Apache plans to buy up Gulf of Mexico deepwater player Mariner Energy in a transaction valued at $3.9 billion announced on 15 April 2010. The deal, announced just days after the company announced it was spending $1 billion to purchase Devon’s shelf assets, will vault Apache into the position of one of the leading deepwater GoM companies.
G. Steven Farris, Apache chairman and CEO, called the acquisition ‘a strategic step and a natural extension into the deepwater Gulf for Apache.’ Further, he said, Mariner ‘provides an exciting new platform for growth in the deepwater and complements our strengths in the Gulf Shelf and the Permian Basin.’
Mariner, with 36 GoM projects in water depths exceeding 1000ft under its belt, ranks fourth in such projects, behind only BP, Shell and Anadarko.
Under the agreement, Mariner shareholders will receive, in aggregate, 0.17043 of a share of Apache common stock and $7.80 cash for each outstanding share of Mariner’s common stock, subject to an election feature and proration. At Apache’s closing stock price of $108.06 on 14 April 2010, the transaction values Mariner’s shares at $26.22 per share, or $2.7 billion. Apache also will assume $1.2 billion in debt.
Mariner’s deepwater portfolio contains seven discoveries in development – including interests in Lucius, announced in January 2010 as logging almost 600ft of high-quality oil pay, and Heidelberg, reported in February 2009 as logging 200ft of net oil pay in multiple high-quality Miocene sands – nearly 100 blocks, and over 50 prospects. Both Lucius in Keathley Canyon block 875 and Heidelberg in Green Canyon block 859 are expected onstream in 20013 or 2014. Mariner also holds interests in over 240 blocks on the Gulf Shelf and over 200,000 net acres across several emerging onshore plays. Farris said Mariner’s Gulf Shelf and Permian assets are ‘both excellent fits with our existing core areas.’
In February, Mariner produced 63,000boe/d from its acreage. At year-end 2009, Mariner had estimated proved reserves of 181 million boe and unbooked resource potential of 2 billion boe.
Farris said Apache has long considered extending its reach into the deepwater Gulf of Mexico. ‘This is the right set of assets and the right time for Apache to expand its deepwater presence … It’s the right time because recent advances in seismic technology and continued enhancements in facilities design have reduced the risks in one of the world’s most prolific oil exploration basins.’
No strangers to working together, the pair teamed up on the Geauxpher discovery in Garden Banks block 462, which started production in May 2009.
The transaction is subject to approval by Mariner’s shareholders and customary regulatory approvals. Completion of the transaction is expected in 3Q 2010.
On 12 April 2010, Apache said it was buying the shelf assets Devon was divesting in a deal expected to close in June 2010 for $1 billion. The properties are projected to add production of 19,000boe/d with year-end 2009 estimated proved and probable reserves of 83 million boe across 158 blocks. Seven major field areas hold 90% of the proved reserves included in the purchase. Devon operates 75% of the production. Based on initial evaluation, Apache has identified 79 recompletion opportunities and 26 drilling prospects across the acquired assets. Apache is funding the acquisition primarily from existing cash balances supplemented with commercial paper. Completion of this transaction is subject to preferential rights to purchase held by the other working interest owners in the properties as well as customary closing conditions and regulatory approvals.