Apache Corp. agreed to buy closely held Cordillera Energy Partners III LLC for $2.85 billion in cash and stock, adding oil reserves in Oklahoma and Texas that can be exploited using hydraulic fracturing.

Apache, a Houston-based producer with fields from Argentina to Australia, said the deal will double its acreage in the Anadarko basin, where horizontal drilling and fracturing in so- called “tight” rock can unlock oil reserves. The acquisition, paid for with $2.25 billion in cash and $600 million of stock, will also give Apache 18,000 barrels a day in existing production.

Producers are looking for fields where fracking, as the process of using water, chemicals and sand to open fissures in rock is known, can produce oil. Natural gas fields are less attractive after prices dropped 84 percent from their 2008 high because of a fracking-driven boom in production. About 50 percent of output in the region where Cordillera has acreage is liquid, Apache said.

“This is an important growth step for Apache, a unique bolt-on opportunity that more than doubles Apache’s acreage in a highly liquids-rich fairway in the Anadarko Basin,” G. Steven Farris, Apache’s chairman and chief executive officer, said in a statement.

The acquisition, expected to be completed by the end of the second quarter, gives Apache control of 71.5 million barrels of oil equivalent in reserves. Cordillera’s operations include about 254,000 net acres in the Granite Wash, Tonkawa, Cleveland and Marmaton areas of western Oklahoma and the Texas Panhandle, Apache said.

Drilling Locations
Cordillera’s assets include 14,000 potential drilling locations across the Anadarko Basin, Apache said. Cordillera is controlled by institutional investors and EnCap Investments, according to the statement.

Apache, which has a market value of $37.2 billion, produced 752,000 barrels of oil equivalent a day in the quarter ending in September. About half its production in the central U.S. now come from horizontal drilling, it said. It will borrow to finance the cash portion of the acquisition.

Cordillera was founded in February 2000 by George Solich. It has previously sold assets to Patina Oil and Gas Corp., Forest Oil Corp., Merit Energy and Devon Energy Corp., according to its website.

Apache’s advisers on the deal were Goldman Sachs Group Inc. and Tudor Pickering Holt & Co., Apache said.

Source: Bloomberg