Apache uk north sea

COMPANY PROFILE

2015

Apache UK North Sea

+ 1 713 296 6000 | www.apachecorp.com

Revitalising the North Sea Editorial: Harriet Pattison

Maintaining a solid reputation for oil exploration, Apache was first founded over half a century ago and has since established a global presence with special repute in the offshore regions of the North Sea. Through its investment and subsequent renewal of the Forties Field, it has now been saved from pre-planned decommissioning.

A company which is now present across five countries first started out in Minneapolis, Minnesota over six decades ago by Truman Anderson, Raymond Plank and Charles Arnao. Apache Oil Corporation had an initial investment of US$250,000, backed by 41 shareholders, and its name is an amalgamation of the three shareholder’s initials – a, p and a, with ‘che.’

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In 1960, the company changed its name to Apache Corporation and over the next two decades it diversified into many sectors including; steel, plastics, agriculture, cattle, and auto supplies – reaching a total of 58 acquired firms.

Seven years on, Apache established its reputation as an oil explorer with its first major oil discovery in the Fagerness No.

1 located in Wyoming’s Powder River Basin, it flowed at 1,200 barrels of oil per day.

To help strengthen its position and streamline the business, Apache began to sell off its real estate, agricultural and industrial businesses in 1977 in an attempt to free up capital for further investment.

Fast forward another few years and Apache entered into the Gulf

Apache UK North Sea

of Mexico in 1980, acquiring a non-operating interest in Gulf of Mexico production through participation in the Shell joint venture. The company became an operator in the region in 1986 through the acquisition of oil and gas assets from Occidental Petroleum.

Apache came up with a new strategy during the 1990’s following its 40-year milestone in the industry, to ‘acquire and exploit’ and in 1991, it acquired the MW Petroleum assets from Amoco which led to a position in the Permian Basin of West Texas and eastern New Mexico – one of the world’s largest oil provinces. The strategy, to invest in international exploration and production, helped to

yield Apache’s first operated production within the Carnarvon Basin, off the coast of Western Australia through the acquisition of Hadson Energy Resources in 1993. The new strategy also added value to properties acquired from Occidental Petroleum, Dow Chemical, Amoco (MW) and Texaco.

A MATURE REGION 10 years on and Apache enters the North Sea region, following its acquisition of an estimated 97% working interest in the UK’s largest oil field, Forties.

In 2011 it acquired Mobil North Sea Limited, helping to provide the region with additional development and exploration opportunities across numerous

North Sea fields including; Nevis, Nevis South, Beryl and Buckland fields. Today, Apache’s total interest reaches over one million gross acres in the North Sea, which, in 2014 contributed 11% of worldwide consolidated production and 6% of year-end estimated proved reserves.

Despite these impressive statistics, the North Sea is classed as a ‘mature asset’ within the offshore industry, largely due to the fact that the best and most readily accessed resources have now been extracted. Like so many offshore locations, explorations are now getting into deeper and much harsher terrains in the North Sea in a desperate search for the remaining resources, namely heavy crudes.

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Equipment within the North Sea is reportedly due for expensive decommissioning - OPEC’s 2013 World Oil Outlook estimated the industry will need an investment of up to £800 billion to ensure both maintenance and replacement until 2035.

And despite an upsurge in investment into the region - £13 billion in 2013 – there was a significant fall in production from a 14% fall in 2012, to a 22% one in 2013. This fall is attributed to natural aging of the region, an increasingly competitive market, infrastructure and a decline in conventional resources. Problems with BP’s Kinneil terminal and the pipeline that runs to the Forties field has not helped matters and in June 2013, the field was forced to close down.

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“Utilizing existing infrastructure within the Forties Field area enables Apache to bring these smaller discoveries on production in a cost-effective manner for the benefit of all stakeholders”

In October 2014, it was announced that Apache may decide to pull out of the UK, selling off its reserves in the region. As the North Sea’s third biggest producer behind Royal Dutch Shell and BP, this news was a blow, with the company’s exit no doubt impacting on the firms left behind, especially those surrounding the Forties field who pump oil and gas into the pipeline system surrounding the site.

The alternative option for the company – aside from selling – would be the creation of a separate and international firm that would include the company’s offshore ventures outside of the UK; but including the possibility of leading to further future investment within the country.

In a statement, Steve Farris,

Apache UK North Sea CEO of Apache said: “Apache continues to evaluate the separation of its international business through capital markets or strategic transactions.

“The company is now evaluating the separation of its international portfolio via the capital markets.

In addition, the company is evaluating strategic proposals for specific assets from parties attracted by Apache’s asset quality and track record. The objective is value growth maximization for Apache’s shareholders.

“In the United Kingdom North Sea, Apache is the most efficient oil and gas operator, with operating efficiency above 90% compared with the industry average of approximately 60%.

Apache has revitalised major, mature assets acquired from other companies, including Forties, the largest oil field in the UK. “In addition, Apache has pursued a successful exploration strategy resulting in the development of multiple new fields,” Farris added.

Forties field, encountered 144 feet of net oil pay in the Bravo channel in 2014 - achieving an initial 30-day production rate of 3,564 Bo/d - this currently stands as the thickest net pay in the Forties field, drilled by Apache, to date.

Two semi-submersible rigs, the Ocean Patriot and WilPhoenix, will be deployed into the greater Beryl area during this year, drilling three wells each.

To encourage investment in the basin, the UK government is reviewing the fiscal regime and in the fourth-quarter 2014, the cluster allowance was introduced to provide tax relief for high pressure,

high temperature fields along with a 2% reduction in overall tax rates.

REVITALISING THE FORTIES FIELD Apache has no doubt revitalised regions of the North Sea, particularly in the ‘Golden Granny’ of the Forties field which it bought back in 2003 from BP at a time when it was expected the field was set to be decommissioned. Gaining operatorship, Apache invested an estimated £4.9 billion in an attempt to renew and repair infrastructure within the field.

Jim House, Apache’s North Sea

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ON THE UP 2014 seemed to bring with it a set of more positive results for Apache and the North Sea. Production in the North Sea in the fourth quarter of 2014 was 80,806 boe/d, a 24% increase from the third quarter and result of production efficiency and a successful drilling program. This production result currently stands as the highest quarterly rate in the company’s North Sea history.

The fourth-quarter of 2014 also reported a very positive success rate of 100% within the region for Apache, operating an average of six drilling rigs and drilling five net wells, two of these wells will come on production this year.

The T75 well, located in the

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divisional Managing Director, explains the Forties field is potentially the largest brownfield renovation project conducted in the North Sea to date: “Virtually all equipment that moved or rotated was replaced or upgraded, from cranes through export pumping systems.”

Cementing this impressive reputation further, Apache invested £400 million on a three-year construction programme for the new Forties Alpha satellite platform built by OGN at Newcastle in the UK North East. Its installation will help to boost output at the field,

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“In the United Kingdom North Sea, Apache is the most efficient oil and gas operator, with operating efficiency above 90% compared with the industry average of approximately 60%”

which at one point, was able to produce 500,000 million barrels a day, highlighting the current status of the North Sea and its operations.

Despite plans to decommission the Forties field last summer, it is hoped Apache’s new investment and the new platform will help to extend the life of the Forties Field by an estimated 20 years with Apache on schedule to launch the additional 4D seismic survey to reinterpret 3D data from the Forties.

“Apache is installing its new platform at the same time production from Forties was originally scheduled to scale down. Production in the Forties

Apache UK North Sea Field is currently running at an average of 57,000 barrels per day of oil, five times higher than the outlook of 10 years ago,” explains House.

A SOLID REPUTATION Apache North Sea has, through large investments, good asset management and corporate responsibility, given itself a strong reputation, so much so that the threat of its leaving UK waters to concentrate on its American assets, would potentially leave the North Sea in an irreparable state.

In recent years, Apache has reported shining results from its other operations in the North Sea, with promising production rates.

In April 2013, Apache

announced first oil from the Tonto field in the North Sea and reported its initial production flow was in excess of 10,000 barrels per day.

“Seismic inversion processing unlocked pay in the Tonto field, which lies above the main Forties Paleocene reservoir,” Apache’s regional Vice President for the North Sea, James L. House said in a statement. “We penetrated Tonto several times in wells targeting Forties. New seismic techniques enabled Apache’s North Sea geoscience team to gain a better understanding of Tonto and establish a development plan.”

In August the same year, the company’s horizontal well located in the Bacchus field pushed its production to 17,600

barrels - per day.

House explained: “Utilizing existing infrastructure within the Forties Field area enables Apache to bring these smaller discoveries on production in a cost-effective manner for the benefit of all stakeholders. A little more than a year after first production, Bacchus has produced 3 million barrels of oil and has already paid out.”

From humble beginnings in the American state of Minnesota, Apache has developed a strong and industry leading footprint, from Australia to Egypt. Perhaps one of its most reputable positions lies in the North Sea due to its acquisition, respective investment and renewal in the UK’s largest oil field, Forties

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