By OGJ editors
HOUSTON, June 11 -- Amerada Hess Corp. agreed to sell 26 oil and natural gas fields to Anadarko Petroleum Corp.; said it is exchanging some assets with EnCana Corp., Calgary; and plans to cut exploration and production jobs by 30%.
The sale of Gulf of Mexico properties to Anadarko and the transfer to interests in UK North Sea fields to EnCana will trim overall costs, enabling Amerada Hess to reduce employees and contractors in its E&P operations by 30%, the company said.
Consequently, Amerada Hess also intends to reduce the size of its Aberdeen and London offices. The staff and facility reductions will yield annual after-tax cost savings of $30 million, the company said.
Anadarko property acquisition
Regarding the Anadarko deal, the two companies estimated the transaction value at $225-260 million, depending upon the exercise of preferential rights and customary closing adjustments. Amerada Hess said the properties had proved reserves of 25 million boe as of Apr. 1, and that first-quarter production averaged 16,000 boed.
Prudential Securities Inc. analyst Jason Gammel in Menlo Park, Calif., issued a research note calling the deal "a positive move" for Anadarko. "While we do not believe property acquisitions should be the primary means of replacing losses in expected production volumes, we believe this transaction should provide reasonable economics."
Gammel said the transaction probably was partially motivated by Anadarko's previously announced production declines at its existing production facilities.
Amerada Hess plans to raise $500 million in the second quarter from the sales of the Gulf of Mexico properties along with the sale of interests in Jabung field in Indonesia, Montrose, Arbroath, and Arkwright fields in the UK North Sea, and the sale of a very large crude carrier.
"These proceeds will provide capital for investment in the development of new fields as well as funds to reduce debt," Amerada Hess said, noting it expects a total $170 million after-tax gain from second-quarter divestitures. It did not specify its new development targets.
EnCana asset swap
Regarding the EnCana deal, Amerada Hess plans to transfer interests to EnCana in certain mature properties in the UK North Sea in exchange for $17 million and an additional interest in Llano field in the Gulf of Mexico. The transaction is expected to close in the third quarter.
Subject to certain approvals, EnCana will receive the operatorship and 14% interest in both Scott and Telford fields. Amerada Hess's share of production from those interests in the two fields average an aggregate 10,000 boed in the first quarter. EnCana also will receive 42.08% interest in certain parts of Block 15/21 not contained in Scott and Telford fields.
Amerada Hess will retain 20.95% interest in Scott field, 17.42% interest in Telford field, and its 76.54% interest in Ivanhoe, Rob Roy, and Hamish fields on Block 15/21.
EnCana will transfer to Amerada Hess its 22.50% interest in Llano field on Garden Banks Blocks 385-386, and its 20% interest in Garden Banks Blocks 387-388, bring Amerada Hess's interest in Llano field to 50%. The field is expected to go on stream during the second quarter of 2004.
