Apache Corporation (APA) has agreed to acquire Devon Energy Corporation's (DVN) oil and gas assets on the Gulf of Mexico Shelf for $1.05 billion. Apache estimated net proved and probable reserves of 83 million barrels of oil equivalent at year-end 2009.
The properties are projected to produce 9,500 barrels of liquid hydrocarbons and 55 million cubic feet of gas per day (net) after closing - the same balance of liquids and natural gas in Apache's current worldwide production. Closing is expected in early June.
Liquid hydrocarbons also are expected to contribute more than 70 percent of the projected revenues from the acquired properties. About half of the estimated proved reserves of 41 million barrels equivalent are oil and natural gas liquids.
"Devon's exit from the Gulf of Mexico creates a great opportunity for Apache to add one of the best remaining Shelf asset portfolios to our existing core area," said G. Steven Farris, Apache's chairman and chief executive officer.
"These are well-maintained, high-quality assets that fit well with Apache's existing infrastructure and play to the strengths that come with our experience operating on the shelf - exploiting the current production base and capturing the upside potential," said Jon Jeppesen, executive vice president and leader of Apache's Gulf Coast Region. "Many of these properties are geologically complex fields that contain large structures with multiple pay intervals that we believe are under-exploited. The prospect inventory includes high-potential trend exploration opportunities in the Norphlet play and highly prospective exploratory acreage off the Texas coast."
"At 3.7 times estimated cash flow, this transaction is immediately additive to Apache's per-share earnings and cash flow, generating excess cash flow that can be used to further Apache's growth through continued development of our global exploration program," Farris said.
Projected daily production from the acquired assets for the remainder of 2010 equals 3 percent of Apache's fourth-quarter 2009 worldwide daily production. When the transaction is completed, the Gulf Shelf's share of Apache's estimated worldwide production will be slightly less than 20 percent.
Apache is the largest held-by-production acreage owner and the second-largest producer in Gulf waters less than 1,200 feet deep. The acquired assets comprise 477,000 net acres across 158 blocks. The fields have 80 platforms and 211 production caissons in waters to 450 feet deep.
Seven major field areas hold 90 percent of the proved reserves. Devon operates 75 percent of the production. Based on initial evaluation, Apache has identified 79 recompletion opportunities and 26 drilling prospects across the acquired assets.
Apache will fund the acquisition primarily from existing cash balances supplemented with commercial paper. Apache has hedged a portion of the production for three years using swaps and collars to protect the economics of the transaction, which is effective Jan. 1.
Completion of the transaction is subject to preferential rights to purchase held by the other working interest owners in the properties as well as customary closing conditions and regulatory approvals.