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The Deal: Apache Sells Gulf of Mexico Assets to Fieldwood for $3.8B

NEW YORK ( The Deal) -- Fieldwood Energy LLC (JCI), which is backed by private equity firm Riverstone Holdings LLC, said after the markets closed Thursday, July 18, that it bought Gulf of Mexico shelf properties from Houston oil and gas explorer Apache Corp. (APA - Get Report) for $3.75 billion.

In a separate statement, Apache said Fieldwood also would assume all asset retirement obligations for the properties, which Apache estimated at a discounted value of $1.5 billion as of June 30. Apache said it's keeping half of its interests in all exploration blocks and in horizons below production in developed blocks, where it said high-potential deep hydrocarbon plays are being tested.

The price is about what Simmons & Co. International thought the properties would fetch in May. Others thought to be bidding included companies such as W&T Offshore Inc. (WTI - Get Report) and Stone Energy Corp. (SGY - Get Report) and other private equity firms including TPG Capital, Kohlberg Kravis Roberts & Co. LP and Apollo Global Management LLC.

Apache announced in February that it would look to sell $2 billion in unidentified assets to pay down debt, a target it boosted to $4 billion in May so it could repurchase shares (a program it has targeted at 30 million). Many analysts thought that selling the assets was a way for Apache to stave off activist investors given its underperformance compared with its peers.

Apache is still thought to have on the block its deepwater Gulf of Mexico properties, which analysts think could fetch $2 billion, and an Australian fertilizer plant, which could bring in another $500 million. "In the near term, we believe the shares should be supported by divestiture announcements and share buybacks," Simmons wrote in a report June 21.

Apache expects to close the deal Sept. 30 and will operate the properties during a transitional period.

Fieldwood claims the properties represent the largest operated asset base on the Gulf of Mexico shelf, including 500 blocks over 1.9 million net acres. Fieldwood hopes to keep almost all of Apache's Gulf of Mexico shelf employees.

Fieldwood said the properties had proved reserves of 239 million barrels of oil equivalent at the end of last year, 55% of which is oil and 75% of which is developed. They produced 95,000 barrels of oil equivalent per day, 90% of which Apache operates.
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