Apache exiting Canada in three deals worth more than $700 million

July 17, 2017
Apache Corp., Houston, is selling all of its Canadian assets in three deals totaling $713 million, or $927 million (Can.). Combined second-quarter production from the assets averaged 300 MMcfd of gas equivalent, two thirds of which was natural gas.

Matt Zborowski
Assistant Editor

Apache Corp., Houston, is selling all of its Canadian assets in three deals totaling $713 million, or $927 million (Can.). Combined second-quarter production from the assets averaged 300 MMcfd of gas equivalent, two thirds of which was natural gas.

In the largest of the three deals, Apache has agreed to sell subsidiary Apache Canada Ltd. to Paramount Resources Ltd., Calgary, for about $354 million, or $459.5 million (Can.). The deal, expected to close in August, includes 1.6 million net acres and developments at Wapiti, Kaybob-Ante Creek, and central Alberta.

Paramount also has agreed to merge with Calgary-based Trilogy Energy Corp., which owns acreage primarily in the Kaybob area.

That deal is expected to close in September. Upon acquiring Apache Canada and merging with Trilogy, Paramount will become a Montney, Duvernay, and Deep basin-focused intermediate exploration and production company.

Apache Canada's Wapiti area includes 45,800 net acres of Montney rights in the core of the overpressured, liquids-rich fairway in the Alberta Deep basin. Paramount says it's ready to commence a large-scale development of the resources and add production in mid-2019 when a third-party processing facility is completed.

Paramount plans to develop Wapiti utilizing the well completion designs that have been successfully used at its nearby Karr development.

Apache Canada's Kaybob-Ante Creek area includes 312,000 net acres targeting liquids-rich gas production from the Duvernay, Montney, and various Cretaceous horizons, including 24,000 net acres of core Duvernay rights. Production from the Kaybob area during the first quarter was 20,000 boe/d, including 20% liquids volumes.

The central Alberta area primarily consists of low-decline properties with resource development potential from the East Shale basin Duvernay formation and the Glauconite, Cardium, and Ellerslie formations. Apache Canada also owns 176,000 net acres of fee simple lands in the central Alberta region. Production during the first quarter was 14,000 boe/d, including 38% liquids volumes.

The second deal by Apache comprises its sale, completed in June, of assets in the Weyburn-Midale area of southeast Saskatchewan and in the House Mountain area of Alberta to Cardinal Energy Ltd., Calgary, for about $230 million, or $300 million (Can).

The assets cover 5,000 boe/d, which is 100% oil and NGLs, of low-decline light oil operated production, as many as 250 light oil drilling locations at Midale, and more than 50 light oil drilling locations at House Mountain. Cardinal's companywide production mix is now 45% light oil and 55% medium oil.

Cardinal has begun a sales process on some of the royalty interests and fee title lands in the deal and expects to use the proceeds to reduce bank debt in the third and fourth quarters.

In the third deal, Apache in June agreed to sell its Provost field assets to an undisclosed privately owned company. The field covers 600,000 acres near Coronation in east-central Alberta. The sale is expected to close in August.

Canadian sell off

Apache's exit from Canada is part of the firm's effort to sharpen its focus on the US, UK North Sea, and Egypt. "This strategic decision will enhance the company's resource allocation to its primary growth areas, particularly within the Permian basin," said John J. Christmann IV, Apache chief executive officer and president.

Several firms from outside of Canada have pared down or completely sold off their assets in the country over the last several months.

In a strategy similar to Apache's, fellow Houston independent Marathon Oil Corp. in March agreed to sell its Canadian business to Royal Dutch Shell PLC and Calgary-based Canadian Natural Resources Ltd. for $2.5 billion while agreeing to buy 70,000 net surface acres in the Permian for $1.1 billion in cash (OGJ Online, Mar. 9, 2017).

Marathon's Canadian divestment came as part of Shell's reshuffling of its Canadian assets, which resulted in the sale of all of Shell's in-situ and undeveloped oil sands interests and the reduction of its share in the Athabasca Oil Sands Project (AOSP) for $7.25 billion (OGJ Online, Mar. 9, 2017). CNRL was on the receiving end of those deals.

Also that month, another Houston independent, ConocoPhillips, agreed to sell its 50% interest in the Foster Creek-Christina Lake (FCCL) oil sands partnership as well as the majority of its Deep basin conventional assets to Cenovus Energy Inc., Calgary, for $13.3 billion (OGJ Online, Mar. 30, 2017).

Centrica PLC last month said it's selling its 60% interest in a Canadian joint venture and will focus its exploration and production activity solely on European assets (OGJ Online, June 12, 2017). In late 2016, Statoil ASA agreed to sell its oil sands business to Calgary-based Athabasca Oil Corp. (OGJ Online, Dec. 15, 2016).