Houston-based Apache Corp. has curtailed drilling in Canada because of high costs and lower gas prices, but it is putting together a possible stealth shale-gas play there. "If it works, and we are trying to get the costs down, that alone could be multiple Tcf (trillion cubic feet)," Apache chief financial officer Roger Plank said at EnerCom Inc.'s annual The Oil & Gas Conference held in Denver recently.

Apache is not participating in any of the U.S. shale plays. In Canada, Apache has assets in British Columbia, Alberta, Saskatchewan and the Northwest Territories, involving 6.8 million acres.

Plank said Apache's balanced global portfolio, leverage to strong international markets and the acreage position sounds simple, "but it has taken us 20 years to get here."

Some key international projects will come onstream in the next few years, providing Apache production growth to 2010. "I've been following Apache for six years and for the first time, I really feel confident about its visible production growth," Carin Dehne Kiley, E&P analyst for Calyon Securities (USA) Inc., said at the conference.

Plank cited several projects under way. First, the company's performance in 2007 should enable it to meet its growth goal of 9% to 12%. "We are in for another year of double-digit growth, which is what we aim for. We've increased our production target twice this year," Plank said.

Longer term, Apache's 46-million-acre global leasehold is paying off. The top 10 discoveries it has made on that acreage since 2000 have uncovered at least 7 Tcf equivalent of gross reserves. Because only four of the 10 are producing at full capacity, and a fifth is constrained by infrastructure limitations, there is a lot more production to come.

Assets are focused in Canada, Egypt and offshore Australia.

Much of the growth will be in Australia, where the company has three large oil and two large gas discoveries.

The largest is offshore Julimar on the Northwest Shelf, with an estimated 1 Tcf of gross reserves, where peak production of some 300 million cubic feet a day is anticipated by 2010."Australia has become a company-maker for us," Plank said.

The U.S. remains an important producer for Apache, however, and strategic M&A has been a key to that, according to John Christmann IV, Apache vice president of business development. He addressed some 500 attendees at the sixth annual A&D Strategies and Opportunities conference in Dallas recently, presented by Oil and Gas Investor and A&D Watch.

The company acquired controlling interests in 28 oil and gas fields in the Permian Basin from Anadarko Petroleum Corp. in March for $1 billion. The transaction provided reserves of some 57 million barrels of oil and 78 billion cubic feet of gas.

The deal was funded with debt and included a joint-venture agreement with Anadarko and cash-flow hedges for a portion of the oil and gas production. Some of the earnings from that transaction will be used to fund growth in its international holdings.

"We are always in the market, and always looking for creative opportunities," Christmann said. "Since 1991, we've had over 28 transactions that were over $100 million, and 20 of those were more than $250 million."

Apache's North American operations are focused on the Gulf of Mexico; the Anadarko Basin of Oklahoma; the Permian Basin of West Texas and New Mexico; the Texas and Louisiana Gulf Coast; and East Texas.

"We pursue acquisitions to create opportunities for growth, not to grow," Christmann said. From 2002-06, Apache's percentage of growth from the drillbit is the second highest in its peer group.

"With Apache, it's more about what you do with an acquisition after you drag it home.

"It's how we differentiate ourselves from our peers. We focus on negotiated opportunities and we bring a differential ingredient to the table. Because all deals have angles, that's something we are always trying to find, an angle to put ourselves in a position where we can do these negotiated opportunities."

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