Anadarko to sell deepwater Genghis Khan

GOM discovery bought by Shenzi partners for $1.35 billion — Hess Corp., BHP Billiton, Repsol; proceeds for debt reduction

Ray Tyson

For Petroleum News

Anadarko Petroleum, which already has sold prize deepwater Gulf of Mexico properties to help pay down a hefty acquisition debt, has agreed to sell its Genghis Khan discovery for $1.35 billion to Hess Corp., Australia’s BHP Billiton and Spain’s Repsol YPF, owners of the adjacent Shenzi field.

Just recently Anadarko announced that it was selling its interests in deepwater Gulf discoveries Knotty Head and Big Foot and the Big Foot North prospect to Norway’s Statoil for $901 million. Anadarko also has sold or swapped its Canadian E&P assets.

Proceeds from the sales are earmarked for debt reduction stemming from Anadarko’s recent acquisitions of Kerr-McGee and Western Gas Resources. The Kerr-McGee deal alone made Anadarko the leading independent producer in the deepwater Gulf of Mexico. Anadarko now has nine hub-and-spoke development projects on-line, several discoveries proceeding toward sanction, several exploration wells currently drilling and a strong prospect inventory.

“Due to the size and quality of the portfolio we have established in the deepwater Gulf of Mexico, we have the opportunity to realize value from targeted divestitures,” Jim Hackett, Anadarko’s president and chief executive officer, said Nov. 12.

Genghis Khan discovered in 2005

Genghis Khan, located in water depths of about 4,300 feet, was discovered in 2005 on Green Canyon Block 652 and includes estimated gross hydrocarbon reserves in the range from 65-to 170 million barrels of oil equivalent. It is part of the same geologic structure as the Shenzi discovery, thought to contain 350-to 400 million barrels of oil equivalent reserves.

Ownership in Genghis Khan will be the same as the Shenzi development, with BHP Billiton holding a 44 percent interest as operator and Repsol and Hess each holding a 28 percent interest. Hess and Repsol will each invest $378 million to cover their share of the transaction. BHP’s share will be $594 million.

Because Genghis Khan is within three miles of the Marco Polo production platform, development of the reserves will proceed through a connection of sub-sea wells to the platform where the pipeline infrastructure is already in place, BHP said.

First oil expected in mid-2007

“The acquisition of Genghis Khan provides BHP with a significant undeveloped asset in the deepwater Gulf of Mexico with near-term production that we will operate,” said J. Michael Yeager, BHP’s group president of energy.

Additionally, Genghis Khan being adjacent to the Shenzi oil and gas field “will allow us to benefit from developmental synergies, and will give us knowledge that will enhance the Shenzi development,” he added.

Shenzi was sanctioned for development earlier this year, and the field is expected to come on-stream in mid-2009. Development is expected to cost around $4.4 billion. A standalone, tension leg platform was selected for the production facility. It’s being designed to handle up to 100,000 barrels of oil and 50 million cubic feet of natural gas per day.

In addition to Genghis Khan, Knotty Head and Knotty Head North, Anadarko is selling its Anadarko Canada subsidiary to Canadian Natural Resources for $4.24 billion.

Separately, Anadarko is swapping its Arctic Canadian assets for an increased share of the Chevron-operated Tonga discovery in deepwater Gulf of Mexico, as well as undisclosed “enhanced terms” related to a recently announced Anadarko-Chevron joint venture in West Texas.

In late August, Anadarko also completed the divestiture of its Gulf of Mexico shelf subsidiary to W&T Offshore for pre-tax $1 billion.