The Gulf of Mexico subsidiary of Apache Corp. (NYSE, Nasdaq: APA) will sell non-operated interests in the Lucius and Heidelberg development projects and 11 primary term deepwater exploration blocks to a subsidiary of Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) for $1.4 billion.
"We have combined our deepwater and shelf technical teams to focus on subsalt and other deeper exploration opportunities in water depths less than 1,000 feet, which have been relatively untested by industry," said Thomas E. Voytovich, executive vice president and chief operating officer for offshore and international operations. "Discoveries on the shelf have quicker cycle times, require less capital, and provide more options to bring oil and gas to market. Apache has working interests in approximately 650 blocks in the Gulf of Mexico. In addition to the exploration and development of properties in shallower water, Apache continues to pursue joint venture and/or monetization opportunities for its deepwater prospects."
The Lucius unit comprises Keathley Canyon blocks 874, 875, 918 and 919, and the company's working interest is 11.7%. The Heidelberg unit includes Green Canyon blocks 859, 903, 904 and 948 and the company holds a 12.5% working interest. Apache's working interest in the 11 primary term blocks ranges from 16.67 to 60%.
During the fourth-quarter 2013, Apache's Gulf of Mexico Deepwater Region contributed 9,167 barrels of oil equivalent per day to the company's total production. None of the company's producing operations are involved in the aforementioned sale.
The Deepwater GOM acquisition will be funded with proceeds from the previously reported sale of FM O&G’s Eagle Ford Shale assets for $3.1 billion. The estimated combined after tax net proceeds from these transactions of approximately $1.3 billion will be used to repay outstanding indebtedness following closing of the transactions
James R. Moffett, chairman of the board; Richard C. Adkerson, vice chairman, and FCX president and CEO; and James C. Flores, vice chairman, and FM O&G president and CEO, said, “Our recently announced agreement to sell our Eagle Ford assets provides proceeds to repay debt and to acquire high - quality assets in our Deepwater GOM focus area. These transactions are value -accretive and the additional interests will enhance our portfolio of assets which are characterized by strong margins, attractive growth potential and compelling investment returns.”
The Deepwater GOM assets being acquired, including Apache’s working interests in the Lucius (11.7%) and Heidelberg (12.5%) oil production development projects , have estimated proved, probable and possible reserves of 55 million barrels of oil equivalents (BOE) and several hundred million barrels of oil equivalents resource potential .
Upon closing of this transaction, FM O&G will own a 35% working interest in the Lucius development, which is on track to commence production in the second half of 2014. Heidelberg, which is a large, high –quality oil development project located in 5,000 feet of water in the Green Canyon area, is operated by Anadarko Petroleum and is expected to commence production in mid-2016. The hull fabrication for the 80,000 -barrels of oil per day Lucius-look-alike facility is more than 85% complete and the spar is expected to be towed to the GOM later this year. Topsides fabrication is currently more than 25% complete.
Latham & Watkins LLP advised FM O&G on the transaction.
The sale is subject to customary closing conditions and is expected to close by June 30, 2014.