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Apache (APA) Offloads Canadian Light Oil Assets Worth $244M

Per a Reuters report, energy giant Apache CorporationAPA is selling its Canadian light oil assets to Calgary-based Cardinal Energy Ltd. for C$330 million ($244 million). The move is likely to help Apache concentrate on high-growth areas like the Permian Basin shale.

Deal Details

As part of the transaction, Apache will divest its Alberta House Mountain assets and its interests in the Midale and Weyburn oil assets, which is located in southeast Saskatchewan. The total amount of production from these assets is 5,000 barrels of oil equivalent per day (BOE/D).

Apache is following the footsteps of major international oil producers like ConocoPhillips COP and Marathon Oil Corporation MRO who have divested Canadian assets worth $22.5 billion so far. On the other hand, domestic oil producers in Canada such as Cardinal, Cenovus Energy Inc. CVE and others have come forward to acquire assets from firms which are withdrawing from the region.

Although production of Canadian light oil is cheaper compared to the oil sands of northern Alberta, factors like tight environmental regulations, limited export pipeline capacity and slow growth have led companies to look elsewhere.

The Reason for the Sale

The decision is in line with the Apache's strategy of making its portfolio more efficient. The company plans to shift its focus to high-growth areas, mainly the Permian Basin, which promises more opportunity. In the first quarter of 2017, the company operated an average of 13 rigs and drilled and completed 22 gross operated wells in Permian Basin, an increase of 29.4% from the fourth quarter of 2016. Production in this area in the first quarter averaged 148,000 BOE/D. Average oil price per barrel in Permian Basin increased from $30.10 to $49.16 year over year, promising higher profit margin for the company. In contrast, the company's production in Canada declined 19% year over year.

Apache still owns other operations in Western Canada, which have a production capacity of 50,000 BOE/D.

About the Company

Founded in 1954, Houston, TX-based 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. Approximately 69% of the company's proved reserves and 54% of its production comes from North America, where its operations are focused in the Permian Basin, the Anadarko Basin in western Oklahoma and the Texas Panhandle, Gulf Coast and the offshore Gulf of Mexico areas of the U.S., and in Western Canada. Internationally, Apache has core operations in Egypt and offshore U.K.

Apache presently has a Zacks Rank #4 (Sell).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Price Performance

In the last six months, Apache's shares fell 28.84%, mirroring the performance of the Zacks categorized Oil and Gas - United States - Exploration and Production industry, which lost 26.55%.

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Cenovus Energy Inc (CVE): Free Stock Analysis Report

Apache Corporation (APA): Free Stock Analysis Report

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Marathon Oil Corporation (MRO): 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 Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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