Apache Corp. closed its acquisition of all of Anadarko Petroleum’s Gulf of Mexico Shelf exploration and production properties. The purchase includes 60 million boe of oil and gas reserves and 74 fields on 232 offshore blocks for $525.4 million in cash, plus assumed liabilities (see NGI, Aug. 23). The properties cover about 664,000 net acres, including 89 undeveloped blocks, and 104 platforms.
Apache will operate 49 of the fields with 70% of the production and 75% of the net reserves, which are 50% natural gas. Apache estimates the properties’ probable reserves at an additional 23 MMboe.
Morgan Stanley Capital Group Inc. acquired an overriding royalty interest in the properties for $645.7 million prior to the Apache transaction. Apache has booked an $83 million liability associated with producing and delivering 20 MMBoe to Morgan Stanley (Apache will not book these reserves) and a $27 million liability associated with previously hedged production. The deal with Morgan Stanley is referred to as a volumetric production payment (VPP), which provides the buyer with ownership of a certain volume of oil and gas to be produced from the properties over time. In this case, the production will be delivered to Morgan Stanley over four years.
Apache CEO G. Steven Farris said the purchase enables the company to grow reserves and production at a reasonable cost during a time when commodity prices and acquisition costs are high. He said the properties would be immediately accretive to Apache’s per-share results and will add significant drilling and operational enhancement opportunities in the years ahead. “Most of the properties are in areas where we already operate, so we can easily and economically integrate them into our existing operations,” said Farris.
Apache’s share of the acquired production is estimated to average 47 MMcf/d of gas and 3,300 b/d of liquid hydrocarbons in the current-year fourth quarter. Production is anticipated to rise to an annual average of 65 MMcf/d of gas and 6,600 b/d of liquids as the Tarantula field in South Timbalier 308 comes on stream in early 2005. There has been minimal impact on production from these properties due to Hurricane Ivan; essentially all production is back on line, the company said. Apache funded the acquisition with commercial paper.
For Anadarko, the sale represents a milestone in the execution of its refocused strategy, which is intended to make the company more competitive by focusing on areas where it can achieve sustainable growth and attractive returns, such as exploration and unconventional resource development and exploitation, Anadarko CEO Jim Hackett said at the time the sale was announced. Anadarko has targeted minimum after-tax proceeds of $2.5 billion from an asset realignment.
Hackett said that by exiting the Shelf, Anadarko can focus on the deepwater, which is expected to be the single largest contributor to Anadarko’s targeted 5-9% annual growth rate through 2009. Anadarko now operates only one offshore platform, the newly commissioned Marco Polo facility at deepwater Green Canyon Block 608. The company also is developing gas reserves in Algeria and Qatar and recently announced the purchase of an LNG import terminal project in Nova Scotia.
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