Apache entered Egypt in 1994 and has since
built up a dominant onshore position through a series of acquisitions and an
aggressive exploration campaign. It is the largest acreage holder in the
Western Desert and operates 24 licences. In 2010, Apache expanded its position
through the acquisition of BP’s entire Western Desert portfolio as part of a
wider transaction involving BP’s North American assets. In 2013, Apache
divested 33.3% of its Egyptian portfolio to Sinopec for USD3.1bn in an effort
to refocus on its North American business.
Apache’s Egyptian portfolio contains
c.594mmboe of 2P reserves (Wood Mackenzie) as at the end of 2014 with about
half of these reserves being gas. Gas production is an important part of Apache’s
business, which is a material supplier of gas to the domestic market with a 12%
market share (excluding Sinopec’s interest in the portfolio). All gas is sold
to EGPC.
One of the biggest concerns for Egyptian
operators over the past couple of years is the receivables balance due from the
EGPC. To date, EGPC have not defaulted (to Apache or any other operator); in
fact, EGPC have been aggressively paying down the balance since the beginning
of 2015. To manage payment default risk, Apache has insurance with USD300mm of cover
from the Overseas Private Investment Corporation and this is in place until 2024.
Egypt has been one of Apache’s success
stories, where production and cash flow have grown strongly with each USD1mm of
investment generating USD2mm. This has be driven by strong and consistent exploration
success – success rate has averaged above 80%. The company holds a large acreage
position with 72% still undeveloped which will provide significant
opportunities for the future.
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| Historical production |
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| Cash flow growth |
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