Apache Pays $715 M for 22 of Shell's GOM Fields
Combating its poor first quarter performance, Houston-based
Apache Corp. dramatically grew its asset base Thursday, paying $715
million and transferring one million common shares of stock to
Shell in exchange for 22 fields in the Outer Continental Shelf of
the Gulf of Mexico (GOM). Apache expects the transaction to add 20
cents/share of value in 1999. The acquisition will go into effect
retroactive to March 1.
"The transaction is expected to add significantly to
earnings/share and cash flow/share," said Apache President G.
Steven Farris. "In addition, while service costs are appropriate,
we intend to accelerate production and reduce costs to add
shareholder value through a program of recompletions, workovers and
Apache will operate 18 of the 22 fields it has acquired. In
February, the properties recorded average net production of 24,900
barrels of oil and 125 MMcf/d. The fields' production and reserve
mix is 54% oil and 46% natural gas. The properties are in water
depths of less than 700 feet. The deal also includes 16 undeveloped
blocks and access to 3-D seismic data covering more than 1,000
blocks throughout the Gulf.
The transaction paid immediate dividends for Apache. Its stock
skyrocketed up $3.06 to $31.69 in early Thursday afternoon trading.
"I think I can speak for everyone on the Apache side when I say
we are more excited about this transaction from the perspective of
asset quality and financial impact than perhaps any other deal we
have ever done," said Bob Dye, Apache's vice president of investor
relations, in a conference call on Thursday.
Apache made the announcement on the heels of a poor 1Q99
earnings report. It accrued a first quarter loss of $3.6 million,
or 4 cents/share as a result of low oil and gas prices. Apache
reported net income of $17.4 million, or 18 cents/share, in 1Q98.
The company realized $1.69/Mcf of gas, compared with $1.98/Mcf in
the year-earlier period. Gas production dropped to 572 million
cubic feet (MMcf) per day, from 611 MMcf per day.
For Shell, the sale represents an opportunity to revise its
grandiose GOM portfolio. "This adjustment of our portfolio in the
Gulf of Mexico will allow for better allocation and focus of our
staff and capital," commented Walter van de Vijver, Shell
Exploration & Production Company's president and chief
executive officer. "Given the high level of activity in Shell's
deep-water and newer Shelf fields, coupled with capital expenditure
priorities, our intent is to focus our activities in those areas
with longer term strategic value."
The sale involves half of Shell's producing properties in
shallow waters of the GOM, but only one-fourth of Shell's daily
gross production from those waters. Both companies said the deal
will close within 30 days.
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