Phillips, Apache To Market Canadian Assets
With oil and natural gas prices soaring, the market for Canadian
producing and development properties has been heating up, as
evidenced by property sales announced recently by Phillips
Petroleum and Apache Canada.
In a strategic shift of production area focus, Phillips put up a
for-sale sign on its sizeable Zama oil and gas property located in
Northwestern Alberta, and has contracted Waterous & Co. of
Calgary to act as its financial advisor on the transaction.
Waterous said the offering was the single largest Canadian asset
ever made available in a public offering.
"Basically, these Zama assets have not developed to a size or a
scale sufficient enough to give interest to us any further," said
Phillips spokeswoman Kristie DesJarlais. "We have the Alaska
assets, and we have a lot of other larger assets in Bohai Bay in
China, Venezuela and the Timor Sea. Those are very large assets,
and this one [Zama] is just not fitting into our core focus area,
so we decided to market it." Earlier this year Phillips acquired a
36.5% interest in the Prudhoe Bay Alaska field, buying out Arco's
share. Along with its other interests there, Phillips now holds the
title of largest oil and gas producer in Alaska.
Zama currently produces 16,500 boe/d, including 7,500 b/d of
light oil and natural gas liquids and 90 MMcf/d of natural gas on
212,000 acres of land, with an additional 275,000 acres of
undeveloped land included in the offering. The sale also includes
three gas plants with 160 MMcf/d capacity, a 150-mile gas gathering
system, 12 compressor stations and seven crude oil processing
facilities. Waterous said there is also room for expansion, with an
additional 1.5 million acres of Crown land available in the
Phillips estimates that cash flow for the Zama property in 2000
will be C$155 million.
Waterous also is handling Apache's recently announced offering
which includes five oil and gas production areas in Alberta and
British Columbia. Current production from the areas that Apache
considers non-core is estimated at 2,500 boe/d, of which 72% is
natural gas. "We do this continuously, we are a big acquirer and we
are constantly reviewing our properties," said Tony Lentini, an
Apache spokesman. Lentini likened the purchase/sell system to the
food chain. When fields become uneconomical for larger companies
such as Shell to continue to develop, they sell them to smaller
companies such as Apache that can still find value. Then when the
field becomes a drain on Apache, it is sold to even smaller
companies, he said.
An analyst noted that the timing of these offerings seemed to
align perfectly with natural gas prices being on the rise again.
"Selling a property with prices at their current $6-plus level,
instead of when prices were $4 to $5 can make all the difference in
the going purchase price," he advised.
Both Phillips and Apache denied there was any correlation to the
timing. DesJarlais said that high gas prices had nothing to do with
the decision to sell the Zama assets, it was just a strategy call.
But she added, "We certainly expect that the current price
situation will be reflected in the value of the assets."
"Naturally when the price is good, maybe you will get a better
price for it, but it is not something we said 'oh we are going to
put all of these on right now because of high prices,' it is just
something we do regularly," Lentini said. He noted that Apache has
made purchases during this time period as well.
Waterous said Phillips is interested in a cash transaction or a
swap into natural gas properties in the San Juan Basin, the
Rockies, North Louisiana or the Permian Basin. Phillips will open
the data room this week, and expects to have the sale completed
during the first quarter of 2001.
DesJarlais pointed out that the Zama sale does not mark an exit
for Phillips from Canada. She said the company plans to keep
properties it holds interests in, but does not operate.
For Apache's offering, Waterous said marketing materials will be
available soon and it expects proposals will be received by Dec.