Chinese behemoth Sinopec is paying $3.1 billion for 33 percent of Apache Corp’s hydrocarbon assets in Egypt. The two companies say that this is the first step of a global strategic partnership to pursue joint upstream oil and gas projects. Apache will receive the money in cash, subject to customary closing adjustments, in exchange for Sinopec gaining a 33 percent minority participation in Apache’s Egypt oil and gas business. Apache will continue to operate its Egypt upstream oil and gas business.
The Egypt partnership is subject to customary governmental approvals and is expected to close during the fourth quarter, with an effective date of January 1, 2013.
Net production from Apache’s Egypt operations averaged 100,000 barrels of oil and 354 million cubic feet (MMcf) of natural gas per day in 2012, according to a company statement. “Gross production during the period averaged 213,000 barrels of oil and 900 MMcf of gas per day. Apache’s exploration and production operations, which are located in remote, unpopulated areas, remain unaffected by political events in the region”.
G. Steven Farris, chairman and chief executive officer of Apache, says that Sinopec’s “technical expertise complements our 20 years of experience operating in Egypt and creates an alliance that will continue to explore and deliver the tremendous hydrocarbon resources in the Western Desert. Sinopec is an ideal partner for us, and we look forward to the growth and value generation ahead for both companies through the expansion of our collaboration to other projects.”
Portfolio rebalancing progress
Apache says it continues to rebalance its portfolio toward assets with predictable growth rates and attractive rates of return. “Pro forma for the partnership with Sinopec and the sale of Gulf of Mexico shelf assets, Apache’s second-quarter 2013 production from North American onshore assets and from Egypt would have comprised approximately 55 percent and 15 percent, respectively. In 2010, onshore North America contributed 31 percent of Apache’s overall production, Egypt represented 25 percent and the Gulf of Mexico shelf represented 17 percent”.
“Our successful exploration and development programs in Egypt have been an important contributor to both growth and cash flow for many years. With today’s partnership, we are ensuring they can continue this contribution in the future,” Farris said. “At the same time, we are taking meaningful steps to rebalance our portfolio to better deliver the full potential of our deep North America onshore resource inventory.”.
Apache employs about 9,000 Egyptians through direct employment, through participation in the Khalda Petroleum Co. and Qarun Petroleum Co. operating joint ventures with Egyptian General Petroleum Corporation , and through employment with oil field service and construction contractors.