Extending its reach into the deepwater Gulf of Mexico and broaden its footprint on the Gulf shelf, the Permian Basin and Rockies oil shales, Apache Corp., Houston, (NYSE, Nasdaq: APA) has completed its acquisition of Mariner Energy Inc., Houston, (NYSE: ME) for $4.3 billion in cash, stock and debt assumption.

Apache paid 0.17043 share and $7.80 in cash per Mariner share. Based on Apache's stock price of $110.20 on Nov. 10, the company issued 17.5 million shares valued at $1.9 billion, paid $800 million in cash and assumed $1.6 billion in debt.

Former Mariner stockholders now own approximately 5% of Apache's outstanding shares.

This deal follows Apache’s announced acquisition of Gulf shelf assets from Devon Energy Corp., Oklahoma City, (NYSE: DVN) for $1 billion and the purchase of Permian Basin, Canadian and Egyptian assets from BP Plc, London, (NYSE, London: BP) for US$7 billion.

The Devon assets add production of 19,000 BOE per day with year-end 2009 estimated proved and probable reserves of 83 million BOE across 158 blocks. The BP assets add estimated proved reserves of 385 million barrels of oil equivalent and net production of 83,000 barrels of oil equivalent per day.

Apache chairman and chief executive G. Steven Farris says, “The Mariner merger—along with our $7 billion acquisition of BP's upstream operating regions in the Permian Basin, Canada and Egypt and our earlier $1 billion acquisition of Devon's Gulf of Mexico Shelf assets—will provide Apache with a rich inventory of growth and value-enhancement opportunities for years to come.”

Mariner chairman, chief executive and president Scott Josey says, "The combination with Apache is an excellent outcome for Mariner's stakeholders. Our shareholders will be rewarded for their faith and support in our company with the opportunity to further benefit from the upside provided from the merger. Our partners will work with a world-class company with the financial and technical resources to fully exploit our assets. Our employees will benefit from the opportunities provided in a large company with values similar to Mariner's.

Apache and Mariner teamed up in the 2008 deepwater Geauxpher discovery and development at Garden Banks 462. Farris adds, "Mariner's skilled, experienced professionals share our values and sense of urgency.”

In February, Mariner produced 63,000 barrels of oil equivalent per day from the Gulf shelf and deepwater, the Permian Basin and unconventional onshore plays. At year-end 2009, Mariner had estimated proved reserves of 181 million BOE (1.087 trillion cubic feet equivalent; 47% oil and liquids), of which 56% is onshore, and unbooked resource potential of 2 billion BOE. Total offshore acreage as of year end was 879,000 acres.

Mariner's deepwater portfolio includes some 100 blocks with seven discoveries in development—including interests in Lucius and Heidelberg—and more than 50 prospects. It reports some 1.4 billion BOE of net unrisked potential in the deepwater Gulf.

Farris says Apache has considered extending its Gulf of Mexico operations into the deepwater for a number of years, and “this is the right set of assets and the right time for Apache to expand its deepwater presence.

"Mariner brings an inventory of developments and prospects that will jump-start our position in the deepwater Gulf; Apache's financial resources will maximize the value of the portfolio," he says. "It's the right time because recent advances in seismic technology and continued enhancements in facilities design have reduced the risks in one of the world's most prolific oil exploration basins."

Mariner also has more than 240 blocks on the Gulf shelf with 53 million BOE of net unrisked potential and more than 200,000 net acres across several emerging onshore plays.

In the Permian, Mariner holds more than 125,000 net acres in Reagan, Glasscock, Upton, Martin and Midland counties with proved reserves of 86 million BOE and 3,000 nonproved drilling locations. As of March, Mariner held some 43,000 net acres in unconventional oil plays in North Dakota, Wyoming, Arkansas and New Mexico. Earlier this week, Mariner announced it has acquired a 100% working interest in approximately 54,000 net acres in the Denver-Julesburg Basin prospective for Niobrara shale in Wyoming.

"Mariner's Gulf shelf and Permian assets are both excellent fits with our existing core areas," Farris says. "These fields provide strong cash flow, drilling inventory and upside potential."

In December, Mariner acquired Edge Petroleum Corp. out of bankruptcy and established a position in South Texas.

In addition to Geauxpher, Apache has drilled several deepwater discoveries in Egypt and Western Australia.

Apache's last corporate transaction was with the Phoenix Resource Cos. in 1996, which established Apache as an operator in Egypt and has become one of the company's principal growth areas.

Combining with Mariner enhances Apache's global portfolio, which is balanced in terms of commodity mix, geography and geology, Farris says. "This transaction is similar to our earlier strategic steps, bringing near-term production and cash flow as well as long-term upside potential from a large acreage position with identified exploration opportunities."

Goldman, Sachs & Co. and J.P. Morgan Securities are advisors to Apache. Credit Suisse Securities (USA) LLC is advisor to Mariner.

Global Hunters Securities analyst Michael Bodino says Apache’s recent Gulf of Mexico acquisitions provide optimism for both deepwater and shelf activities. He values the deal at $42,857 per flowing BOE and $15.47 per proved BOE. “Apache sees the Mariner transaction as a strategic step and a natural extension into the deepwater Gulf. Mariner provides an exciting new platform for growth in the deepwater and complements the Apache shelf and Permian Basin assets.”

Jefferies & Co. Inc. analyst Subash Chandra values the deal at $10,500 per flowing thousand cubic feet equivalent. “Apache is one of the few operators making a commitment to the Gulf of Mexico after two deals in a week.”

Analysts at Tudor, Pickering, Holt & Co. Securities Inc. value the deal at $60,000 per BOE per day in a deal that “makes sense” for Apache. “The fact that Apache can do this and spend $1 billion on Devon’s shelf properties shows you the power of having dry powder.”