Apache Corporation Acquires Fletcher Challenge Energy Subsidiaries in Canada and Argentina

Strategic Insights -

Apache Corporation has signed a definitive agreement to acquire Fletcher Challenge Energy subsidiaries with properties in Canada's Western Sedimentary Basin and Argentina, expanding the company's natural gas exposure in one of its international core areas. The deal is valued at US$600 million, subject to adjustments, and includes hedged gas production. In a separate transaction, Shell will purchase 1.64 million restricted shares of Apache common stock for US$100 million.

Key Takeaways:

  • Apache Corporation is acquiring Fletcher Challenge Energy subsidiaries with proved reserves of 713 billion cubic feet of natural gas equivalent for US$600 million, subject to adjustments.
  • The acquisition increases Apache's natural gas exposure in one of its international core areas at a price of 84 cents per thousand cubic feet (Mcf) equivalent, based on proved reserves alone.
  • The Canadian properties, located in Alberta, British Columbia, and Saskatchewan, have an estimated reserve life of nine years and an average working interest of 74 percent.
  • Apache will operate 80 percent of the properties, which contain more than 300 identified drilling locations, and will acquire 14 natural gas processing plants and 35 compressor stations.
  • The acquisition is expected to be additive to Apache's earnings per share and cash flow per share.
  • The company's acquisition evaluation took into account the effect of assuming Fletcher Challenge Energy's existing gas hedges, which are on volumes of 75 MMcf per day in 2001 at an average price of $2.15 per Mcf.
  • Apache will also acquire a 25 percent interest in a 5,000-acre, non-operated exploration concession in West Central Argentina's Neuquen Basin.

Statistics:

  • US$600 million: the value of the acquisition, subject to adjustments.
  • 713 billion cubic feet: the proved reserves to be acquired by Apache.
  • 738 million Mcf: the net daily production after royalties for the second half of 2000.
  • 12,600 barrels: the net daily production of liquid hydrocarbons for the second half of 2000.
  • 2.4 million net acres: the approximate size of the Canadian properties.
  • 600 percent: the increase in Apache's net undeveloped acreage in Canada.
  • $2.15 per Mcf: the average price of gas hedges in 2001.
  • October 2002: the expiration date of Apache's gas hedges.

Sources:

  • Apache Corporation (NYSE: APA) news release, October 9 (no source URL provided).
  • Shell Overseas Holdings press release (no source URL provided).