Private equity firm has big plans for Apache Gulf assets

In 2008, Matt McCarroll founded Dynamic Offshore Resources, an oil and gas exploration and production company. The firm gobbled up 10 acquisitions, invested less than $200 million, and sold the business four years later to SandRidge Energy for $1.3 billion.

Now CEO of Fieldwood Energy, a unit of New York private equity firm Riverstone Holdings, McCarroll is shepherding a $3.75 billion purchase of producing assets in the Gulf of Mexico from Apache Corp.

McCarroll said in an interview with FuelFix Tuesday that he is eyeing future production growth and a bright future in the Gulf, but isn’t ruling out the possibility of eventually selling the business for a big profit, like he did with Dynamic Offshore Resources, which was also a Riverstone-backed company.

“We’re not opposed to selling assets if it makes sense to do so,” McCarroll said.

He added, “You always keep your options open. Whether that’s selling the company, whether that’s going public, whether that’s merging with another company or whether it’s keeping these assets and distributing cash, there are lots of options here.”

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For now, Fieldwood’s 12-member staff is focused on absorbing the Gulf assets from Apache and the 650 employees associated with those assets, and growing the business through production and possible expansion.

“We are going to let these guys continue operating these assets the way they have been,” McCarroll said.

The small Fieldwood team already is based in Houston. The staff plans to move into the offices being acquired from Apache in Houston, where there are 175 people, and Lafayette, La., where there are about 75 employees. The remaining 400 Apache employees work offshore.

“We are going to hire everybody that we need,” McCarroll said. “We’re not expecting any layoffs.”

McCarroll said his team met with the Apache employees following last week’s announcement and “tried to relieve them of as much uncertainty as possible.”

Houston-based Apache Corp, the largest producer of oil and gas in the shallower regions of the Gulf of Mexico, is selling off all of its production there in the deal with Fieldwood.

The assets include wells currently producing about 100,000 barrels of oil equivalent per day. The sale will end Apache’s 30-year run as a producer in Gulf waters up to 1,000 feet deep, known as the shelf region.

The sale includes more than 500 blocks with 1.9 million net acres and year-end 2012 estimated proved reserves of 133 million barrels of oil and natural gas liquids and 636 billion cubic feet of natural gas.

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McCarroll noted that the deal also calls for Fieldwood and Apache to jointly participate in exploration projects on the acquired assets, tunneling deeper into the earth than the existing wells.

“This will be a growing business,” he said. “It will not be one where we are looking to cut a lot of jobs and make money from cost-cutting. We will be adding rigs, increasing production every year.”

There are risks.

The deal also calls for Fieldwood to cover the retirement obligations of the assets – the expected cost of taking assets out of use in the future. Apache estimates that at roughly $1.5 billion.

McCarroll said he is not too concerned about the costs of abandoning wells that are no longer producing oil. The potential impact was factored into the purchase price for the Apache assets, he said.

“We understand how that work has to be done,” he said. “We’re pretty good at it. It will be a big focus for us, but it’s not something we’re really worried about.”

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And McCarroll and his team have experience in the shallower waters of the Gulf. Dynamic Offshore Resources’ operations are in the Gulf of Mexico, predominantly in water depths of less than 300 feet.

“There are always risks in our business,” McCarroll said. “But having the employees stay with us and the assets eliminates a lot of the start-up risk, the risk of not knowing the assets you buy. It’s going to be business as usual now until closing.”

He added that with the assets spread across the Gulf “one thing happening in one field going bad really wouldn’t hurt us.”