Apache taking over Repsol's Egypt holdings

Apache Corp. says it has acquired substantially all of Repsol YPF's oil and gas concession interests in the Arab Republic of Egypt for US$410 million, effective January 1, 2001. Apache noted that the acquisition will increase its net production in Egypt by approximately 75%. 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 b/d of liquid hydrocarbons and 220 million cf/d of gas. 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% 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% contractor interest and Repsol is the operator with a 50% contractor interest, Plank said.

Two processing plants at Khalda have a combined capacity of 300 MMcf/d of gas and 22,600 b/d of condensate. Khalda's current gross production is approximately 200 MMcf/d of natural gas and 40,000 b/d of liquid hydrocarbons. Two major natural gas transportation pipelines serve the concession, including the Western Desert Pipeline System, with a capacity of 655 MMcf/d, in which the Khalda partners hold a 49% 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 b/d of liquid hydrocarbons and 110 MMcf/d of natural gas, up from the current average of 23,500 b/d and 50 MMcf/d. The exercise of preferential rights by a 10% 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% contractor interest in the prospective West Mediterranean Concession, increasing its contractor interest to 100% 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%, with Repsol retaining its 33% contractor interest. The concession's production currently averages 2,300 b/d of liquid hydrocarbons.

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

Apache entered Egypt in 1994 with a 25% interest in the Qarun Concession, where the company made an 11,957 b/d 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% per year between 1996 and year-end 2000.