Leading independent energy company Apache Corporation (APA) announced that it has started producing hydrocarbon at its Balboa Field in the Gulf of Mexico (“GoMâ€), south of Galveston, Texas. This happens to be the first deepwater production in the Gulf region since the oil spill accident. 

In a flashback — on April 20, 2010, an ultra-deepwater Horizon drilling platform of British major BP plc (BP) exploded and sank in the U.S. GoM. The incident, which killed 11 workers and spewed more than 200 million gallons of crude oil in the sea, is tagged as the worst oil spill in U.S. history. Subsequently, a six-month moratorium was imposed on offshore drilling in the region at water depths of more than 500 feet.

However, in mid-October, 2010, the federal government lifted the deepwater drilling ban keeping in mind the upgraded technological equipment and advanced safety measures that were adopted by the oil and gas companies.

Soon afterwards, in early November 2010, Apache completed its acquisition of Mariner Energy Inc. for about $4.3 billion and got possession of Balboa. This acquisition enabled Apache to extend its operations in the deepwater of the Gulf and the company began its first production at the field on December 28, last year.  

Apache, through one of its affiliates, holds a 50% working interest and acts as an operator of the field. The remaining stake is held by Marubeni Oil & Gas (USA) Inc.

The field, at a water depth of 3,350 feet, is currently generating approximately 30 million cubic feet of natural gas and 1,400 barrels of oil per day. This East Breaks Block 597 located field is a one-well development with a six-mile tieback to the Anadarko Petroleum Corporation (APC) operated Boomvang spar on East Breaks 643.  

We believe that Apache is on the right growth trajectory, making lucrative acquisitions and utilizing the acquired assets to enhance production. Long-term production growth visibility has significantly improved following the start up of Balboa field operation.  

We are maintaining our long-term Neutral recommendation on the stock. Apache currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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