Freeport-McMoRan will sell its onshore California oil and gas properties, which include several facilities throughout the Central Coast, to Sentinel Peak Resources California LLC for a total of $742 million, according to SEC filings.

The deal includes $592 million in cash and an additional $50 million per year in 2018, 2019 and 2020 if the price of crude oil averages $70 a barrel or higher.

Denver-based Sentinel, which was formed in 2016 by private-equity firm Quantum Energy Partners to focus on California development, will assume future abandonment obligations regarding the properties, according to an Oct. 14 SEC filing. Freeport – the oil, copper and gold producer based in Arizona – doesn’t expect to record a material gain or loss on the transaction when it is expected to close in the fourth quarter.

Freeport said that it was “reviewing strategic alternatives” for all of its oil and gas operations in October 2015. While the deal marks an exit strategy for some of its onshore oil and gas holdings, Freeport would still retain its offshore facilities located in federal waters approximately 5 miles offshore in the Santa Maria Basin — the Point Arguello Unit and its platforms Hidalgo, Harvest and Hermosa as well as the Point Pedernales Unit and Platform Irene.

The transaction may also impact Freeport’s previous oil well expansion plans in San Luis Obispo County.

Freeport, along with ExxonMobil and Venoco, have been buffeted by the shutdowns of Plains All American Pipeline’s Line 901 and Line 903 following the 2015 Refugio oil spill.

Freeport’s regional onshore facilities include the 23-acre Lompoc Oil and Gas Plant, which produces oil from the Point Pedernales and Tranquillon Ridge fields.

It remains unclear what Sentinel’s future plans are in SLO County.

“This transaction provides the catalyst to build a world-class team that can work with the various stakeholders in California in a safe, reliable and environmentally sensitive way as we develop and grow the business,” said Michael Duginski, Sentinel president and CEO, in a news release.

Freeport had planned to add 350 new wells and replace 100 in the Arroyo Grande oil field off Price Canyon Road. The Planning Commission approved one phase of the project, which was appealed by the Center for Biological Diversity.

If Sentinel continues with the Arroyo Grande project, and it is approved, it would increase production to about 6,000 barrels a day, up from about 1,350, and add about 50 to 60 jobs.

The Center for Biological Diversity challenged state regulators’ approval of an exemption that would allow the operator to inject leftover water from drilling into part of a protected aquifer to accommodate its anticipated well expansion.

Once oil is extracted, it is separated from the water and the wastewater, or produced water, is reinjected into the oil formation. Freeport applied to exempt a larger portion of the aquifer in the oil field from the Safe Water Drinking Act.

Freeport argued that the groundwater in the aquifer is not a source of drinking water and will not be one in the future. The state Division of Oil, Gas and Geothermal Resources and the Central Coast Regional Water Control Board both recommend the exemption’s approval.

But the plan could contaminate drinking and crop irrigation water, the center argues in a lawsuit filed on Aug. 3 in San Luis Obispo County Superior Court. The suit alleges that regulators did not properly analyze the aquifer exemption plan’s risks as required by the California Environmental Quality Act.

If the U.S. Environmental Protection Agency approves the plan to exempt the aquifer from protection, the operator could move forward with plans to drill hundreds of new wells in the area.

Freeport stock went up 5 cents from $9.64 to $9.69 on Oct. 14 but dropped to $9.53 by Oct. 17’s close. Shares had dropped precipitously over the past three months, prior to Oct. 14, since they reached $13.14 in July. Freeport has a market cap of around $12.7 billion.

• Contact Alex Kacik at akacik@pacbiztimes.com.