Apache Said to Weigh Sale of Deep-Water Assets in Gulf

Apache Corp. is weighing a sale of deep-water assets in the U.S. Gulf of Mexico two years after entering the region with its purchase of Mariner Energy Inc., according to a person familiar with the matter.

The company may begin a sale process as early as next week, said the person who asked not to be identified because the matter is private. Only deep-water assets in the U.S. Gulf would be for sale, the person said. The holdings may be worth as much as $3 billion, analysts for RBC Capital Markets and Tudor Pickering Holt & Co. said in separate notes today.

Apache spent more than $16 billion buying offshore and onshore assets from 2010 to 2012, boosting holdings in the U.S., Canada, Egypt and the North Sea. Apache said last month it planned to sell about $2 billion in assets after its buying spree, potentially using some proceeds to pay down debt. John Roper, a spokesman for Houston-based Apache, said he was unable to comment on the specifics of the asset sale.

“We are actively exploring several different alternatives toward reaching that goal but it is very early in the process,” he said in an e-mail yesterday.

A sale of its deep-water Gulf assets would represent a reversal of strategy for the oil and gas producer, which made its entry into the area with its 2010 acquisition of Mariner Energy for $2.7 billion. The purchase, at a 45 percent premium over Mariner’s closing price the day before the deal was announced, made Apache “a player” in the deep-water Gulf, Scott Hanold, an analyst at RBC Capital Markets, said at the time.

Potential Buyers

Apache also obtained drilling acreage in the Permian Basin of West Texas with the deal.

Apache gained 2.9 percent to $75.65 at the close in New York.

There are probably several operators in the deep waters of the Gulf who would be interested buyers, Brian Youngberg, an analyst at Edward Jones in St. Louis, said in a telephone interview yesterday.

Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell Plc are among the biggest explorers in the region. Exxon would be one possible buyer, as a partner with Apache in its Lucius project, said Leo Mariani, an analyst at RBC Capital Markets in Austin, Texas, who rates Apache shares at sector perform and owns none, in a telephone interview yesterday.

Deep-water exploration is not a core area for Apache, Youngberg said.

Gulf Acreage

“The liquids-rich plays onshore should be the growth driver going forward,” said Youngberg, who rates Apache shares a hold and owns none. “That would allow them to better focus on growing production. That’s the challenge they have right now.”

Apache at year-end owned 900,000 gross acres in the Gulf deep-water region, according to the company’s annual report released March 1. The region accounted for 2 percent of its total oil and gas production in 2012. Apache planned to invest $400 million drilling seven new wells and undertaking other projects in the region in 2013, according to the report.

Plains Exploration & Production Co. last year paid BP Plc $5.55 billion for deep-water oil fields in the Gulf. When announcing that deal in September, Plains reported that those fields produced the equivalent of 59,500 barrels of oil a day.

Using the per-barrel price in that transaction, Apache’s deep-water fields in the the Gulf, which produced close to the equivalent of 18,000 barrels of oil per day in the fourth quarter, would be worth about $1.7 billion.

‘Strategic Step’

Apache might get “a little better than that at the end of the day” if the future production of its Lucius and Heidelberg projects are factored in, Mariani said.

The company called its entry into the deep-water Gulf a “strategic step and a natural extension” when it announced the Mariner acquisition in April 2010.

The company is now focused on achieving growth from onshore projects in North America, such as in the Permian Basin. Apache said last year it planned to boost the percentage of output that comes from U.S. onshore properties to 41 percent in 2016 from 21 percent in 2011.

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