Apace Closes North Sea Asset Buy - Analyst Blog


Apache Corporation ( APA ) closed the acquisition of Mobil North Sea Limited assets for $1.25 billion from the U.S. oil giant ExxonMobil Corporation ( XOM ). Apache executed the deal through its subsidiary Apache North Sea Limited.

The purchased assets comprise ExxonMobil's operating interests in the Beryl, Nevis, Ness, Nevis South, Skene and Buckland fields, the Beryl/Brae gas pipeline and the SAGE gas plant, as well as non-operating interests in the Maclure, Scott and Telford fields. It also includes the Benbecula exploration acreage west of the Shetland Islands.

This acquisition is expected to boost Apache's production by 54% (reflecting an increase of 19,000 barrels of oil equivalent and 58 million cubic feet of natural gas a day) and raise its proved reserves in the North Sea by 44%.

Of late, Apache has been busy acquiring properties for the expansion of its operational territories. In mid-December 2011, Apache announced plans to take over a 65% stake in Australia based Burrup Holdings Limited for an estimated amount of A$560 million or $560 million.

We believe that Apache's long-term production growth visibility improved significantly following the asset acquisition of BP plc ( BP ) and the purchase of a portion of Devon Energy 's ( DVN ) Gulf of Mexico assets. These new acreage positions complement the company's diversified asset base.

We also remain optimistic about Apache's international operations, and the commitment to build an asset base in Australia and Egypt over the last few years. Moreover, we see meaningful growth in free cash flow over the coming years, stemming from project start-ups in these countries.

However, we see limited upside potential for Apache, considering its sensitivity to gas/oil price volatility as it is subject to complex market forces. Additionally, the company is exposed to risks such as drilling disturbances, geo-political risks and project timing delays.

As such, we expect Apache to perform in line with the broader market and, therefore, maintain our Neutral recommendation for the long term. Apache currently retains a Zacks #3 Rank (short-term Hold rating).

APACHE CORP ( APA ): Free Stock Analysis Report
BP PLC ( BP ): Free Stock Analysis Report

DEVON ENERGY ( DVN ): Free Stock Analysis Report
EXXON MOBIL CRP ( XOM ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: APA , BP , DVN , XOM



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