Apache To Sell Gulf Of Mexico Shelf Business To Fieldwood Energy For $3.75 Bln

(RTTNews) - Oil and natural gas producer Apache Corp. (APA) agreed Thursday to sell its shallow Gulf of Mexico Shelf operations and properties to private equity firm Fieldwood Energy LLC for $3.75 billion in cash. The deal is expected to close by September 30, 2013. Meanwhile, Apache will continue to operate the properties during the transitional period.

As part of the deal, Fieldwood will also assume all asset retirement obligations for these properties, which is estimated at a discounted value of about $1.5 billion as of June 30, 2013.

Houston, Texas-based Apache's Shelf portfolio is the largest operated asset base in the Gulf of Mexico Shelf, comprising of more than 500 blocks with 1.9 million net acres and year-end 2012 estimated proved reserves of 133 million barrels of oil and natural gas liquids and 636 billion cubic feet of natural gas. The current daily production exceeds 95,000 boe and is over 90 percent operated. Meanwhile, Fieldwood noted that it has obtained underwritten committed financing to fund the deal from Citigroup Global Markets, J.P. Morgan, Deutsche Bank AG New York Branch, BofA Merrill Lynch and Goldman Sachs Bank USA.

The deal is part of Apache's plan announced in early May to divest $4 billion in assets by the end of 2013. It intends to use initial proceeds of $2 billion to reduce debt and enhance financial flexibility. The remaining $2 billion of proceeds will be used to repurchase about $2 billion of its common shares under a 30 million share repurchase program authorized by the board earlier this year.

Apache's board and management team has already conducted a strategic portfolio review to identify assets that no longer fit its growth profile. It plans to divest non-core assets to focus on more recently acquired properties, and retain those that drive long-term growth and generate cash from operations. The firm is also pursuing other monetization including joint venture partnerships.

"This transaction is an important step toward rebalancing our portfolio. At the end of this process, we expect Apache to have the right mix of assets to generate strong returns, drive more predictable production growth, and create shareholder value," Apache Chairman and CEO Steven Farris said in a statement.

Apache noted that the shallower horizons in the Shelf have matured to the point that dependable production growth is more difficult to achieve than from its onshore liquids plays.

Apache said it has decided to retain 50 percent of its ownership interest in all exploration blocks and in horizons below production in developed blocks, where high-potential deep hydrocarbon plays under existing salt domes are being tested. It has retained 50 percent of the deep rights on 406 blocks held by production and 50 percent of all rights in 146 primary term blocks.

Additionally, Fieldwood and Apache have agreed to jointly participate in deep exploration opportunities on the acquired assets targeting a robust inventory of high potential prospects including subsalt horizons around known producing fields.

Houston-based Fieldwood Energy, a portfolio company of New York-based private equity firm Riverstone Holdings LLC, has agreed to retain substantially all of Apache's Gulf of Mexico Shelf employees. The Gulf of Mexico has been a core area of focus for Riverstone Holdings since its early funds.

"Apache is clearly the preeminent operator on the Gulf of Mexico Shelf, and Fieldwood is very enthusiastic about the opportunity to continue this legacy going forward. Fieldwood is thrilled to welcome onboard the world-class technical and operating staff that has been responsible for Apache's historic success in this basin," Fieldwood President and CEO Matt McCarroll noted.

APA closed Thursday's regular trading session at $83.60, up $1.29 or 1.57% on a volume of 2.93 million shares. The stock gained a further $1.25 or 1.50% in after-hours trading.