Amerada Hess Reshapes Asset Portfolio
Amerada Hess has announced several initiatives to reshape its portfolio of producing assets, reduce costs and improve financial returns. First, the Corporation has sold mature Gulf of Mexico Shelf properties to Anadarko Corporation for $260 million before exercise of preferential rights and customary closing adjustments, which will result in a second quarter after-tax gain of approximately $75 million. The properties sold had proved reserves of 25 million barrels of oil equivalent at April 1, 2003 and averaged production of approximately 16,000 barrels of oil equivalent per day during the first quarter of 2003.
Net proceeds from asset dispositions during the second quarter, primarily this transaction and the sales of interests in the Jabung Field in Indonesia, the Montrose, Arbroath and Arkwright Fields in the United Kingdom North Sea and a very large crude carrier, will total approximately $500 million. These proceeds will provide capital for investment in the development of new fields as well as funds to reduce debt. The total after-tax gain from asset dispositions in the second quarter will be approximately $170 million.
Second, Amerada Hess announced that it has reached agreement with EnCana Corporation to exchange interests in certain mature properties in the United Kingdom North Sea, primarily in the Scott and Telford Fields, for an additional interest in the Llano Field, an oil and gas field under development in the Gulf of Mexico, and $17 million. This transaction is expected to close in the third quarter of 2003 and will result in a small gain.
Subject to certain approvals, Amerada Hess will transfer to EnCana 14% interests in both the Scott Field and the Telford Field and a 42.08% interest in certain parts of Block 15/21 not contained in the Scott and Telford Field Units. Amerada Hess will retain a 20.95% interest in the Scott Field, a 17.42% interest in the Telford Field and its 76.54% interest in the Ivanhoe, Rob Roy and Hamish Fields on Block 15/21. The Corporation's share of production from the 14% interests in the Scott and Telford Fields being transferred averaged an aggregate of 10,000 barrels of oil equivalent per day in the first quarter of 2003. The Corporation also will transfer operatorship of the Scott and Telford Fields to EnCana.
EnCana will pay to Amerada Hess $17 million and transfer to Amerada Hess its 22.50% working interest in the Llano Field in the Gulf of Mexico on Garden Banks Blocks 385 and 386 and its 20% working interest in Garden Banks Blocks 387 and 388, bringing Amerada Hess' working interest in the Llano Field to 50%. Production from the Llano Field is expected to begin during the second quarter of 2004 and is expected to average a gross rate of 40,000 barrels of oil equivalent per day at peak.
Facilitated by the sale of the Gulf of Mexico Shelf properties and the transfer of operatorship to EnCana and consistent with its drive to reduce costs, Amerada Hess plans a reduction in force of approximately 30% of employees and contractors in its Exploration and Production operations. Reflecting the reduction, Amerada Hess will downsize its office facilities in Aberdeen and London. One time costs will be approximately $70 million ($45 million after-tax). These costs will be charged to income as specific liabilities are incurred. It is anticipated that approximately $30 million of the after-tax one time costs will be reflected in second quarter results. The reduction in staff and facilities will result in annual cost savings of approximately $50 million ($30 million after-tax).
Amerada Hess confirmed its previous forecast that production in 2003 will average about 360,000 barrels of oil equivalent per day.
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