Houston-based Apache Corporation has agreed to sell its Gulf of Mexico shelf unit to a portfolio company owned by the New York-based private equity firm Riverstone Holdings for approximately $3.75 billion. Riverston’s Fieldwood Energy is buying the business, which had 239 millions of barrels of oil equivalent in reserves at the end of 2012. More than half of it is oil and 75 percent of it is already developed.
Apache is the largest producer of oil and gas in the shallower regions of the Gulf of Mexico. The assets include wells that currently produce approximately 100,000 barrels of oil equivalent per day. This sale will end Apache’s 30-year run as a producer in the shelf region.
The oil and natural-gas wells sit on approximately two million acres and amount to about 12 percent of Apache’s daily production. Apache has shifted its focus away from the Gulf, to focus instead on its growth prospects of drilling in Texas and Oklahoma.
This deal is the biggest sale on record by Apache. According to Standard & Poor’s Capital IQ, Apache has spent $15 billion in acquisitions over the last three years. Apache released a statement saying that this deal will help rebalance its portfolio. The company will also offload approximately $1.5 billion worth of asset retirement obligations as well.
Apache will retain a 50 percent stake in all exploration blocks of the assets and will work with Feildwood Energy to develop deep-water sites in the holdings.
G. Steven Farris, Apache’s chairman and chief executive said in a statement, “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.”
According to Capital IQ, although the firm has partnered with others on some of the biggest energy-related private equity firms in history, this deal is one of the biggest takeovers associated with Riverstone alone.
Pierre F. Lapeyre, Jr and David M. Leuschen, Riverstone’s co-founders said in a statement, “We have had a long-standing and strong relationship with Apache’s executive management and have been great admirers of their entire organization and their Gulf of Mexico operations for many years.”
Anaylists weigh in on the deal and Apache’s reasons. Fadel Gheit, a senior analyst at Oppenheimer & Co. said, “They have different priorities now compared to when they bought the shallow-water properties many years ago. They need the cash to reduce debt and buy back stock.”
Goldman Sachs and the law firm Bracewell & Giuliani advised Apache on the deal.
Citigroup, JPMorgan Chase, Deutsche Bank, Bank of America, Merill Lynch, and Goldman Sachs are providing financing to Fieldwood. Legal firms, Vinson & Elkins and Simpson Thacker & Bartlett advised Fieldwood on the deal.
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