APACHE TAKES BIG PLUNGE IN GULF OF MEXICO

Apache Corp. plans to acquire essentially all of Hall-Houston Oil Co.'s producing leases in the Gulf of Mexico. When the two step, $125.5 million deal between the two Houston companies closes in early July, subject to approvals, the gulf will become Apache's second largest producing region. Apache's largest producing region at present lies onshore along the U.S. Gulf Coast in Texas and Louisiana.

June 14, 1993

4 min read

Apache Corp. plans to acquire essentially all of Hall-Houston Oil Co.'s producing leases in the Gulf of Mexico.

When the two step, $125.5 million deal between the two Houston companies closes in early July, subject to approvals, the gulf will become Apache's second largest producing region. Apache's largest producing region at present lies onshore along the U.S. Gulf Coast in Texas and Louisiana.

In the first transaction, Apache will pay $29.3 million for Hall-Houston's interest in Mustang Island Blocks 787 and 805. Apache agreed in a letter of intent to pay $96.2 million for the balance of Hall-Houston's productive gulf holdings. The first transaction will become effective upon closing and the second Apr. 1, 1993.

Included in the trades are interests in 75 fields in 98 blocks, including 66 operated by Hall-Houston with average interests of about 33.3%. Twelve fields covered in the deal are under development or awaiting pipeline connections. Five exploratory blocks with defined prospects are part of the second transaction.

Proved reserves net to Apache in fields covered by the purchase are estimated at 112 bcf of gas equivalent (bcfe). Estimates of probable reserves add more than 30 bcfe. About 89% of the reserves involved in the deal are gas.

ACQUISITION'S OUTLOOK

Apache Pres. and Chief Operating Officer William J. Johnson expects his company's exploitation skills to substantially increase the value of the assets bought from Hall-Houston.

Apache reckons the leases will increase its production 50-55 MMcfd of gas and 1,300-1,500 b/d of condensate in second half 1993. According to Hall-Houston's May operations summary, net production from 99 wells on the portfolio of leases acquired by Apache averaged 70 MMcfd of gas and 1,796, b/d of oil and condensate.

In addition, Apache said field development and new pipeline connections on the acquired leases could add 70-80 MMcfd of gas during 1994.

The field encompassed by Mustang Island Blocks 787 and 805 could be a high priority development. Two wells drilled on the acreage cut 350 ft of net pay in 21 sands. Two more wells likely will be drilled on the tracts later this year.

In addition to the Hall-Houston deal, Apache in 1993 has closed or has under contract 27 lease purchases with combined reserves of 4.9 million bbl of oil equivalent. Combined costs are expected to be about $23.1 million.

Apache at yearend 1992 estimated its reserves at 188 million bbl of oil equivalent (BOE), more than triple estimated reserve volumes of 56 million BOE 5 years ago.

At yearend 1992, Apache was producing 32,940 b/d of oil and 280 MMcfd of gas.

HALL-HOUSTON PLANS

Hall-Houston retained interests in 85,000 gross acres in the gulf. Excluded from the Apache deal were 13 exploratory prospects and three fields under development, including Main Pass Block 129 where production has started from one well.

The company plans this year to drill a well on Main Pass 129 and to drill a well and set a production platform on Mobile Block 865 and its East Cameron Block 199/Vermilion Block 201 prospect. Also, wildcats are to be spudded by August on two of its 13 exploratory prospects in the gulf.

Hall-Houston Chairman Gary Hall said his company decided to sell assets in the gulf to help retire bank debt and allow preferred shareholders an opportunity to take some cash or reinvest.

Many shareholders plan to reinvest at least part of their proceeds from the Apache sale with Hall-Houston, so Hall expects much of the money to be used to develop other prospects, mostly in the U.S.

No further spending is planned this year on Hall-Houston's Titik Terang gas discovery in Malaysia, on a 1.5 million acre offshore tract northwest of Sabah in western Borneo. However, the company continues to evaluate offshore prospects off China.