July 10, 2017 – Upon the closing of three recent transactions, Houston-based Apache Corporation will no longer operate in Canada.
Apache Oil Corporation started out of Minneapolis, Minnesota in 1954 and drilled its first wells in Oklahoma. The company moved its headquarters to Houston, TX in 1992. Apache Corporation began major operations in Canada with the 1995 acquisition of DeKalb Energy Canada Ltd.
Apache’s chief executive officer and president, John J. Christmann IV, announced in a press release, “Today’s announcement is consistent with Apache’s objective of streamlining our portfolio and focusing on assets in the United States, United Kingdom North Sea and Egypt. This strategic decision will enhance the company’s resource allocation to its primary growth areas, particularly within the Permian Basin.”
Apache averaged nearly 300 million cubic feet of gas equivalent per day in production with its Canadian assets for the second quarter of 2017, with two-thirds of that production being natural gas. Approximately 11 percent of Apache’s total oil and gas output for 2016 came out of Canada.
The latest of the three transactions involves properties located mainly in the provinces of Alberta and British Columbia owned by Apache Canada Ltd. Apache corporation has agreed to sell these assets to Paramount Resources Ltd.
Signed in June, another transaction was the selling of Apache’s Provost assets in Alberta to an undisclosed privately owned company. The third transaction was also signed in June and included Apache assets, Midale and House Mountain. These assets, located in Saskatchewan and Alberta, were sold to Calgary-based Cardinal Energy Ltd.
Per the Apache Corp. press release, “The Cardinal transaction closed in late June, and the remaining two are expected to close by the end of August 2017.”
Apache received a total of roughly $713 million for the sale of the Canadian assets. With the exit from Canada, Apache will significantly reduce asset retirement obligations and annual overhead costs, improving cash margins per barrel of oil equivalent and earnings per share.
Christmann added, “With our decision to exit Canada, Apache’s resulting global portfolio is more streamlined and our resources more focused. Our strong positions and enhanced focus in our core areas will drive improvements to overall returns on capital invested going forward.”
The company will use a portion of the proceeds from the sales to pay off debts. Apache also plans to allocate some of the money to its drilling programs in the Permian Basin.
Apache isn’t the first oil company to leave Canada this year. Oil companies have sold nearly $24 billion in drilling rights and assets in the oil sands so far, this year. Included in the sell-off are other Houston-based companies like Marathon Oil and ConocoPhillips. Industry giant Royal Dutch Shell has also sold off a large portion of its assets in Canada.
Since the crash in crude oil prices, producers have looked to move out of the Canadian oil sands to find projects that are more cost productive and less labor intensive.
Article written by HEI contributor Raymond Arrasmith.