Apache to Buy Devon Energy Assets in the Gulf of Mexico for $1.05 Billion
Apache Corp., the largest independent U.S. oil producer by market value, agreed to buy Devon Energy Corp.’s oil and gas assets in the Gulf of Mexico for $1.05 billion, adding to one of its most profitable production regions.
The deal is expected to close by early June, Houston-based Apache said today in a statement. Apache plans to fund the purchase from existing cash and commercial paper.
Devon, based in Oklahoma City, said Nov. 16 it plans to sell all its offshore and non-North American assets to focus on U.S. and Canadian onshore drilling.
“Devon’s exit from the Gulf of Mexico creates a great opportunity for Apache to add one of the best remaining shelf- asset portfolios to our existing core area,” Steven Farris, chief executive officer of Apache, said in the statement.
Apache rose 35 cents to $107.11 at 4:15 p.m. in New York Stock Exchange composite trading. Devon rose 6 cents to $67.32.
“For a while, Apache’s been saying that they’ve been looking to make some deals,” said Philip Weiss, an analyst at Argus Research Corp. in New York, who rates both shares at “hold” and says he owns neither. “I think they finally found something they like at a price that they like.”
The additional gulf assets aren’t expected to change Apache’s overall strategy, Weiss said. The only area of concern is the “little bit of risk” associated with production in the area being halted because of hurricanes, he said.
Texas, Louisiana, Alabama
The purchase, which is expected to be worth about $840 million after taxes, covers 158 blocks off the coast of Texas, Louisiana and Alabama, Devon said today in a statement.
The areas are expected to produce 9,500 barrels of oil and natural-gas liquids, and 55 million cubic feet of gas per day after the deal closes, Apache said.
The amount of production being bought is equal to 3 percent of Apache’s worldwide output, Bill Mintz, an Apache spokesman, said today in a telephone interview.
BP Plc agreed last month to pay $7 billion for other Devon assets in Brazil, the Gulf of Mexico and Azerbaijan. Devon also is selling its assets in China and Angola. The company said it has now announced most of the assets it plans to sell.
Apache produced the equivalent of 42.8 million barrels of oil last year in the Gulf Coast region, its largest area after Egypt. The region includes operations onshore and in the Gulf of Mexico, where there are higher rates of return compared with other parts of the world, according to a federal filing.
Apache says it is the second-largest producer on the gulf’s Outer Continental Shelf, which is in water less than 1,200 feet (366 meters) deep.
‘Great’ Value Source
The company’s Gulf of Mexico portfolio is a “great source of value generation for our shareholders,” Farris told investors Feb. 18 on an earnings conference call.
Apache planned to run an average of seven drilling rigs in the region this year, John Crum, president of North American operations, said on the Feb. 18 call.
The risk of hurricanes has been a concern for Apache and others. Apache spent $64 million last year in excess of insurance proceeds to repair damage from hurricanes in 2008 and another $260 million for the continued abandonment and removal of wreckage from platforms toppled in hurricanes.
To contact the reporter on this story: David Wethe in Houston at firstname.lastname@example.org.