Apache Corp. is said to be shopping some of its portfolio in the Gulf of Mexico, a region where it now reigns as the largest shallow water driller and where it has steadily been building an inventory of deepwater prospects.
Jefferies LLC has been engaged to approach potential buyers about some prospects, which are said to include producing fields and interests in two major projects now being developed, a source told NGI. The company had no comment.
Apache has been the largest offshore held-by-production acreage owner on the Outer Continental Shelf of the GOM since 2004, where it has about 3 million acres gross. The shallow waters contributed 12% of Apache’s worldwide production and revenue in 2012 and it now has a stake in 666 blocks. Production in 4Q2012 on the Shelf averaged 95,980 boe/d, which was 7% higher year/year (y/y).
In the deepwater, production in 4Q2012 was 17,903 boe/d, a 17% y/y increase. Last year the company drilled six deepwater wells, one operated and five in which it participated. Apache also was awarded 28 blocks in the June 2012 Central GOM Lease Sale; it now has an interest in 166 blocks with about 900,000 gross acres.
The two big projects that now are in development stages are the Anadarko Petroleum Corp.-operated Lucius and Heidelberg fields. First production from Lucius is expected in late 2014; Heidelberg still is being appraised.
Why would the explorer want to sell any of its prospects? Look no further than North America’s onshore, and in particular, the Permian Basin, where Apache long has had legacy assets. The Texas/New Mexico portfolio has seen new life with unconventional drilling techniques — and at a much lower cost than operating in the GOM offshore.
Production in the final quarter of 2012 across the Permian region averaged 117,898 boe/d, 74% weighted to liquids (see NGI, Feb. 18). The output was 6% higher than in the previous quarter and 22% higher than in 4Q2011, Apache noted. The company averaged 32 drilling rigs in the quarter, and it drilled or participated in 781 wells. Plans are to up the rig count and run 34 rigs this year.
Last year, Apache replaced more than 262% of its output in the Permian region through exploration and development, excluding revisions, it noted.
Also requiring capital is Apache’s half-stake in a Kitimat, BC, liquefied natural gas export project with Chevron Canada Ltd., in which the company could solve takeaway issues from its substantial holdings in the Horn River and Liard basins.
Last month CEO Steve Farris said the company planned to sell about $2 billion of assets, which would be “whatever we decide to put on the market…We are looking at all our options.”
Wells Fargo Securities LLC analyst David Tameron said in a note Friday he spent some time with Apache’s management team last week and “much of the conversation focused on potential monetizations, potential use of proceeds (debt first up to $2 billion), and Street sentiment regarding shares.”
Apache’s management was “upfront in addressing that it needed to execute and deliver on its production targets and that it has moved into a ‘show-me’ period with the Street. That is exactly where we stand on shares, thinking first and foremost Apache needs to execute and near-term, hit its targets…” The path ahead is “admittedly a little more murky” but “still believe there is significant value in the asset base, and think on a risk/reward basis, an ‘outperform’ rating is still justified.”
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