The majors' large asset sales have begun, and Apache Corp. was at the front of the line. The company had been working on a U.K. North Sea strategy for more than two years. It didn't have any assets there and it wanted some. So, in one deal-a roughly $630-million purchase from BP Plc-the company has a new core area. The deal is for the Forties Field-the largest ever discovered in the U.K. North Sea and No. 8 today in terms of reserves and rate of production. Apache's approach to acquisitions is a lesson to investors in other E&P companies. Does the company in which you have shares wander around looking at what's for sale, and then get in line in bidding for it? Or does it develop a sensible idea of an area in which it wants to operate-an area from which it can build a company-and make assets available in this region or play? The latter requires approaching sellers before they think of selling, and this is how Apache succeeded in securing the Forties Field. When BP decided it would sell, Apache already had run the numbers and knew the pros and cons. It didn't have to hesitate, hem or haw. Patience is important too in this strategy of finding an area and then buying assets-rather than buying assets and trying to make a company out of something you and fellow managers may not understand. Apache had not signed a deal in more than two years, prior to announcing a $260-million one in December for South Louisiana producing properties and then the $1.3-billion one in January for the Forties Field and for shallow Gulf of Mexico producing fields. When unable to "make" assets available-by convincing current owners of why they should sell to you, and now-patience is important. Other factors can help make your case, while you wait. Apache was helped in its quest for a U.K. North Sea business by a new tax regime in the area that makes tax liabilities higher on production that is not associated with new spending, and lower when there is new spending, such as on field expansion and redevelopment. In short, it makes the producing assets of older players more economic to new players. BP awoke one day to a question of whether to reinvest in a waning field-the 32-year-old Forties Field produced 500,000 barrels of oil per day at one time; it produces about 48,000 barrels a day now-and pay the same or less taxes, or sell it. Having the money to make a fast deal is key too. How much dry powder does your company have? Are you hanging on to too many assets whose value can be converted into cash for buying properties that breathe new life into your stock price? Pumping more production from Apache's new Forties Field will come with challenges. The field's output is declining 5% to 10% a year, and BP's efforts to affordably rejuvenate it were unsuccessful, according to JJ Traynor, analyst with Deutsche Bank. Of course, Apache has already hedged the field's production at prices that will have the purchase price paid in two years. After that, there's a lot of gravy. More Apache acquisitions in the U.K. North Sea are to come. "We think we're in a position to play the consolidation game [there]," John Christmann IV, Apache director, business development, told fellow E&P acquisition and divestiture professionals at a Houston program just after the deal was announced. "[The BP deal] gives us some nice, big assets to get a toehold there." Some additional acquisition opportunities may come from BP. After closing the sale of the Forties Field, the major will have remaining production of about 700,000 barrels of oil per day from the area. Surely there are other barrels that don't meet BP's profit analysis. What hasn't received as much attention is that Apache has made nearly $1 billion in Gulf Coast and Gulf of Mexico acquisitions in a matter of weeks. The shallow-water Gulf assets it is buying from BP were assigned a deal value of $670 million. This is in addition to the $260-million South Louisiana deal it made a few weeks earlier. Independents too small to do billion-dollar deals with the majors are wondering what their larger peers, such as Apache, will sell as they absorb their acquisitions and divest their least-performing 20% of assets. What are the managers of the company in which you hold shares doing? For more on the BP-Apache deal, see "Company Briefs" in this section. For more on the current A&D market and forecasts for more asset sales by majors, see "NewsWell" in this issue. -Nissa Darbonne, Managing Editor