By Anna Driver and Greg Roumeliotis
July 18 Apache Corp said on Thursday it
had agreed to sell its Gulf of Mexico shelf assets for $3.75
billion to private equity firm Riverstone Holdings LLC as the
oil and gas company focuses on growth from its U.S. onshore
Shares of Houston-based Apache rose nearly 2 percent to
$85.27 after the close of regular trading.
Riverstone Holdings affiliate Fieldwood Energy LLC will
become the largest player in the shallower continental shelf
region of the Gulf, acquiring a portfolio covering 1.9 million
net acres through the deal.
Fieldwood will also assume $1.5 billion in estimated future
costs related to plugging and abandoning old oil and gas wells,
The sale will also put Apache close to reaching its goal of
selling $4 billion in assets this year.
"This is really the first step in the rebalancing in our
portfolio," Steve Farris, Apache's chief executive officer, told
reporters on a conference call.
Apache's shelf portfolio ended 2012 with estimated proved
reserves of 133 million barrels of oil and natural gas liquids
and 636 billion cubic feet of natural gas. The fields produced
around 50,000 barrels of oil and liquids and 254 million cubic
feet of natural gas per day. Apache is keeping a 50 percent
stake in the unexplored portions of the properties.
Apache spent more than $16 billion acquiring oil and gas
properties over the last three years. Now the company is selling
off assets as it has struggled to grow production and its shares
Reuters reported in May that the company had asked Goldman
Sachs Group Inc to explore the sale of a stake in the
shelf holdings as part of that process and had discussions with
private equity firms.
But Riverstone wanted the whole asset and approached the
company about buying the entire shelf portfolio, according to a
person familiar with the matter. The firm hopes to manage the
assets more aggressively than they have in the past, contain
costs and work to extend reserve life, the person said.
Drilling in the shallower regions of the U.S. Gulf is
generally easier, cheaper and less risky than deepwater
drilling. Fieldwood's management previously teamed up with
Riverstone to build Dynamic Offshore, a company focused on the
Gulf of Mexico shelf that was sold to SandRidge Energy Inc
in 2012 for about $1.3 billion.
Apache bought its deepwater position from Mariner Energy
just three years ago, five days before BP Plc's well
blowout in the Gulf of Mexico resulted in the worst oil spill in
Due to increasing regulation since the spill, drilling in
the deepwater Gulf of Mexico has become a costlier and lengthier
process for oil and gas companies - a potentially daunting
prospect for a company such as Apache that is looking to shore
up its balance sheet.
Investors showed their displeasure with Apache's recent
strategy and performance at the company's annual meeting in May
where, in a non-binding vote, they rejected a pay raise for
Mark Hanson, oil and gas analyst with Morningstar in
Chicago, said Apache received a fair price for the assets and
hopes that company plans to sell more.
"Outside the U.S., they have a lot of stuff like that is
going to suck up a lot of cash," said Hanson, citing properties
in Australia and Canada. "But this is a great start. They said
they would deliver on this and they have."
It was not clear whether Apache would carry on exploring a
sale of its deepwater assets in the Gulf of Mexico, for which it
had hired Jefferies Group LLC to advise on.
Riverstone has obtained underwritten committed financing for
the transaction - the largest it has led in its 13-year history
- from Citigroup Global Markets, J.P. Morgan, Deutsche Bank AG
New York Branch, BofA Merrill Lynch and Goldman Sachs Bank
USA. Vinson & Elkins LLP and Simpson Thacher & Bartlett LLP
served as legal advisors to Fieldwood.