Apache Corporation (APA) is planning to raise up to $840 million from the divestment of its Alberta, Canada based oil and gas properties going by Bloomberg. The U.S. energy firm might be compelled to take this stance as activist investor Jana Partners LLC is pressing it to focus on oil rich projects in the U.S. by shedding international assets. Jana Partners LLC has more than $1 billion worth of stake in Apache.
The sale also reflects Apache’s asset restructuring program that highlights its intention to get rid of non profitable projects and focus on core assets.
The Alberta-based oil and gas resources of Apache generate net annualized operating income of $119 million by producing roughly 10,000 barrels of oil equivalent every year. Apache is seeking help from The Bank of Nova Scotia (BNS) – an investment bank in Toronto – to sell the assets.
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. We like Apache’s large geographically diversified reserve base, as well as its balanced exposure to natural gas and crude oil, and multi-year trends in reserve replacement and production growth. This allows management to allocate capital and resources to high-return projects.
However, since oil price has been weak from August, we don’t expect Apache to generate significant earnings during the third quarter as it primarily produces and sells crude oil.
Currently, Apache caries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. market in the next one to three months.
Meanwhile, one can look at better-ranked players in the same industry like WPX Energy Inc. (WPX) and Whiting Petroleum Corp. (WLL). WPX Energy sports a Zacks Rank #1 (Strong Buy), while Whiting Petroleum holds a Zacks Rank #2 (Buy).
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