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Apache GOM Sale Shifts Focus to Onshore

Apache Corp., which had planned to sell about $4 billion worth of assets by the end of the year, accomplished that goal and more last week after agreeing to sell Gulf of Mexico (GOM) Outer Continental Shelf operations and properties, and the asset retirement obligations, to a Riverstone Holdings affiliate for $5.25 billion total.

Fieldwood Energy LLC is paying $3.75 billion cash for the assets, and it agreed to assume all of the properties' retirement obligations, which, as of June 30, were estimated by Apache at a discounted value of about $1.5 billion.

Apache's Shelf portfolio, considered the largest-operated asset base in GOM waters up to 1,000-feet deep, comprises more than 500 blocks with 1.9 million net acres. At the end of 2012, estimated proved reserves from the Shelf were 133 million bbl of oil and natural gas liquids, along with 636 Bcf of natural gas.

In the first three months of this year, the properties being sold averaged net production of about 50,000 b/d of liquids and 254 MMcf/d of gas.

"This transaction is an important step toward rebalancing our portfolio," CEO G. Steven Farris said. "At the end of this process, we expect Apache to have the right mix of assets to generate strong returns, drive more predictable production growth and create shareholder value."

Apache plans to retain its half-stake in all of the exploration blocks and the horizons below production in the developed blocks, where high-potential deep hydrocarbon plays are being tested.

The Houston operator has had "a great run on the Gulf of Mexico Shelf over the last 30 years, and the Shelf region and staff have played a vital role in making Apache the company it is today," said Farris. "As our company has evolved, however, so have our investment priorities.

"Since 2010 we have increased our focus in North America on capturing and developing a deep inventory of onshore assets, where we have been generating exceptional production growth at attractive rates of return." The Shelf's "shallower horizons...have matured to the point that dependable production growth is more difficult to achieve than from our onshore liquids plays."

Apache still wants to test the potential associated with offshore emerging plays "under existing salt domes, which is why we retained 50% of the deep rights on 406 blocks held by production and 50% of all rights in 146 primary term blocks," Farris said.

The explorer plans to use the sales proceeds, as it indicated earlier this year, to reduce debt and enhance financial flexibility (see NGI, May 13). Of late, Apache has been dedicating more of its capital to North America's onshore, particularly in its legacy Permian and Anadarko basins, along with a proposed liquefied natural gas export joint venture with Chevron Corp. in British Columbia.

The effective date of the transaction, set to close by the end of September, was July 1. Fieldwood management plans to offer jobs to "substantially all" of Apache's Shelf employees.

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