Apache Acquiring Phillips' Zama Assets

Apache Corporation will review its $200-million Canadian capital budget for 2001 after agreeing to buy Phillips Petroleum Company 's Zama assets in northwestern Alberta for $490 million (U.S.).

The Phillips deal includes 71.6 million bbls of oil equivalent (59% natural gas of a 6:1 conversion ratio), producing and undeveloped acreage, extensive infrastructure and two- and three-dimensional seismic data, Apache officials told a conference call today.

This is Apache's third major acquisition in Canada in the past 12 months. A year ago the company completed the purchase of Shell Canada Limited properties, with proved reserves of 87.5 million BOE for $761 million (Cdn.) (DOB, Dec. 2, 1999).

Earlier this fall Apache agreed to acquire New Zealand-based Fletcher Challenge Energy Ltd. 's Canadian and Argentine assets for $600 million (U.S.). That deal is expected to close by March 31.

So far on the Phillips properties, Apache has identified 228 new exploration and development drilling locations and re-entries plus numerous recompletion and production enhancement opportunities, said Steve Farris, Apache's president and chief operating officer.

Farris told the conference call Canadian capital spending plans would be reviewed in light of the Phillips and Fletcher purchases.

Last month, Apache Canada Ltd. President Floyd Price said the company had already expected to spend about $200 million (Cdn.) in Canada next year -up about 20% from the 2000 capital budget -- but that budget includes neither the Phillips nor the Fletcher properties.

Farris said Apache's Canadian officials would be in Houston next week to review capital plans in light and the Phillips and Fletcher purchases.

"We have a pretty aggressive capital plan up there right now," said Farris. "I think this Phillips acquisition has about $30 million of capital included in it but we would like to expand that as we get to know the assets better."

Phillips already has three rigs lined up to drill at Zama next year and Apache officials said they plan to take at least two more rigs up there, assuming they can get the required approvals and site preparation done in time. Apache has identified a number of Keg River pinnacle reef drilling locations. Officials said these wells typically average about 300,000 bbls per well and are from 1 100 to 2 000 metres. On the gas side, Apache officials said they have identified some pinnacle reef Slave Point-type locations.