Apache Corp is exploring a sale of a stake in its shallow water Gulf of Mexico assets, attracting private equity interest as it looks to reach a $4 billion asset sale target, Reuters is reporting.
(Reuters) – Apache Corp is exploring a sale of a stake in its shallow water Gulf of Mexico assets, attracting private equity interest as it looks to reach a $4 billion asset sale target, several people familiar with the matter said.
Apache has hired Goldman Sachs Group Inc to sell a minority stake in its oil and gas assets located on the shallower continental shelf region of the Gulf, the people said. These assets currently produce more oil and gas and are easier and less risky to exploit than their deepwater counterparts.
Apache would retain control and continue to develop and operate the shelf assets, they added, underscoring its reluctance to give up its status as the largest oil and gas producer in the Gulf of Mexico shelf.
Apache shares ended up 0.9 percent at $82.39 on Tuesday.
The Houston-based company has also hired Jefferies Group Inc to sell all of its deepwater assets in the Gulf of Mexico, which could potentially be more lucrative, but are also more costly and risky to develop, the people added.
The shelf assets appeal primarily to financial investors, the people said. TPG Capital LP, Apollo Global Management LLC and KKR & Co LP are among the private equity firms mulling offers for them, they added.
The deepwater assets appeal to other oil companies as well as private equity, the people said.
TPG is working with the former Mariner Energy team, led by Scott Josey, that sold the deepwater assets to Apache in 2010 in a $3.9 billion deal, one of the people said.
TPG is interested in acquiring both the deepwater and shelf assets provided Apache gives up control of the latter, the person added.
Some of the people spoke on Tuesday and others spoke last week. They asked not to be identified because details of the processes are confidential.
An Apache spokesman declined to comment on the sales processes, but noted the company has announced an asset sale program. Goldman Sachs also declined to comment. Jefferies, Apollo, TPG and KKR did not immediately respond to requests for comment.
Apache has developed a robust list of potential assets sales and believes it can generate about $4 billion of proceeds in 2013 from the initial phase of its divestiture program, Chief Executive Steve Farris told analysts on May 9, without referring specifically to the Gulf of Mexico assets or their value.
The company would use the money first to pay down $2 billion of debt and then buy back shares, he added.
According to the company’s website, Apache has been the largest owner of acreage held by production on the Gulf of Mexico’s continental shelf since 2004, with about three million gross acres.
Apache spent more than $16 billion acquiring oil and gas properties over the last three years. But the company now is selling assets off, including some that acquired over that period, as it has struggled to grow its production, causing its shares to fall.
The company agreed to buy its deepwater position from Mariner just three years ago, five days before BP Plc’s (BP.L: Quote, Profile, Research, Stock Buzz) well blowout in the Gulf of Mexico resulted in the worst oil spill in U.S. history.
Because of the increasing regulation since the spill, drilling in the deepwater Gulf of Mexico has become a costlier and lengthier process for oil and gas companies – a daunting prospect for a company such as Apache that is looking to shore up its balance sheet.
Investors showed their displeasure with Apache’s recent strategy and performance at the company’s annual meeting where, in a non-binding vote, they rejected a pay raise for Farris.
Apache’s deepwater production in the Gulf of Mexico in the first-quarter of 2013 was 13,311 barrels of oil equivalent per day (boe), a 26 percent decline from the fourth quarter of 2012, Apache said earlier this month. Its production from the shelf was 92,024 boe per day, a 4 percent decline from the fourth quarter of 2012.