US oil and gas company Apache Corporation announced Monday it would buy privately held energy assets in Oklahoma and Texas in a $2.85 billion cash-and-stock deal.
Apache said its acquisition of Cordillera Energy Partners III will significantly reinforce its shift into horizontal drilling.
"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 chairman and chief executive, said in a statement.
"Multiple, stacked horizontal targets provide decades of potential drilling locations," Farris said. "Because 80 percent of revenue comes from liquid hydrocarbons production, this transaction provides compelling economics at current commodity prices."
Cordillera's operations include approximately 254,000 net acres (102,790 hectares) in western Oklahoma and the Texas panhandle.
Cordillera has estimated proved reserves of 71.5 million barrels of oil equivalent and current net production of 18,000 barrels of oil equivalent per day, Apache said in a statement.
In addition, Cordillera has assembled a "leading" acreage position with significant resource potential including 14,000 potential drilling locations in the liquids-rich Anadarko Basin, which straddles Oklahoma and Texas, said Apache.
Under the terms of the agreement, the owners of Cordillera will receive roughly $600 million in Apache stock and the $2.25 billion balance will be paid in cash to be funded by debt.
The acquisition, expected to be completed by April 30, should contribute positively to earnings and cash flow this year, Apache said.
Farris said in a conference call with analysts that given weak natural gas prices in the United States, oil was the driver for the investment.
"The real value of this play is the liquid value of it, not the gas," he said in response to an analyst's question.
About 53 percent of Cordillera's production is in the form of liquid hydrocarbons, of which two-thirds is crude oil.
With the acquisition, Apache intends to boost its production in the Oklahoma-Texas region by 80 percent by the end of 2012, from a current output of some 40,000 barrels to 70,000 barrels.
Investors welcomed the announcement, pushing Apache shares up 0.9 percent to $97.70 in midday New York trade.
Founded in 1954, Apache reported 2011 net profit of $3.0 billion on revenue of $12.1 billion.