Independent oil and gas exploration and production company Apache Corp. (APA) announced after markets closed on Thursday that it had launched a global strategic partnership with a subsidiary of Chinese oil giant Sinopec in order to “pursue joint upstream oil and gas projects.” The first deal in this new joint venture will be a payment of $3.1 billion in cash from Sinopec to Apache in exchange for one-third of Apache’s Egyptian oil and gas business.
Apache has been trying to rationalize its portfolio for a couple of years now. The company acquired more than $16 billion in assets over the past three years and said in May that it plans to sell off $4 billion in assets by the end of this year. The oil and gas company plans to use half the receipts from the projected $4 billion in asset sales to pay down debt and the other half to repurchase stock.
In the company’s second quarter, Apache’s Egyptian production accounted for 19% of its total 790,000 barrels of oil equivalent daily global production. Egyptian production is about 56% oil, and the company reported that oil production was down by about 2,500 barrels a day in the second quarter due to increasing water cuts in some areas. Having a deep-pocketed partner can help Apache make new discoveries that will take up the slack from slower production at existing wells. All in all, Apache did a smart thing.
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