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Apache Surges When Activist Investor Reveals Major Stake

Nilanjan Choudhury

Apache Corp. (APA) shares surged 4.6% to $103.12 on Jul 22 after activist hedge fund Jana Partners LLC disclosed a $1 billion stake in the U.S. energy company and urged it to undertake moves to enhance shareholder value, including exploring a sale of the company. Nearly 6 million shares were traded on the day, comparing with the average volume of around 3 million. Apache currently has a market cap of $39.8 billion.

Barry Rosenstein-headed Jana Partners called on the Houston-based oil and gas producer to exit from its international holdings and concentrate exclusively on U.S. drilling activities. The fund recommended Apache to pull out of two major projects in Canada and Western Australia and free up cash as it feels that the mega-developments would take much time and money before they can contribute.

Additional, Jana Partners feels that investors have given thumbs down to the company’s global diversification strategy and that Apache should consider selling itself if it does not take further steps to boost its value. The New York investment firm pointed out that Apache has performed poorly compared to its peers, some of whom operate solely in domestic shale formations like the Permian basin.  

Apache welcomed Jana Partners’ investment and emphasized that it has already taken steps in implementing the measures demanded by the fund. The company is focused on rebalancing its portfolio, targeting predictable and profit-oriented production growth in North America. As part of this initiative, Apache has sold some overseas properties including those in Argentina and Egypt, in the process raising some $10 billion from asset divestment over the past 18 months.  

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. The company currently retains a Zacks Rank #3 (Hold), implying that it is expected perform in line with the broader U.S. equity market over the next one to three months.

However, some better-ranked domestic upstream energy stocks include Swift Energy Co. (SFY), Midstates Petroleum Company Inc. (MPO) and WPX Energy Inc. (WPX). All the firms hold a Zacks Rank #1 (Strong Buy).

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