Apache plans to sell $4 billion in assets by year-end

Thu May 9, 2013 1:35pm EDT

(Reuters) - U.S. oil and gas company Apache Corp (APA.N) on Thursday said it plans to sell $4 billion in assets, using proceeds to shore up its balance sheet and share price through debt reduction and a big share buy-back.

Disappointing production and investor concern over Apache's high exposure to Egypt - which accounted for 20 percent of its output in 2012 - have pressured the company's stock. So far this year, the stock is down about 1 percent compared with a 9 percent gain in the SIG oil exploration and production index .EPX

Investors and analysts liked Apache's plan, sending shares up nearly 5 percent in midday New York Stock Exchange trading.

"We applaud the move to repurchase very cheap equity while simultaneously focusing the company by removing some non-core assets," analysts at Simmons & Co said in a note to clients.

Apache's stock is trading at about 16 times 12-month forward earnings. Shares of rivals EOG Resources Inc (EOG.N) and Anadarko Petroleum Corp (APC.N) traded at about 65 times their forward earnings.

The company, which also reported a profit that missed Wall Street estimates for a fifth straight quarter due to lower oil and gas prices, did not identify the assets it planned to sell.

Houston-based Apache said it planned to use about $2 billion from the sale of non-core assets to reduce debt, with the other $2 billion earmarked for the repurchase of up to 30 million shares, or about 7.5 percent of Apache's outstanding shares.

The company, with a market capitalization of $30.45 billion, was also considering entering joint ventures.

Apache in February had said it was planning $2 billion in asset sales in 2013, without identifying any assets.

Oil and gas producers across the board, including Hess Corp (HES.N) and Chesapeake Energy Corp (CHK.N), are looking at streamlining their asset base to focus drilling in only the most profitable areas.

Apache has spent more than $16 billion acquiring oil and gas properties over the last three years, but now the company will shift its focus to growing production on assets it already owns, Steve Farris, Apache's chief executive officer told analysts on a conference call.

"Our whole goal is to be more profitable and (have) more predictable growth," said Farris.

The company in the past three years has bought assets in Canada, the Gulf of Mexico and the North Sea, and acquired companies such as Mariner Energy Inc and Cordillera Energy Partners III LLC.

DRILLING FOR LIQUIDS

Apache's first-quarter production worldwide rose less than 2 percent to 781,819 barrels of oil equivalent per day.

Disruptions caused by cyclones in Australia and the downtime of a third-party gas plant in Canada were offset by output from onshore drilling in the United States, the company said.

Production from the Permian Basin and Central U.S. regions, where the company spent the majority of its first-quarter drilling capital, brought in 26 percent of worldwide output.

Apache, which also drills for oil and gas in Canada, Egypt, the British part of the North Sea and Argentina, said liquids represented 53 percent of first-quarter production and contributed 82 percent of revenue.

Apache's average realized oil prices fell about 8.5 percent in the first quarter. Natural gas prices dropped 2.6 percent.

Net income fell to $698 million, or $1.76 per share, from $778 million, or $2 per share, a year earlier.

Adjusted profit was $2.02, below the average analyst forecast of $2.21, according to Thomson Reuters I/B/E/S.

First-quarter revenue fell 10 percent to $4.08 billion, missing the average analyst forecast of $4.31 billion.

Apache's shares were up $3.53 at $81.30.

(Additional reporting by Anna Driver in Houston; Editing by Joyjeet Das, Robin Paxton and Kenneth Barry)

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