Houston’s Apache Corp. remains in an acquiring mood, agreeinglast week to buy Occidental Petroleum Corp.’s offshore oil and gasinterests in the Gulf of Mexico for $385 million. The deal callsfor Apache to pay Occidental $341 million for the properties thisyear, then pay $11 million a year for the next four years. Closingis expected by mid-August.

The Gulf of Mexico property includes 32 fields, half of themoperated, on 93 blocks with total proved reserves of 56.8 MMBoe.Also included are proprietary 3-D seismic data on 113 blocks thatcover about 1,022 square miles. Apache estimates that daily netproduction from the new properties through year-end will be 107MMcf, and 7,800 barrels of oil.

“These are excellent assets with upside potential we can realizethrough the drill bit,” said G. Steven Farris, Apache’s president.He said most of the acreage is “near or adjacent to Apache blocksand complements our existing 3-D seismic data and operations.”

So far, Farris said Apache has identified 50 drilling locationsand 150 behind-pipe recompletion opportunities on the properties,but added that the company protected the “economics of thetransaction with a collar,” preserving the potential forsignificantly higher gas prices.

Following the agreement, Apache announced that it will beginoffering seven million shares of common stock through underwritersmanaged by Merrill Lynch & Co., Goldman Sachs & Co.,Salomon Smith Barney and Credit Suisse First Boston. Those proceedswill be used to pay down short-term debt that came with all ofApache’s acquisitions in the past year.

“We’re in an ideal environment for Apache to capitalize onopportunities for adding value, just as we have in the past,”Farris said. “This offering will enhance Apache’s financialflexibility to build upon our track record.” Apache expects thedeal to immediate add to its earnings per share and cash flow.

Just last month, Apache acquired fields in Texas and New Mexico for more than $300 million from Collins & Ware Inc. (see NGI, June 19). Last October, it acquired producing properties and other assets in Alberta, British Columbia and Saskatchewan, Canada with proved reserves of 87.5 MMBoe from Shell Canada Limited for C$770 million (see NGI, Oct. 11, 1999).

Meanwhile, Los Angeles-based Occidental has been selling its smaller, less profitable properties and buying larger producing fields in the United States. In March, Occidental agreed to spend $3.6 billion for Altura Energy Ltd., a U.S. joint venture of BP Amoco Plc and Shell Oil Co. (see NGI, March 13). Altura has proven reserves of about 850 million barrels of oil and gas.

Occidental is expected to record a pre-tax gain of $65 millionon the sale. It has targeted $2 billion in debt reduction thisyear, and the Apache deal nearly meets that goal. Proceeds from theApache sale are expected to raise about $1.8 billion.

“We expect to accomplish all our debt-reduction goals this yearand maintain our momentum of our debt-reduction programs into2001,” said Occidental CEO Ray Irani.

Apache also said that when it officially announces its secondquarter net income on Thursday (July 27), it expects to reportearnings of $1.22 per share, ahead of the average Wall Streetestimate of $1.08 a share calculated by First Call/ThompsonFinancial. The gains compare with 1999 net income of $0.28 centsper share.

Occidental reported its second quarter earnings last week,announcing that it had its “best quarter in history” with netincome of $564 million ($1.53 per share). The 2000 second quartercompares with 1999 net income of $9 million ($.02 per share).

Carolyn Davis, Houston

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