Apache has agreed to acquire all of BP's oil and gas operations, acreage and infrastructure in the Permian Basin of West Texas and New Mexico and Egypt's Western Desert. Apache also will acquire substantially all of BP's upstream natural gas business in western Alberta and British Columbia. Apache will pay $7 billion for the assets, which include estimated proved reserves of 385 million barrels of oil equivalent (boe).
Net production from the properties in the first half of 2010 was 28,000 barrels of liquid hydrocarbons and 331 million cubic feet of gas (MMcf) per day, or a total of approximately 83,000 boe per day. By comparison, in the just-completed second quarter of 2010 Apache produced 646,866 boe per day. The transaction also adds 2.4 million net acres to Apache's global portfolio.
"This is a rare opportunity to acquire legacy positions from a major oil company, with oil and gas production, acreage, infrastructure, seismic data, field studies, exploration prospects and other essential aspects of our business," said G. Steven Farris, Apache's chairman and chief executive officer. "We seldom have an opportunity like this in one of our core areas let alone three. This is a step change that will add muscle, enabling Apache to add value for decades to come through our demonstrated exploitation capabilities and exploration drilling."
The effective date of the transaction is July 1, 2010. Closing is subject to certain preferential rights as well as normal regulatory approvals and conditions in the United States, Canada, Egypt and the European Union. As a part of the acquisition, Apache will advance $5 billion of the purchase price to BP on July 30, 2010, ahead of the anticipated closing. This advance will be returned to Apache or applied to the purchase price at closing. Apache intends to finance the acquisition with a combination of debt and equity securities as well as cash on hand. The company has also obtained a $5 billion bridge loan facility to backstop any financing requirements.
Apache expects the transaction to be modestly accretive to cash flow and per-share production and reserves and neutral to earnings per share in the first full year.
Permian Basin acquisition
Apache is acquiring 10 field areas in the Permian Basin with estimated proved reserves of 141 million boe (65 percent liquids), first-half 2010 net production of 15,110 barrels of liquids and 81 MMcf of gas per day, and two operated gas processing plants.
"These are under-exploited assets with 1.7 million gross acres – including 405,000 net mineral and fee acres – in prospective areas of the basin with substantial opportunities for new drilling." Farris said.
Apache produced 42,287 barrels of liquids and 86 MMcf of gas per day (net) in the Permian Basin during the second quarter of 2010. At year-end 2009, Apache had proved reserves of 469 million boe and 961,000 gross acres in the Permian.
Apache is acquiring resource-rich acreage in western Canada with estimated proved reserves of 224 million boe (94 percent gas) and first-half 2010 net production of 6,529 barrels of liquids and 240 MMcf of gas per day.
"We are buying a substantial production base and 1.3 million net acres that include significant positions in several emerging unconventional plays including the Montney, Cadomin, Doig and coalbed methane," Farris said.
In the second quarter, Apache's Canadian operations produced 340 MMcf of gas and 16,557 barrels of liquids per day. At year-end 2009, Apache had 531 million boe of proved reserves and 5.6 million gross acres in Canada.
Apache is acquiring four development leases and one exploration concession across 394,300 acres in Egypt's Western Desert. The assets have estimated proved reserves of 20 million boe (59 percent liquids), and first-half 2010 net production of 6,016 barrels of oil and 11 MMcf of gas per day.
"This is under-explored acreage in a highly prospective area of the Western Desert; a 3-D seismic acquisition program is under way," Farris said. "BP's holdings also include strategically positioned infrastructure including a natural gas processing plant, a liquefied petroleum gas plant and oil and gas export lines. These facilities will enable Apache to increase production from our existing fields in the Western Desert."
Apache's second-quarter net production in Egypt averaged 98,495 barrels of oil per day – up 8.5 percent from the first quarter – and 388 MMcf of gas per day, up 7 percent. At year-end 2009, Apache had estimated proved reserves of 309 million boe and 11.1 million gross acres in Egypt.
"This transaction provides a sustainable growth platform for Apache's onshore North America operations that complements our recent transaction with Devon Energy Corp. in the Gulf of Mexico and our pending merger with Mariner Energy, as well as strategic infrastructure and exploration potential in Egypt," Farris said. "We appreciate the opportunity and the professional manner in which BP employees conducted themselves. Their cooperation was a key ingredient for this transaction to come together."
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