Apache $2.85 billion deal hikes Anadarko liquids stake

Apache Corp., Houston, has agreed to acquire Cordillera Energy Partners III, a private exploration and production company with Anadarko basin operations, for $2.85 billion.

Acquiring the private company’s assets will enable Apache to more than triple the pace of its operated activity in the multiplay fairway in 2012, the company said.

About half of Cordillera’s 254,000 net acres in the Granite Wash, Tonkawa, Cleveland, and Marmaton plays is held by production, more than doubling Apache’s current acreage holding, and 80% of its revenue comes from liquid hydrocarbons (OGJ Online, Dec. 19, 2011).

The properties to be acquired are in Texas and Oklahoma and produce 18,000 b/d of oil equivalent from 71.5 million boe of proved reserves. The acreage contains 14,000 potential drilling locations, Apache said.

Apache has been active in the basin for 50 years and has drilled 79 horizontal wells on its own acreage since 2009. The development drilling program is self-funding starting in 2013, Apache said.

The sellers, including EnCap Investments, other institutional investors, and Cordillera management, will receive $600 million in Apache common stock subject to customary lock-up provisions. The balance of the consideration will be paid in cash to be funded with debt.

Effective date of the transaction is Sept. 1, 2011, with closing anticipated in the 2012 second quarter, subject to regulatory approval and customary closing conditions. Cordillera will continue to acquire acreage in the area on Apache’s behalf through closing.

A wash, including the Granite Wash, consists of a series of thick, multi-layer, liquids-rich sandstones and conglomerates. While it is considered “tight” by conventional standards, the Granite Wash possesses reservoir properties superior to typical shale resource plays and responds well to horizontal drilling with multistage fracturing completions.

A typical producing column in the acreage fairway is more than a mile thick with up to five liquids-rich Granite Wash targets and five additional oil-bearing tight sandstone targets. Approximately 50% of the hydrocarbon stream is liquid--condensate and natural gas liquids. Additional deep gas horizons include the Skinner, Atoka, and Morrow. According to Oklahoma regulatory agencies, more than 60 separate formations currently produce oil and gas in the fairway.

As a result of Apache’s shift to horizontal drilling with multistage completions, horizontal wells drilled in the last 3 years, all successful, now account for about half of Apache’s Central Region production which totaled about 40,000 net boe/d at the end of 2011.