Houston-based Anadarko Petroleum Corp. notched another sale in its ongoing divestiture plan last week, announcing the sale of its Genghis Khan discovery in the deepwater Gulf of Mexico to the owners of the adjacent Shenzi field for $1.35 billion. The transaction continues the Gulf’s hot deal streak and furthers the internationalization of the U.S. oil and gas breadbasket.
The sale comprises Anadarko’s 100% working interests in Green Canyon block 652 and certain deep rights in Green Canyon block 608. The Shenzi ownership group is comprised of Australia’s BHP Billiton, with 44%, and Hess Corp. of the United States and Spain’s Repsol, each with 28%.
Earlier this year, Raymond James analysts called the Gulf the “epicenter” of merger and acquisition activity (see NGI, May 29). “An interesting observation is that almost all of the domestic E&P acquisitions made by international operators over the past year have been in the Gulf of Mexico,” the analysts said in May. “In addition to Marubeni and Norsk Hydro, Norway’s Statoil and Japan’s Nippon Oil and Mitusi & Co. have made sizable purchases in the Gulf of Mexico.”
As for Genghis Khan, the trio of buyers appears to have gotten a deal. In a Nov. 7 note, JP Morgan projected the value of Genghis Khan at $1.6- 2.4 billion. But it’s hard to put a price on the field since estimates of gross reserves vary widely. Genghis Khan is only the latest Anadarko asset to go to a non-U.S. company as the company continues to right its balance sheet.
“Similar to the Statoil transaction announced Nov. 6 (see NGI, Nov. 13), this divestiture further advances our efforts to reduce financial leverage following the acquisitions of Kerr-McGee and Western Gas Resources in August” (see NGI, Aug. 28; June 26), said Anadarko CEO Jim Hackett. “Due to the size and quality of the portfolio we have established in the deepwater Gulf of Mexico, we have the opportunity to realize value from targeted divestitures. Our deepwater position in the Gulf is robust, with nine hub-and-spoke development projects already on-line, a number of discoveries proceeding toward sanction, several exploration wells currently drilling and a solid prospect inventory for the future.”
Genghis Khan, in water depths of about 4,300 feet, is part of the same geologic structure as the recently sanctioned Shenzi project and includes estimated gross reserves in the range of 65 million to 170 million boe, said Hess. The field has two wells and development infrastructure in place. First oil is expected in mid-2007. Ownership in Genghis Khan will be the same as the Shenzi development.
The field is located within three miles of the Marco Polo production platform, and development of the reserves at Genghis Khan will proceed through the connection of subsea wells where the pipeline infrastructure is already in place, said BHP Billiton. Development may include up to seven wells.
BHP has said it intends to expand its U.S. operations and grow its oil and gas production by one-third over the next three years.
“The acquisition of Genghis Khan provides BHP Billiton with a significant undeveloped asset in the deepwater Gulf of Mexico with near-term production that we will operate,” said J. Michael Yeager, group president energy for BHP Billiton. “Additionally, Genghis Khan being adjacent to our Shenzi oil and gas field will allow us to benefit from developmental synergies, and will give us knowledge that will enhance the Shenzi development when it comes on-stream in 2009.”
The sale is expected to close in the fourth quarter, subject to closing conditions. Randall & Dewey marketed the asset and served as Anadarko’s financial advisor.
Kerr-McGee and Western contributed significantly to Anadarko’s third-quarter performance. Anadarko announced a divestiture plan in June, and the company said in September that it was well on its way to restoring its balance sheet and establishing permanent financing for the Kerr-McGee and Western deals. Progress has included the sale of Anadarko Canada Corp. to a Canadian Natural Resources Ltd. (see NGI, Sept. 18). Anadarko also agreed to divest its remaining Canadian arctic frontier interests through a separate exchange of assets with Chevron USA Inc. and Chevron Canada Ltd., wholly owned subsidiaries of Chevron Corp. (see NGI, Nov.6). Anadarko so far has been unsuccessful in its attempts to sell its Bear Head LNG project.
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