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 assets.
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, Apache said.
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 have suffered.
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 U.S. history.
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 Farris.
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.