Apache, Morgan Stanley buying Anadarko's GOM shelf properties, royalty interest

Aug. 20, 2004
Anadarko Petroleum Corp. agreed to sell its Gulf of Mexico shelf properties through two transactions totaling $1.312 billion. Apache Corp. is paying $537 million for properties and Morgan Stanley Capital Group Inc. is paying $775 million for an overriding royalty interest.

By OGJ editors
HOUSTON, Aug. 20 -- Anadarko Petroleum Corp. agreed to sell its Gulf of Mexico shelf properties through two transactions totaling $1.312 billion. Apache Corp. is paying $537 million for properties and Morgan Stanley Capital Group Inc. is paying $775 million for an overriding royalty interest.

The divesture is part of Anadarko's previously announced plan to reduce its debt and buy back stock. Anadarko plans to sell properties representing 15% of its yearend 2003 proved reserves and 25% of its current oil and gas production, with after-tax proceeds expected to exceed $2.5 billion (OGJ Online, June 10, 2004).

The Apache and Morgan Stanley sales package represents 98.6 million boe of proved reserves as of yearend 2003 and current daily net production of 46,000 boe.

Anadarko Pres. and CEO Jim Hackett said, "The price offered for our shelf properties is indicative of the high quality of assets we are divesting."

The shelf properties include 78 fields and 112 platforms. Upon completion of the announced sales, Anadarko will operate one offshore platform, the newly commissioned Marco Polo tension leg platform on deepwater Green Canyon Block 608 (OGJ Online, July 19, 2004).

"By exiting the shelf, we can focus our gulf program on the deepwater, which is expected to be the single-largest contributor to Anadarko's targeted 5-9% annual [production] growth rate through 2009," Hackett said.

The Morgan Stanley and Apache transactions, expected to close by Sept. 30, are subject to normal closing conditions and purchase price adjustments. The sale to Apache is subject to US regulatory review.

Volumetric production payment
Anadarko's sale of an overriding royalty interest to Morgan Stanley is in the form of a volumetric production payment (VPP), which provides the buyer ownership of a certain volume of oil and gas to be produced from the properties during a set number of years.

Morgan Stanley is acquiring royalty interest in 24 million boe of reserves expected to be produced during the next 4 years.

Apache's share of the acquired production is estimated to average 50 MMcfd of natural gas and 3,000 b/d of liquid hydrocarbons in the fourth quarter. Production is expected to rise to 70 MMcfd of gas and 6,500 b/d of liquid hydrocarbons when Tarantula field comes on stream on South Timbalier 308 in early 2005.