2010-04-12-2010-04-12-2010-06-10

Acquired 477,194 net acres across 158 blocks in Gulf of Mexico shelf, gaining 41 MMBOE proved, 19,000 BOE/d

Nearing the end of its repositioning to onshore North America, Devon Energy Corp., Oklahoma City, (NYSE: DVN) has sold all of its Gulf of Mexico shelf assets to Houston-based Apache Corp. (NYSE: APA) for $1.05 billion.

The companies value the deal at $16.76 barrels of oil equivalent proved and $241 per acre.

"Devon's exit from the Gulf of Mexico creates a great opportunity for Apache to add one of the best remaining shelf asset portfolios to our existing core area," says Steve Farris, Apache chairman and chief executive.

The acquisition covers 477,194 net acres across 158 blocks including 51 producing blocks offshore Texas, Louisiana and Alabama The fields have 80 platforms and 211 production caissons in waters to 450 feet deep. Seven major field areas hold 90% of the proved reserves. Devon operated 75% of the production.

Devon reports 2009 production at approximately 62 million cubic feet of gas and 9,000 barrels of liquids per day. As of year-end 2009, estimated proved reserves included 144 billion cubic feet of gas and 15 million barrels of liquids. Apache estimated net proved and probable reserves of 83 million barrels of oil equivalent (41 million barrels proved; 49% oil) at year-end 2009 and projects production following closing to be 9,500 barrels of liquids and 55 million cubic feet of gas per day net (19,000 barrels equivalent). Some 72% of revenues are from liquids.

Apache, the largest held-by-production acreage owner and the second-largest producer in Gulf waters less than 1,200 feet deep, reports it has identified 79 recompletion opportunities, 14 reactivations and 26 drilling prospects across the acquired assets.

Devon chairman and chief executive Larry Nichols says, "When we first announced our plans to reposition Devon, we expected total after-tax proceeds of between $4.5 and $7.5 billion. This sale of the remaining Gulf of Mexico assets, combined with our previously announced divestitures of $8.3 billion, ensures that we will exceed the upper end of that range. Furthermore, we are pleased to have a single purchaser for the shelf assets with the financial strength and experience of Apache."

Devon estimates after-tax proceeds to be approximately $840 million. Data rooms for Devon's remaining international assets are currently open. Devon expects the closings of all divestitures to be completed prior to year-end.

Apache executive vice president and leader of Apache's Gulf Coast Region Jon Jeppesen says, "These are well-maintained, high-quality assets that fit well with Apache's existing infrastructure and play to the strengths that come with our experience operating on the shelf–exploiting the current production base and capturing the upside potential. Many of these properties are geologically complex fields that contain large structures with multiple-pay intervals that we believe are under-exploited. The prospect inventory includes high-potential trend exploration opportunities in the Norphlet play and highly prospective exploratory acreage off the Texas coast."

Farris adds, "At 3.7 times estimated cash flow, this transaction is immediately additive to Apache's per-share earnings and cash flow, generating excess cash flow that can be used to further Apache's growth through continued development of our global exploration program."

Apache funded the acquisition primarily from existing cash on hand and commercial paper. Apache has hedged a portion of the production for three years using swaps and collars to protect the economics of the transaction, which is effective Jan. 1.