Apache to Acquire Repsol's Egypt Interests for US$410 Million; A 'Step Change' for Apache's Already Formidable Operations in Egy

abarrelfullabarrelfull wrote on 07 Apr 2015 14:27
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Jan. 23 2001

Apache Corporation (NYSE: APA) today announced the acquisition of substantially all of Repsol YPF's oil and gas concession interests in the Arab Republic of Egypt for US$410 million, effective Jan. 1, 2001. Apache said the acquisition will increase its net production in Egypt by approximately 75 percent and be additive to earnings per share and cash flow per share.

Repsol's properties include interests in seven Western Desert concessions; Apache currently holds interests in six of the seven.

"The acquisition adds to Apache's already formidable interests in Egypt's Western Desert," said Raymond Plank, Apache chairman and chief executive officer. "Upon closing, anticipated in the second quarter, Apache will operate production of more than 75,000 barrels of liquid hydrocarbons per day and 220 million cubic feet (MMcf) of gas per day. That will make us the largest operator-producer of liquid hydrocarbons in the Western Desert and the third largest in Egypt. In terms of natural gas, we become the second-largest producer in the Western Desert. In all, Apache will be providing approximately 10 percent of Egypt's total daily oil and gas output."

The acquisition adds significant upside potential in the Western Desert in terms of exploration, exploitation and infrastructure enhancement opportunities, especially in the Khalda/Khalda Offset Concession, in which Apache has a 40 percent contractor interest and Repsol is the operator with a 50 percent contractor interest, Plank said.

Two processing plants at Khalda have a combined capacity of 300 MMcf of gas and 22,600 barrels of condensate per day. Khalda's current gross production is approximately 200 MMcf of natural gas and 40,000 barrels of liquid hydrocarbons per day. Two major natural gas transportation pipelines serve the concession, including the Western Desert Pipeline System, with a capacity of 655 MMcf per day, in which the Khalda partners hold a 49 percent interest.

"We have had an eye on Repsol's position in the Western Desert for some time," said G. Steven Farris, Apache president and chief operating officer. "With Repsol's acquisition of YPF last year and its commitment to South America, this transaction is beneficial to both sides. The acquisition changes the cadence for Apache in the Western Desert.

"Assuming continued and improving cooperation with the Egyptian General Petroleum Corporation, we anticipate increasing our annual investment, which should provide rising levels of production and employment, to the benefit of Egypt," Farris said.

The acquisition is expected to boost Apache's net production in Egypt to approximately 37,500 barrels of liquid hydrocarbons and 110 MMcf of natural gas per day, up from the current average of 23,500 barrels and 50 MMcf per day. The exercise of preferential rights by a 10 percent interest holder in Khalda would lower the expected production gain from the acquisition.

The transaction will be funded with debt.

Along with operatorship and a larger interest in the Khalda/Khalda Offset Concession, Apache gains another 33 percent contractor interest in the prospective West Mediterranean Concession, increasing its contractor interest to 100 percent in the onshore portion and in waters up to and including 100 meters in depth.

Apache's interest in the deepwater portion will remain at 67 percent, with Repsol retaining its 33 percent contractor interest. The concession's production currently averages 2,300 barrels of liquid hydrocarbons per day.

Apache also secures an additional 31.8 percent contractor interest in the Ras Kanayes Concession, raising its total interest there to 57.3 percent. Apache's interest in the Ras el Hekma Concession increases to 90 percent, from 40 percent, and its interest in the Northeast Abu Gharadig Concession rises to 48 percent from 24 percent. The transaction also provides Apache interests in one new operated concession and one new operated development lease: the South Umbarka Concession, with 100 percent; and the Umbarka Development Lease, with 50 percent. Umbarka currently is producing 1,135 barrels of oil per day, and South Umbarka is producing 3,000 barrels of oil and condensate and 18 MMcf of natural gas per day.

Apache entered Egypt in 1994 with a 25 percent interest in the Qarun Concession, where the company made an 11,957-barrel-per-day oil discovery in 1995. Through a series of acquisitions and concession agreements, the company has built a leasehold position comprising 13 million net acres, including the Repsol properties. Apache's active exploration and development program added production at a rate of 44 percent per year between 1996 and year-end 2000.

APACHE'S GROWTH IN EGYPT
1996 1997 1998 1999 2000E
Production (thousand barrels
of oil equivalent per day) 8.3 19.5 28.2 34.4 35.6
Revenue (millions) $65.0 $132.6 $129.2 $236.0 $360.5
Net Income (millions) $18.7 $38.1 $23.1 $69.6 $129.1

Apache is a large oil and gas independent with operations in the United States, Canada, Egypt, Western Australia, Poland and China.

Apache will hold a conference call to discuss the Repsol transaction at 11 a.m. Central Time on Wednesday, Jan. 23. The conference call will be webcast live and archived on Apache's web site, www.apachecorp.com


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