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Why Apache Corp’s investors want to focus “closer to home”

Kshitija Bhandaru

Apache Corp’s Australian oil discovery didn't impact stock much (Part 4 of 6)

(Continued from Part 3)

Investors want to focus closer to home

Apache Corp’s (or APA) major operations are located in North America. Apache Corp’s investors are wanting it to focus closer to home. Let’s take a brief look at APA’S major operations within North America.

Permian Basin

Apache is one of the largest operators in the Permian Basin. It has a leasehold 3.3 million gross acres. In its annual 10-K, the company reported that it has more than 13,500 producing wells in 155 fields. The company also reported that production in the region has increased for 12 consecutive quarters.

Central region

APA’s Central region operation controls 1.8 million gross acres. Holdings include more than 3,800 producing wells in the Texas Panhandle and western Oklahoma. APA has targeted more oil and liquids-rich gas plays in this region.

Gulf of Mexico

APA’s Gulf Coast assets were previously divided into three segments—Gulf Coast Onshore, Gulf of Mexico Deepwater, and Gulf of Mexico Shelf. However, in 2014, Gulf Coast Onshore and Gulf of Mexico Shelf were integrated into the Gulf of Mexico region.

In 2014, APA plans to invest ~$500 million in Gulf of Mexico regions. Capex spending for North America in 2014 is slated to $2.6 billion.

Other international

Apart from North America, Apache also has significant international operations in Egypt, Australia, North Sea, and Canada.

Since 2001, APA has also had a presence in Argentina. In February, 2014 its operation in this region sold for $800 million.

Investors placing pressure

In the second quarter, activist hedge fund JANA Partners LLC disclosed a 4.5 million share stake in Apache. JANA has been wanting APA to sell off its international assets and focus more on North American drilling.

Also, JANA wanted APA to exit two major projects—the Kitimat in Canada and the Wheatstone LNG project in Australia—in order to free up some cash. APA would use the cash in U.S. regions like the Permian Basin.

Key stocks and exchange-traded funds (or ETFs)

Major operators in the Permian Basin include Pioneer Resources (PXD), Devon Energy (DVN), and EOG Resources (EOG). All of these companies are components of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Investor pressure yields results

JANA Partners said that if APA doesn’t take further action to focus exclusively in the U.S. and increase its value, Apache should consider selling itself.

In its second quarter earnings, APA noted that it intends to completely exit the Wheatstone and Kitimat LNG projects.

The next part in the series discusses how APA and its segments performed in the recent quarter.

Continue to Part 5

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