Apache Closes $852M Asset Sale in Argentina - Analyst Blog

U.S. energy firm Apache Corp. APA declared the closure of its asset divestment in Argentina. Apache sold the properties to Argentina-based integrated energy firm YPF SA YPF, for a consideration of roughly $852.0 million. Of the total, $800.0 million was in cash while YPF assumed $52.0 million debt of Apache.

In Argentina, Apache had reserves of roughly 540.0 billion cubic feet of natural gas equivalent as of Dec 30, 2013. Moreover, the company generated 256.0 million cubic feet of gas equivalent per day in the nation in 2013.

The asset sale represents Apache's strong focus on North American assets. The exploration and production (E&P) company expects to generate considerable output from upstream operations in North American acreage and hence is expected to earn significant cash flow for its shareholders. Apache added that the recent asset sale also completes the company's divestment program started in 2013.

Houston, Texas-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 geographically-diversified reserve base, its balanced exposure to natural gas and crude oil, and multiyear trends in reserve replacement and production growth. This allows management to allocate resources to high-return projects.

However, the company's long-term production and reserve growth primarily depends on its acquire-and-exploit model. Apache may find it difficult to complete accretive transactions in the future, which could negatively impact its growth.

Apache currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the oil and gas E&P industry like Range Resources Corporation RRC, Warren Resources Inc. WRES and Clayton Williams Energy Inc CWEI. Range Resources and Warren Resources sport a Zacks Rank #1 (Strong Buy), while Clayton Williams Energy carries a Zacks Rank #2 (Buy).