Petroleum

Apache Corp., headquartered in Houston, said Friday it hascompleted its acquisition of Phillips Petroleum Corp.’s Canadianassets for nearly US$490 million. The properties, which areapproximately 59% natural gas, have proved reserves ofapproximately 71.6 MMboe and are located in the Zama area ofNorthwest Alberta. The assets include producing and undevelopedacreage, extensive infrastructure and 3-D and 2-D seismic data.There are approximately 212,000 net developed acres and 275,000 netundeveloped acres, and current production is about 70 MMcf and6,000 bbl of liquid hydrocarbons a day. Average working interest inthe properties is 88%, and Apache will operate 90% of theproduction. It also expects the acquisition to immediately add toearnings per share and cash flow per share. Apache also hascontracted to sell slightly more than half of the Zama properties’gas production, about 60.6 MMcf/d to protect from downside risk andpreserve the upside potential. The price will be set at theCanadian Gas Price Reporter monthly spot index price within acollar with a weighted average floor price of US$4.60/Mcf, and aweighted ceiling of US$6.60 Mcf during 2001 at current exchangerates.

PanCanadian Petroleum encountered a huge amount of gas with itsthird Deep Panuke appraisal well, M-79A, drilled offshore NovaScotia. During a five-day test, the well flowed at an average rateof more than 63 MMcf/d despite limitations in the downholeconfiguration of the test string.

Montana Power Co. is no longer in the oil and gas business, after closing last week on the sale of some of its energy assets to PanCanadian Petroleum Ltd. for $475 million in a combination of cash and credit. The assets include oil, natural gas and gas liquids exploration, production and marketing companies in the United States and Canada.

The Independent Petroleum Association of America won an”impressive” victory when Congress amended the Energy Policy andConservation Act, a victory that may change where exploration andproduction development takes place in the future. The changes, saidIPAA at its recent annual meeting in San Antonio, require theDepartment of Interior to begin a comprehensive inventory ofgovernment-controlled lands on which oil and gas are found.

The Independent Petroleum Association of America won an”impressive” victory when Congress amended the Energy Policy andConservation Act, a victory that may change where exploration andproduction development takes place in the future. The changes, saidIPAA at its recent annual meeting in San Antonio, require theDepartment of Interior to begin a comprehensive inventory ofgovernment-controlled lands on which oil and gas are found.

Montana Power Co. is no longer in the oil and gas business,after closing the sale of some of its energy assets to PanCanadianPetroleum Ltd. for $475 million in a combination of cash andcredit. The assets include oil, natural gas and gas liquidsexploration, production and marketing companies in the UnitedStates and Canada.

Producers are in for a very profitable year if recent thirdquarter earnings reports are any indication. Occidental Petroleumreported a three-fold increase in third quarter earnings comparedto the same period last year, going from $126 million ($0.35 pershare) in 3Q99 to $402 million ($1.09 per share) in 3Q2000. Thesuccessful performance is mainly the result of higher commodityprices. Oxy’s earnings before special items for the third quarterwere $370 million ($1.00 per share) as opposed to last year for thesame time period when the company posted $125 million ($.35 ashare). Oxy’s oil and gas division earned $690 million beforespecial items, compared to $279 million in 3Q99. Although commoditycosts played a large part in the increase, the company also citedan increase in production volumes due to its acquisition of AlturaEnergy from Shell Exploration & Production Co. and BP duringthe second quarter of 2000. Its domestic gas production levels rosefrom 673 MMcf/d during 3Q99 to 687MMcf/d for 3Q2000, while domesticliquids (mostly crude) rose from 71,000 b/d to 210,000 b/d.

Calgary’s Petrobank Energy and Resources Ltd. has agreed to sellabout 85% of its entire production — petroleum and natural gasinterests in the Alder Flats and Cynthia areas of Alberta — forC$85 million to an unidentified “large independent oil and gasproducer.” Petrobank said the sale is effective Aug. 1, subject toregulatory and shareholder approvals. Closing is expected in earlyJanuary. Proceeds from the sale will be used to pay down debt andprovide capital for new projects.

High prices and increased production led to a blockbuster thirdquarter for PanCanadian Petroleum. The company’s cash flow morethan doubled to $654 million, or $2.59 per share, up from $303million, or $1.21 per share, during the same period last year. Netincome increased 194% to $297 million, or $1.17 per share comparedto $101 million, or $0.40 per share.