Apache Corp. has closed on the previously announced $1 billion acquisition of controlling interest in 28 producing oil and natural gas fields on more than 218,000 gross acres with over 300 drilling locations in the Permian Basin of West Texas from Anadarko Petroleum Corp.
Apache will book net reserves of 70 MMboe (57 MM barrels of oil and 78 bcf of natural gas); net daily production from the fields is estimated at 9,000 barrels of oil and 19 million cubic feet of gas. The acquisition adds 31% to the company’s existing Permian oil production and 24% to its gas production in the basin.
Apache operation in Permian basin.
“These assets fit well with our existing Permian Basin position and their long reserve life provides further balance for Apache’s worldwide portfolio,” said G. Steven Farris, president, chief executive, and COO.
Most of the asset value is concentrated in 8 operated fields comprising 81% of the proved reserves and 72% of the net production. Apache is funding the acquisition with debt; after the transaction, the company’s debt remains less than 30% of total capitalization.
Apache Corp. discovers and produces oil and natural gas in the US, Canada, the UK North Sea, Egypt, Australia, and Argentina.
Hercules Offshore to acquire TODCO for $2.3 billion
Houston-based Hercules Offshore Inc. and TODCO have entered into a definitive merger agreement under which Hercules Offshore will acquire 100% of the outstanding stock of TODCO in a stock and cash transaction valued at about $2.3 billion.
The combined company will operate a fleet of 33 jackup rigs, 27 barge rigs, 64 liftboats, 3 submersible rigs, 9 land rigs, and one platform rig and have operations in ten different countries on five continents.
Randy Stilley, CEO, president, and director of Hercules Offshore, stated, “This transaction positions Hercules Offshore as one of the leading shallow water oil service providers globally. We intend to leverage the strong organizations of both Hercules Offshore and TODCO to create long- term value for our companies’ shareholders, customers and over 3,900 employees. Looking forward, Hercules Offshore will continue to focus on seeking strategic growth opportunities, expanding our geographic diversity and maintaining our status as a low-cost provider, while preserving our conservative and disciplined financial management.”
Jan Rask, president, CEO, and director of TODCO, commented, “We are very pleased with the signing of this agreement with Hercules Offshore and believe this transaction maximizes value for shareholders. Shareholders have an opportunity to realize cash while continuing to participate in a robust offshore drilling market through an entity with a balanced capitalization. In addition, we believe the Hercules Offshore management team has proven acquisition and integration capabilities and will continue to capitalize on growth opportunities that exist in the fragmented offshore jackup drilling market.”
Following the transaction, the Hercules Offshore senior management team will continue, under the leadership of Randy Stilley, to be governed by the Hercules Offshore board of directors, which will include 3 TODCO directors.
TODCO shareholders will receive average total consideration equal to 0.979 shares of Hercules Offshore and $16.00 in cash for each share of TODCO common stock outstanding, or an estimated 56.9 million shares of Hercules Offshore and cash of $930.7 million.
It is anticipated that the transaction will be tax free to TODCO and the stock portion of the consideration will be received tax free by its shareholders. Upon completion of the transaction, which is expected to be in mid-2007, it is anticipated that TODCO shareholders will own roughly 64%, and that Hercules Offshore shareholders will own the remaining 36% of the combined company.
Hercules Offshore will fund its acquisition of TODCO through existing cash on hand and a senior secured term loan facility which has been underwritten by UBS Investment Bank. The company plans to use cash from operations in the years ahead to repay the fully pre-payable term loan.
Hercules Offshore was recently given a “B” corporate credit rating by Standard & Poor’s CreditWatch with positive implications following the acquisition announcement. According to an S&P analyst, while the company will have a larger, more diversified fleet in various geographic areas, the consolidated company still has a high exposure to the Gulf of Mexico market, which has shown signs of weakness that have pressured day rates.
UBS Investment Bank acted as lead financial advisor, and Simmons & Co. International acted as financial advisor and provided the fairness opinion to the board of Hercules Offshore. Andrews Kurth LLC acted as principal legal advisor to Hercules Offshore for this transaction. Citigroup Corporate and Investment Banking acted as financial advisor and Porter & Hedges LLC acted as principal legal advisor to TODCO.
Madagascar completes $85M development capital facility with Credit Suisse; opens Houston office
Madagascar Oil, a private oil and gas company holding the largest onshore licensed acreage in Madagascar, has closed on a 24-month equity-linked development capital facility in the amount of $85 million with Credit Suisse, who acted as lead manager on the financing. Proceeds will be used for the company’s ongoing exploration and appraisal operations in Madagascar. Jefferies International served as the company’s financial advisor on the transaction.
The company is also opening a new corporate head office in Houston. “Securing this development capital facility and opening the Houston office are important milestones for Madagascar Oil,” said CEO Alex Archila. “As we move ahead with this work, Houston, with its solid infrastructure, cutting edge technologies and inviting business climate, was the natural choice for the company’s corporate head office.”
According to Archila, coring and other appraisal work is proceeding at Bemolanga, which is one of the largest undeveloped bitumen reserves in the world with 16.6 billion barrels of oil in place of which 9.8 billion barrels are probable and possible recoverable reserves according to an independent appraisal by DeGolyer & MacNaughton.
“Having oil is not enough. You have to have a plan,” said Archila. His plan is to core every structure this year and log each one. He says the company will then drill vertical wells and a steam injection project to show what he believes the company can produce. The pilot steam injection project is underway at the Tsimiroro heavy oil field, which holds a medium range estimate of 1.0 billion barrels OIP with 611 million barrels recoverable, according to an independent appraisal conducted by Netherland Sewell.
The pilot facilities, including a drilling rig, three 60,000 barrel storage tanks, four steam generators, heavy cranes and other operational equipment have arrived into Madagascar’s port of Maintirano and will be transported to the Tsimiroro field once post-rainy season road repair work is completed. He says the company spent roughly $50 million for the equipment. “The biggest challenge is getting the right people in the field,” he said. The steam injection project is expected to produce its first heavy oil during the third quarter of 2007.
Headquartered in Houston and domiciled in Bermuda, Madagascar Oil Ltd. is an oil and gas exploration and production company focused on development of onshore heavy-oil resources and exploration of onshore conventional oil and gas prospects in Madagascar.
While the company is currently private, Archila expressed interest in taking the company public within the next 2 years. He said listing in Canada makes sense because of the parallel market.
Second large contract in place for construction of MPU Heavy Lifter
MPU Offshore Lift ASA (MPU) has entered into a contract with a Dutch joint-venture consisting of companies Van Hattum en Blankevoort BV (VHB) and BAM Civiel BV (BAM) for the construction of the concrete hull of the MPU Heavy Lifter.
The concrete construction will take place in the dry-dock of Keppel Verolme in Rotterdam and will commence the beginning of July 2007. The contract value is about EUR$55 million.
Artist’s rendition of completed MPU Heavy Lifter
Photo courtesy of MPU Offshore Lift ASA
Since mid-December, MPU has worked with the contractors to test and document the LWAC concrete and a mock-up test has been casted and tested under the supervision of experts from Sintef in Norway and Intron and the University of Delft in the Netherlands.
With the conclusion of this second major contract, the contracts for the construction of the MPU Heavy Lifter are in place, the first vessel that has been tailor made for single lift removal and installation of platforms in the North Sea and World-wide.
The first contract for the outfitting of the vessel was in December 2006 with Keppel Verolme BV, a contract totaling near EUR$165 million. Detail design and engineering are on schedule and the vessel is set to be delivered from the yard mid-January 2009.
The contracts total close to EUR$220 million, which is within the anticipated range according to the premises for the funding raised late 2006.
For MPU this concludes a long period, 8 years, of conceptual development, model tank testing, design and verifications. “The response from the market, potential clients and the investors, have been very enthusiastic, and we are now looking forward to see the vessel ready for operation in 2009 as there is a great demand for new lifting capacity in the offshore decommissioning and installation market,” said Kolbjørn Høyland, CEO of MPU Offshore Lift ASA.
Apache Egypt oil well tests 1,067 b/s from new zone discovery
Apache Corp.’s Zaina-2 well in Egypt’s Western Desert tested 1,067 barrels of oil per day (b/d) from 12 feet of oil pay in the Abu Roash G-10 sand. The field is located in the company’s East Bahariya Concession, which Apache operates with a 100% contractor interest.
The field discovery well, Zaina-1, tested 1,165 b/d in July 2005 from 55 feet of oil pay in the Upper Bahariya sand. The Abu Roash G-10 sand is a new producing zone in the field. The Abu Roash G-10 and G-20 sands, with 39 feet of indicated oil pay, are behind-pipe recompletion targets for Zaina-1, which is currently producing 560 b/d.
Apache acquired a 50% contractor interest in the East Bahariya Concession in 1997, and became operator with a 100% contractor interest in 2001. Earlier that year, Apache and Repsol made the first discovery on the concession, the Karama-1X. The concession has produced 21 million barrels of oil since Apache commenced operations, with current volumes flowing at the rate of 18,500 b/d. The company plans to drill 39 development wells there this year.
Speaking at the Howard Weil energy conference recently, Apache CEO, president, and COO G. Steven Farris said the well tested 25.6 million cubic feet (MMcf) of gas per day from the Jurassic Upper Safa member of the Khatatba formation.
“Jade-1X is an important discovery for Apache in that it extends the known productive limits of the Jurassic gas fairway almost 12 miles southwest of existing Jurassic production,” Farris said. “This discovery also suggests significant reserve potential exists in multiple Alam El Bueib (AEB) reservoir objectives. We plan five additional Jurassic and two AEB exploratory wells on the concession this year.”
The Jade-1X logged a total 65 feet of net pay in the Jurassic Upper Safa. Completion tests were conducted on a one-inch choke with 1,382 pounds per square inch of flowing wellhead pressure from perforations between 13,850 feet and 13,882 feet to evaluate 32 feet of net pay. An additional 33 feet of Upper Safa net pay in three sands between 13,480 feet and 13,750 feet will be perforated and gas from those zones will be commingled with that of the lower zone when the well comes on production around midyear.
The Jade-1X also logged 217 feet of pay in the AEB 3D, 3G and 6 sands. The AEB is a prolific producer throughout the 3.8-million-acre Greater Khalda complex, which includes Matruh. Apache plans to move the rig about two miles north of the Jade-1X discovery to appraise the AEB reservoirs.
Apache is currently constructing two additional trains in the Khalda Concession to increase takeaway capacity by 200 MMcf of gas per day, bringing total capacity to roughly 750 MMcf per day. Construction is expected to be completed by the end of next year.
Apache Corp. is a large oil and gas independent with operations in the US, Canada, the United Kingdom North Sea, Egypt, Australia, and Argentina.
Max secures commitment for $100M debt facility
Max Petroleum Plc has obtained a commitment from Macquarie Bank Ltd. to enter into a $100 million senior secured subordinated debt facility to finance the development of its oil and gas assets in Kazakhstan. Closing is subject to standard regulatory approvals. The debt facility will have a 4-year term and bear interest at a rate ranging from LIBOR plus 4% to LIBOR plus 6.5%.
The facility will have an aggregate commitment of $100 million with an anticipated initial borrowing base of $20 million to be used to fund Max’s appraisal and development of the Zhana Makat field on Block E. The borrowing capacity will be subject to review and adjustment on a periodic basis, principally to fund additional exploration and development projects, with the total availability at any given time subject to a number of factors, including commodity prices and reserve levels.
Macquarie will receive a 5-year warrant to acquire 7.5 million ordinary shares in Max Petroleum at an exercise piece of 160.6p per share. Future increases in the borrowing base beyond $20 million will trigger the further issuance of warrants to Macquarie to acquire up to 12.5 million additional shares in the company at an exercise price equal to the higher of either a 10% premium to the 30-day volume weighted average price prior to issuance, or the prevailing conversion price of the group’s outstanding convertible debt. The additional warrants, if any, will be issued in 2.5 million share increments for each $10 million in additional borrowing capacity made available to the group.
Jim Jeffs, executive chairman, commented, “Entering into a project finance facility with Macquarie will greatly enhance our liquidity as we execute our long-term exploration and development program for our extensive asset base in the Pre-Caspian basin. Specifically, this provides us with the financial flexibility to appraise and develop shallow and intermediate discoveries without limiting our ability to effectively finance more capital-intensive exploration projects going forward. It has also been secured on attractive terms with a partner who recognizes the value across our portfolio of assets.”
Aabar Peotroleum makes debut in Africa
Aabar Petroleum Investments Co. PJSC’s wholly-owned subsidiary, Dalma Energy, has won a drilling contract in Algeria, marking Aabar’s entry into Africa. The one-year contract was awarded by RepsolYPF, Spain’s largest oil company, and is valued at US$23.24 million. It includes an option of a 6 month extension valued at an additional $11.74 million.
Drilling operations are expected to begin in June 2007 with the deployment of two deep drilling land rigs. The rigs have a capacity of 2,000 HP and were built in China for about $22 million each. The number of new rigs commissioned by Dalma Energy this year goes up to 4 and takes the company’s total rig count to 22.
