Accelerates APA’s Transition to North America
Apache Corporation (ticker: APA) has closed on the $2.8 billion sale of its stake in two separate LNG projects, the company announced on April 10, 2015. The projects include the Wheatstone LNG in Australia and the Kitimat LNG facility in British Columbia, with Woodside Petroleum assuming APA’s interest in both projects.
The closing comes just days after Apache announced the sale of Apache Energy Limited, its Australian subsidiary, to a consortium of private equity funds for $2.1 billion in cash. With the divesture, APA fully exited the Australian E&P business and transferred ownership of its 49 MBOEPD of production, but retained a 49% interest in a fertilizer company. The divested production represents roughly 16% of its international production volumes and approximately 7% of its overall volumes, based on Q4’14 results. Australian production had increased by 12% on a year-over-year basis.
The value was in line with analyst estimates, with William Featherston of UBS Financial Services saying the price was “reasonable given the short reserve life (<8 yrs) and declining long term production profile.” BMO Capital Markets said the sale was about $55 million above its estimates, but the $4.9 billion in total sales from APA’s recent divestments are above its value estimate of $4.3 billion.
The sizable sales are part of Apache’s plan to right-size the company and implement a renewed focus on North American opportunities. In a press release, John Christmann, IV, President and Chief Executive Officer of Apache, said 70% of the company’s pro forma production will be sourced from onshore operations in the United States and Canada. “[This] represents a notable step in Apache’s strategic portfolio repositioning,” he said. “Over the last five years, we have transitioned Apache’s primary growth engine to North America onshore through the announcement or completion of approximately$17 billion of asset purchases and $17 billion of asset sales.”
Apache’s only remaining operations outside of North America reside in the North Sea and Egypt, with each area returning an average of more than 80 MBOEPD. The company has been actively trying to pay down debt for the last several years and held a debt to market cap percentage of 49% prior to the announcement of its most recent deals.
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