Apache (APA) to Divest North Sea Assets to Neptune Energy

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Apache Corporation APA recently agreed to divest stakes in some of its U.K. Central North Sea properties through its wholly-owned subsidiary, Apache North Sea Limited, to the Neptune Energy Group, which is an independent international exploration and production company.

Per the deal, Apache will sell its operating interest of 35% in the Seagull development and 50% in the Isabella prospect to Neptune Energy. The deal is expected to close in 2018. The financial details of the deal are yet to be disclosed.

The divestment can enable Apache to maintain its diligent capital-allocation planning process. The company can use the proceedings from the sale to reduce its debt burden. Currently, its long-term debt to capitalization ratio is 46.9%, marginally higher than 46.1% of the industry it belongs to.  

Notably, Houston, TX-based Apache has an intention of focusing on operations-driven growth in the Permian Basin, which is the premier shale play of the United States and a hot destination for the energy players. The company plans to allocate around 70% of its capital budget in the region over the next three years. A growing number of oil explorers - including the likes of Cimarex Energy Co. XEC , EOG Resources, Inc. EOG and Parsley Energy, Inc. PE - are devoting bulk of their investments into the Permian as they turn their attention to less-expensive projects that can deliver cash quickly in today's 'moderate oil' environment.

The Seagull project, which will start in 2019, is expected to evolve as a multi-well subsea tieback, wherein first oil is expected within the end of 2021. Neptune Energy expects to start the Isabella project, which is one of the largest undrilled exploration sites in the Central North Sea, next year.

Neptune Energy's chief executive, Jim House had worked at Apache for more than 25 years before joining the company in January. Neptune Energy expects the acquisitions to provide the company with low-cost and short-term development possibilities.

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This article appears in: Investing , Business , Stocks
Referenced Symbols: APA , EOG , XEC , PE

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