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Apache to Buy Cordillera Energy

Written By Brianna Panzica

Posted January 23, 2012

Apache Corp (NYSE: APA) was up on Monday after announcing its decision to purchase Cordilla Energy Partners III.

The deal, worth $2.85 billion, will be paid in both cash and stocks, and it will add a large number of valuable assets to oil and gas company Apache.

Cordillera owns 254,000 acres in the Anadarko basin, an oil- and gas-rich shale formation that stretches across Oklahoma and Texas.

Along with the acquisition of this acreage, Apache will also receive the company’s 71.5 million barrels of oil equivalent.

Cordillera currently produces 23% liquid gas, 30% oil, and 47% gas from its wells and obtains most of its revenue from these sales.

Apache will be adding to its already strong foothold in the Anadarko basin, an area it has been developing for 50 years.

This deal will add power to Apache’s hold in the region, though Leo Mariani of RBC Capital Markets doesn’t think the terms of the deal are top notch:

“The ultimate price is $6,000 an acre and gas prices need to go up in the next few years for them to make money on this.”

As hydraulic fracturing, or fracking, has increased the supply of natural gas in the U.S., gas prices have fallen and will likely continue to do so.

Cordillera’s development of the Anadarko basin includes a large number of fracking wells.  Fracking has been under environmental scrutiny because of claims that it causes small earthquakes and pollution to drinking water.

In the acquisition, Apache will pay $2.25 billion in cash.  The additional $600 million will come from common stocks.

This follows an announcement that Canadian Pembina Pipeline Corp (TSE: PPL) will purchase Provident Energy Ltd (NYSE: PVX).

The consolidation of these energy companies is enabling increased domestic development, something that will decrease dependence on foreign oil, particularly from OPEC.

Apache was up 0.71% on Monday to $97.49.

That’s all for now,


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