Apache to acquire Phillips' Zama assets in Alberta
Apache Corp., Houston, said Wednesday it's acquiring Alberta properties with proved reserves of 71.6 MMboe, 59% of which is natural gas, from Canadian affiliates of Phillips Petroleum Co. for $490 million (US). The assets, which include producing and undeveloped acreage, extensive infrastructure and 3D and 2D seismic data, are located in the Zama area of northwest Alberta.
Apache Corp., Houston, said Wednesday it's acquiring Alberta properties with proved reserves of 71.6 MMboe, 59% of which is natural gas, from Canadian affiliates of Phillips Petroleum Co. for $490 million (US).
The assets are in the Zama area of northwestern Alberta. Last month Phillips announced plans to sell the properties, which include producing and undeveloped acreage, extensive infrastructure, and 3D and 2D seismic data (OGJ Online, Nov. 17, 2000).
The properties total 212,000 net developed acres and 275,000 net undeveloped acres. Production is 70 MMcfd and 6,000 b/d of liquid hydrocarbons. Average working interest in the properties is 88%. Apache will operate 90% of the production.
Facilities include three sour gas plants with a total capacity of 150 MMcfd, 13 compressor stations, and 150 miles of owned and operated gas gathering lines. The assets also include 786 sq miles of proprietary 3D seismic and 4,155 miles of 2D seismic.
"Including the pending Phillips and Fletcher Challenge transactions, since reentering Canada in 1995 via a merger with DeKalb, Apache will have acquired 338 million bbl equivalent of reserves at an average price of $5.66/boe,'' said G. Steven Farris, president and chief operating officer.
He said the Phillips properties have extensive upside potential, "both in terms of exploitation and exploration. We have identified 228 new exploration and development drilling locations and re-entries at present, plus numerous recompletion and production enhancement opportunities.'
"Based on current production and forward prices, the two Canadian transactions bring us the equivalent of 2 years' production at a cost of only 6 months' cash flow,'' Farris said. Apache expects to fund the acquisition with cash and commercial paper, bringing the company's debt-to-capitalization ratio to 38% upon closing.
The transaction, effective Dec. 29, has been approved by the boards of both companies and is expected to close when regulatory approval is obtained.
Phillips acquired the producing assets in 1997 from Pennzoil and Gulf Canada for $320 million (US). It recently bought additional infrastructure in the area. Phillips will retain various non-operating interests in Alberta and British Columbia properties.
"This sale is part of Phillips' ongoing effort to rationalize our exploration and production portfolio, focusing on legacy assets and divesting properties that are not core to our business,'' said Bill Parker, executive vice president of production and operations. "An added benefit is a reduction in debt and a strengthened financial position.''
Phillips expects to realize $470 million (US) in after-tax proceeds from the sale, resulting in a gain to net income of $110 million (US). Assuming deal closes by yearend, the company expects its debt-to-capital ratio to be 52%, down from the 61% following its Alaskan acquisition in April.