Tiny Fieldwood Energy LLC made a big splash in the Gulf of Mexico July 18, snapping up $3.75 billion worth of Apache’s Corp’s assets in the Gulf of Mexico, a move that vaults it into the Gulf’s big leagues 10 months after its initial capitalization.

Apache plans to sell the mature fields as part of an asset restructuring program, which pushes the company’s focus back onshore. In addition, the company will pay down debt and buy back shares with proceeds from the sale.

Fieldwood, which was capitalized in December 2012 with $625 million from private equity firm Riverstone Holdings LLC, will focus its operations in the Gulf, where it will acquire the largest operated asset base in the Gulf of Mexico Shelf, comprised of more than 500 blocks and 1.9 net million acres. The deal is scheduled to close on Sept. 30.

At the end of 2012 Apache reported total proved reserves attributable to the assets at 239 million barrels of oil equivalent (MMBOE), of which more than 55% is oil and more than 75% is developed. Current daily production exceeds 95,000 BOE and is at least 90% operated.

Apache will retain 50 percent of its ownership interest in all exploration blocks and in horizons below production in developed blocks, where high-potential deep hydrocarbon plays are being tested.

"This transaction is an important step toward rebalancing our portfolio," said G. Steven Farris, Apache’s chairman and chief executive officer. "At the end of this process, we expect Apache to have the right mix of assets to generate strong returns, drive more predictable production growth, and create shareholder value.

The company intends to use proceeds to reduce debt and enhance financial flexibility and to repurchase Apache common shares under a 30-million-share repurchase program authorized by the Board of Directors earlier this year.

Additionally, Fieldwood and Apache will jointly participate in deep exploration opportunities on the acquired assets targeting a robust inventory of high potential prospects including subsalt horizons around known producing fields.

Matt McCarroll, president and chief executive of Fieldwood, said, "Apache is clearly the preeminent operator on the Gulf of Mexico Shelf, and Fieldwood is very enthusiastic about the opportunity to continue this legacy going forward. … We’ve been looking at a number of areas, all conventional…but when this came along we dropped everything else. We’ve been working on this for a couple months.”

McCarroll said he may eventually expand Fieldwood from the shelf to onshore the Gulf Coast. This is Fieldwood’s first deal since it was originally funded by Riverstone in December 2012; its 12 employees will now be joined by substantially all of Apache’s shelf employees.

Fieldwood will finance the purchase with capital from Citigroup Global Markets, J.P. Morgan, Deutsche Bank AG New York Branch, Bank of America Merrill Lynch and Goldman Sachs Bank USA. In addition, Riverstone has increased its equity commitment to the private company. Vinson & Elkins LLP and Simpson Thacher & Bartlett LLP served as legal advisors to Fieldwood.

John Lancaster, Partner at Riverstone, added, "This transaction is a unique opportunity to acquire a successful business of scale with a strong partner we know well and the proven professionals who have built this business over many years.”

McCarroll and other Fieldwood executives are former senior executives of Dynamic Offshore Resources, which was the first partnership between Riverstone and the Fieldwood management team. SandRidge Energy Inc. bought out Dynamic Offshore resources in February 2012 for about $1.3 billion.

Analysts from RW Baird & Co. said the value of the transaction is closer to $5.24 billion after taking into consideration the assumption of $1.5 billion in asset retirement obligations. For Apache, the sale is an important part of the company’s efforts to put a renewed focus on U.S. onshore production given its repeatability, production consistency, and shorter payback. Apache had previously announced it planned about $4 billion in asset sales by the end of the year.

Since 2010, Apache has acquired $17 billion in assets onshore and offshore. This included a November 2010 $2.7-billion purchase of Mariner Energy (including all its shelf assets) and the June 2010 purchase of Devon Energy Corp.’s shelf assets for $1.05 billion.

Bernstein Research reported the deal will enable Apache to begin buying back its shares by the fourth quarter of this year. The $3.75 billion price tag was a fair valuation of the assets on the block, Bernstein Research reported.