Friday 15 August 2014

Apache divesting international assets? A hard one!


On 31 July 2014, Apache announced its Q2 2014 results
  • Apache said it was looking to exit its Canadian LNG positions and was considering options around its international assets
  • This comes amidst Jana Partners, a hedge fund which recently picked up c.USD1bn of shares in Apache, wrote to investors arguing that Apache should focus its efforts on the North American onshore
    • Reasoning behind this is that over the last few years, a number of North American onshore pure plays have outperformed Apache
    • Apache's international assets, it is argued, are diluting its North American onshore story
  • However, analysts do not necessarily agree
    • Apache's international assets, especially those in Egypt and the North Sea, generate significant free cash flow for the group
    • These are areas of existing production and are low risk operations
    • The cash flows are important for the funding of the North American portfolio
  • It is further noted that given the number of North Sea assets on the market, the geopolitic issues plaguing North Africa and the relative maturity (though strong cash flow generation) of these assets, it is unlikely that Apache will fund a buyer willing to pay full value
  • Its other main operations are in Australia, including the Wheatstone LNG project

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