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Freeport-McMoRan (FCX) Terminates Drillship Contract With Rowan Companies (RDC)

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Freeport-McMoRan Inc (NYSE:FCX) is up by just under 1% in morning trading after the company terminated a drillship contract with offshore driller Rowan Companies PLC (NYSE:RDC). In return for terminating the contract, Freeport-McMoRan will pay Rowan $215 million in cash. The agreement should save Freeport-McMoRan $300 million in additional payments for the drillship’s services. Freeport-McMoRan Inc (NYSE:FCX) has been steadily retreating from activity in the higher-cost offshore market, as the company focuses on attractive land-based oil and gas opportunities. Just a few weeks ago, Freeport-McMoRan agreed to pay another offshore driller, Noble Corporation (NYSE:NE), $540 million and up to $75 million in contingent payments to cancel agreements involving two other drillships. Investors view the retreat as good news, as it will ultimately save Freeport-McMoRan capex cash in the long run.

Heading into the second quarter of 2016, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, an 8% drop from one quarter earlier. According to Insider Monkey’s hedge fund database, Icahn Capital LP, managed by Carl Icahn, holds the most valuable position in Freeport-McMoRan (NYSE:FCX). Icahn Capital LP has a $1.08 billion position in the stock, comprising 5% of its 13F portfolio. On Icahn Capital LP’s heels is Discovery Capital Management, managed by Rob Citrone, which holds a $102.5 million position; 1.5% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish consist of Ken Griffin’s Citadel Investment Group, David Halpert’s Prince Street Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

On the next page we are going to take a look at the latest trading activity in Freeport-McMoRan. At the end of this article we will also compare FCX to other stocks, including Liberty Media Corp (NASDAQ:LMCA), Cameron International Corporation (NYSE:CAM), CA, Inc. (NASDAQ:CA) to get a better sense of its popularity.

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