Apache Closes on Argentina Acquisition

Apache Corporation has closed on the previously announced acquisition of Pioneer Natural Resources' operations in Argentina.

Apache paid $675 million to acquire oil and gas assets in Argentina's Neuquen, San Jorge and Austral basins with estimated net proved and probable reserves of 101 million barrels of oil equivalent, including proved reserves of 22 million barrels of liquid hydrocarbons and 297 billion cubic feet (Bcf) of natural gas. Net current production is approximately 9,000 barrels of liquid hydrocarbons and 125 million cubic feet (MMcf) of gas per day. The assets include five operated and three non-operated gas processing plants and 112 miles of operated pipelines in the Neuquen Basin. Also included are 2,200 square miles of recently acquired 3-D seismic data.

The acquisition significantly expands Apache's presence in Argentina, where the company has conducted small-scale operations since 2001. Argentina is the largest natural gas producer in Central and South America and second only to Mexico in natural gas consumption.

"This transaction provides a platform for growth in Argentina," said G. Steven Farris, Apache's president and chief executive officer. "The country has sizable oil and gas reserves, favorable geology, a skilled workforce, an improving economy and increasing energy demand, all of which add up to a good place for Apache to conduct business."

Also, the Argentine government has moderated price controls on non- residential natural gas in order to stimulate production to meet rising demand. "These recent decisions to relax price controls in the commercial and industrial sectors should make it more economic to pursue some new natural gas plays," Farris said.

"Apache can add value through its active operating approach," he said. "The assets we are acquiring have upside potential from workovers, recompletions and waterflood enhancements, an inventory of 470 drilling locations, and unused gas processing capacity," he said. "We have excellent ingredients to grow production in Argentina."

To encourage investment in the under-explored Austral Basin in Tierra del Fuego, the government has established an income-tax- and export-tax-free zone, which makes the fiscal terms for investment very attractive relative to other parts of the world.

The acquisition is expected to be immediately accretive to Apache's per- share earnings and cash flow, even though the current aggregate gas price in Argentina is $1.08 per thousand cubic feet. Apache is financing the acquisition primarily with cash and commercial paper.