U.S. energy firm, Apache Corp. (APA), has decided to divest its Gulf of Mexico (GoM) Shelf assets for a cash consideration of roughly $3.75 billion to Fieldwood Energy LLC, a subsidiary of a private equity firm Riverstone Holdings. The properties span over 1.9 million acres, with proved reserves of 133.0 million barrels of liquids and 636.0 billion cubic feet of natural gas.
Additionally, Fieldwood will obtain all the future obligations related to the asset retirement, which is estimated to be roughly $1.5 billion. However, Apache will retain 50% stakes in all the unexplored blocks. The transaction is expected to close by Sep 30, 2013, subject to customary and regulatory approvals. In the transitional period, Apache will continue operating the assets.
Apache believes that this proposed sale will help it to rebalance its portfolio and also generate shareholder’s value. Moreover, the transaction will enable Apache to reach closer to its goal of selling properties of roughly $4.0 billion by the end of 2013. The proceeds from this divestment will be used to lower Apache’s debt burden and to repurchase shares.
Houston, Texas-based Apache is one of the world's leading independent energy companies engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. We like Apache’s large geographically-diversified reserve base, as well as its balanced exposure to natural gas and crude oil, and multi-year trends in reserve replacement and production growth.
However, the company’s long-term production and reserve growth primarily depends on its acquire-and-exploit model. Apache may find it difficult to complete accretive transactions in the future, which could negatively impact its growth rate.
Apache currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at exploration and production firms like EPL Oil & Gas Inc. (EPL), Matador Resources Co. (MTDR) and Memorial Production Partners LP (MEMP). All the firms sport a Zacks Rank #1 (Strong Buy).
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