Apache to sell Lucius, Heidelberg developments for $1.4B
As part of a strategy alteration, the Gulf of Mexico subsidiary of Apache Corp. will sell non-operated interests in the Lucius and Heidelberg development projects and 11 primary term deepwater exploration blocks to a subsidiary of Freeport-McMoRan Copper & Gold Inc. for $1.4 billion.
"We have combined our deepwater and shelf technical teams to focus on subsalt and other deeper exploration opportunities in water depths less than 1,000 feet, which have been relatively untested by industry," said Thomas E. Voytovich, executive vice president and COO for offshore and international operations. "Discoveries on the shelf have quicker cycle times, require less capital, and provide more options to bring oil and gas to market. Apache has working interests in approximately 650 blocks in the Gulf of Mexico. In addition to the exploration and development of properties in shallower water, Apache continues to pursue joint venture and/or monetization opportunities for its deepwater prospects."
The Lucius unit comprises Keathley Canyon blocks 874, 875, 918 and 919, and the company's working interest is 11.7%. The Heidelberg unit includes Green Canyon blocks 859, 903, 904 and 948 and the company holds a 12.5% working interest. Apache's working interest in the 11 primary term blocks ranges from 16.67 to 60%.
At an estimated net resource potential of 56.1 MMboe for the two blocks, Stifel analysts view the sell-off positively, estimating a transaction valuation of $24.96/boe of resource potential. The deal, they noted, is "in line with the average valuation of $24.11/boe of resource potential for two sales APC made for stakes in the Heidelberg and Lucius prospects."
During the fourth-quarter 2013, Apache's GOM Deepwater Region contributed 9,167 boe/d to the company's total production. None of the company's producing operations are involved in this sale.
The Deepwater GOM acquisition will be funded with proceeds from the previously reported sale of FM O&G's Eagle Ford Shale assets. The estimated combined after tax net proceeds from these transactions of approximately $1.3 billion will be used to repay outstanding indebtedness following closing of the transactions.
The Deepwater GOM assets being acquired, including Apache's working interests in the Lucius (11.7%) and Heidelberg (12.5%) oil production development projects, have estimated proved, probable and possible reserves of 55 MMboe and several hundred million barrels of oil equivalents resource potential.
Upon closing of this transaction, FM O&G will own a 35% working interest in the Lucius development, which is on track to commence production in 2H14. Heidelberg, located in 5,000 feet of water in the Green Canyon area, is operated by Anadarko and is expected to commence production in mid-2016. Latham & Watkins LLP advised FM O&G on the transaction.
Stone eyes success at Cardona
Stone Energy Corp. encountered oil in the deep water Cardona South well at Mississippi Canyon 29. Stone operates and owns a 65% working interest in the well.
The Cardona South well (MC 29 #5 well) encountered over 275 feet of net oil pay in three separate sections of the well. The Cardona South success extends the productive zone of the Mississippi Canyon 29 TB-9 well to the adjacent fault block to the south and sets up a potential second and third well in the fault block. Plans are to flow the Cardona South well (and the previously announced Cardona discovery) to the Stone owned and operated Pompano platform with first production expected in early 2015.
Chairman, president and CEO David H. Welch noted "...we expect volumes from these two wells to more than double our deep water oil production."
The rig is scheduled to move back to the original Cardona well (MC 29 #4 well) to commence completion operations before returning to complete the Cardona South well. Separately, the original Cardona well was previously estimated to have approximately 84 feet of net oil pay. After further evaluation, the estimated net oil pay for this well is now approximately 96 feet.
"After several years (and many millions of dollars) spent building a portfolio of deep water prospects, and through fits and starts in kicking off exploration, SGY appears to be hitting its stride in the deep water, stringing together successes in its operated program at Cardona, Amethyst and now Cardona South," noted analysts at Global Hunter Securities following the announcement.
Briefs
US crude hits 26yr high
US crude oil production averaged an estimated 8.3 million barrels per day in April, the highest level for any month in 26 years, according to a recent EIA report. Production growth is expected to continue—mainly due to an increased output from tight oil formations in North Dakota and Texas—through 2015. In addition, the EIA oil production from the Gulf of Mexico to increase this year and in 2015, marking the first increase in offshore oil output in five years.
Bakken reaches 1B
The Bakken field of North Dakota and Montana recently reached the milestone of 1 billion barrels of light, sweet crude oil produced. According to data from IHS, cumulative oil production reached the billion barrel mark in the first quarter of 2014. "This milestone validates the immense potential of the Bakken field and development is just beginning," said Jack Stark, senior vice president of exploration for Continental Resources Inc., the largest producer, driller, and leaseholder in the Bakken field. "Two-thirds of this oil was produced in the last three years."
