Apache buys oil and gas interests from Occidental subsidiary

Jul 19, 2000 02:00 AM

Apache announced a two-part structured agreement to acquire an Occidental Petroleum subsidiary that owns interests on the Outer Continental Shelf of the Gulf of Mexico and to acquire that subsidiary's natural gas production for a total of $ 385 mm, a portion of which will be paid in future years, and subject to normal post-closing adjustments.
The interests comprise properties in 32 fields, half of them operated, on 93 blocks with total proved reserves of 56.8 mm barrels of oil equivalent. Included in the package is proprietary 3-D seismic data on 113 blocks covering 1,022 square miles.
The transaction is expected to close by August 15, 2000, subject to satisfaction of customary closing conditions, with an effective date of July 1. It is expected to add immediately to Apache's per-share earnings and cash flow.

Year-to-date, Apache has announced or completed cash acquisitions totalling $ 860 mm, including Crescendo (western Oklahoma and the Texas Panhandle) in January and Collins & Ware (South Texas and the Permian Basin) in June. In total, the acquisitions have added reserves of 184 mm barrels of oil equivalent (boe) at a cost of $ 4.67 per boe and daily production of 190 mm cf of gas and 14,000 barrels of liquids.
Apache estimates net production from the Occidental properties through yearend to average 107 mm cfpd of gas and 7,800 bpd of oil. Apache estimates the proved reserves have a six-year reserve life.
"These are excellent assets with upside potential we can realise through the drill bit," said G. Steven Farris, Apache's president and COO. "In addition, much of the acreage is near or adjacent to Apache blocks and compliments our existing 3-D seismic data and operations." He said the company has identified 50 drilling locations and 150 behind- pipe recompletion opportunities.
Farris said Apache has protected the economics of the transaction with a "collar" while preserving the potential for significantly higher gas-price realisations. Apache also announced that it expects to commence an offering of 7 mm shares of common stock through underwriters managed by Merrill Lynch & Co., Goldman Sachs & Co., Salomon Smith Barney and Credit Suisse First Boston. Proceeds will be used to pay down short-term debt incurred with Apache's year 2000 acquisitions.
"We're in an ideal environment for Apache to capitalise on opportunities for adding value, just as we have in the past," Farris said. "This offering will enhance Apache's financial flexibility to build upon our track record."

Apache is a large gas and oil independent with operations in the United States, Canada, Egypt, Western Australia, Poland and China.

Source: Apache Corp.
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