Overview: JANA's activist position in Apache Corp. (Part 5 of 6)
Apache’s shareholder value
Last month, activist investors’ hedge fund JANA Partners LLC disclosed a stake worth $1 billion in Houston-based independent exploration and production company Apache Corp. (APA). It’s pushing the company to divest its international holdings. The fund said in its 2Q14 investor letter that although APA has undertaken a strategic review, divested some of its international and non-core assets, and launched an aggressive share repurchase program, it needs to do more.
Apache said in its annual regulatory filing that by 2013, it completed more than $7 billion in asset sales. The proceeds were utilized to pay down nearly $2.6 billion of debt and to repurchase $1 billion of shares under a 30-million share repurchase program authorized by the company’s board. It added that it exited the year with nearly $2 billion in cash. The company recently announced plans to exit its liquefied natural gas (or LNG) projects in Canada and Australia, and the proceeds could be further used for share buyback.
In May, the company’s board authorized repurchasing an additional ten million shares, supplementing the 30-million-share authorization announced in May, 2013. Apache said it repurchased 24.3 million shares for ~$2.1 billion under the prior authorization. The management said that “Apache’s portfolio has been rebalanced for predictable and profitable growth driven by our oil- and liquids-rich onshore North America assets.” It added that “The board has increased the buyback authorization because of its confidence in Apache’s ability to continue to execute our future growth plans. We continue to see our stock as a compelling investment at current levels.” The company said it repurchased $780 million worth shares in the 2Q14.
Apache has paid a common dividend to stockholders since 1965. It has increased the dividend 67% since 2012. Common stock dividends paid during 2013 totaled $303 million. In the 1Q14, Apache’s board approved a 25% increase to $0.25 per share for the regular quarterly cash dividend. In May, the board declared the regular quarterly cash dividend of $0.25 per share. In 1Q14, the company paid $79 million in dividends.
Activist investor JANA’s earlier targets have been Oil States International (OIS), Safeway (SWY), QEP Resources (QEP), Outerwall (or OUTR), and Agrium (or AGU) where the fund has pushed to bring about changes such as separations and spinoffs to unlock shareholder value.
Browse this series on Market Realist:
- Part 1 - Why Apache Corp. faces activist pressure from JANA Partners
- Part 2 - Overview: Apache’s domestic and international operations
- Part 3 - Apache’s liquefied natural gas projects in Canada and Australia
- Investment & Company Information
- Apache Corp.