares and up to $200 million in near-term Noble bonds. Through this arrangement, Noble expects to realize the full value of such payment. 

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