Apache To Acquire Anadarko Gulf of Mexico Producing Properties for $537 Million HOUSTON, Aug. 20 /PRNewswire-FirstCall/ -- Apache Corporation (NYSE, Nasdaq: APA) announced today that it has signed a definitive agreement to acquire all of Anadarko Petroleum's Gulf of Mexico Shelf properties for $537 million, effective as of Oct. 1, 2004.
The acquisition includes 78 fields on 241 offshore blocks (approximately 693,000 net acres), including 93 undeveloped blocks, and 112 platforms. Apache will operate 53 of the fields with 80 percent of the production and 85 percent of the net reserves. Apache will book proved reserves of approximately 61 million barrels of oil equivalent (MMboe) of which 51 percent is natural gas. Apache estimates the properties' probable reserves at an additional 23 MMboe.
"This transaction enables Apache to grow reserves and production at a reasonable cost during a time when commodity prices and acquisition costs are high," said Apache CEO and President G. Steven Farris. "These properties will be immediately accretive to our per-share results and will add significant drilling and operational enhancement opportunities in the years ahead."
Prior to the Apache transaction, Morgan Stanley Capital Group Inc. agreed to pay Anadarko $775 million to acquire an overriding royalty interest in 24 MMboe of lower-risk reserves estimated to be produced over the next four years. Apache will record a $99 million liability to reflect the future cost of producing and delivering the reserves to Morgan Stanley but will not book these reserves. Apache will book the remaining reserves at a lower cost per barrel equivalent and retains all of the potential upside from future exploration and development activities.
Apache's share of the acquired production is estimated to average 50 million cubic feet (MMcf) of natural gas and 3,000 barrels of liquid hydrocarbons per day in the current-year fourth quarter. Production is anticipated to rise to an annual average of 70 MMcf of natural gas and 6,500 barrels of liquid hydrocarbons per day as the Tarantula field in South Timbalier 308 comes on stream in early 2005.
Consistent with its strategy of locking in the economics of an acquisition in the critical early years, Apache has hedged 70,000, 90,000 and 90,000 million Btu (MMBtu) of gas per day, respectively, over the next three years. The hedges are in the form of costless collars with floors of $6.00, $5.50 and $5.25 per MMBtu and ceilings of $6.78, $6.66 and $6.20 per MMBtu. On the oil, Apache has costless collars on 6,000, 8,000 and 7,000 barrels per day, respectively through 2007, with floors of $37.00, $34.00 and $33.00 per barrel and ceilings of $43.50, $41.50 and $39.25 per barrel.
"Anadarko and Apache worked extremely well together and we thank Anadarko for the opportunity to consummate an expeditious transaction that adds value for both companies' shareholders," Farris said. "Now, it's time for our people to do what they do best and get after it."
He noted that the acquired properties are strategically aligned with Apache's existing Shelf acreage. "That means we can easily and economically integrate them with our current holdings in the Gulf," Farris said.
The transaction is expected to close by the end of the third quarter, subject to Hart-Scott-Rodino review and normal post-closing adjustments. Additionally, some of the properties are subject to preferential rights, which may be exercised by third-party owners. The purchase is being funded with commercial paper and cash on hand.
Apache completed a similar Gulf of Mexico acquisition from Shell in July 2003 for approximately $200 million. As of June 30, 2004, Apache had recouped 54 percent of its total investment in those properties, with 112 percent of the reserves remaining. Remaining reserves have been increased through exploration and development activity.
Apache Corporation is a large oil and gas independent with core operations in the United States, Canada, the United Kingdom North Sea, Egypt and Australia.
Additional information on Apache's acquisition of Anadarko's Gulf of Mexico Shelf properties, including a map, is available on Apache's web site, http://www.apachecorp.com. To use today's webcast: http://www.visualwebcaster.com/event.asp?id=24444. Apache will hold a conference call on the Anadarko acquisition on Monday, August 23, at 9:00 a.m. Central Time. The conference call will be carried live on the company web site and available for delayed playback for one week, beginning approximately two hours after the conference call is concluded. To access the delayed playback, call (719) 457-0820 and provide the pass code number, 975434.
This news release contains certain "forward-looking statements" as defined by the Private Securities Litigation Reform Act of 1995 including, without limitation, expectations, beliefs, plans and objectives regarding Apache's reserves, reserve life, production, exploration potential, and capital expenditures. Any matters that are not historical facts are forward-looking and, accordingly, involve estimates, assumptions and uncertainties. There is no assurance that Apache's expectations will be realized, and actual results may differ materially from those expressed in the forward-looking statements.