Along with earnings, mid-major energy company Apache (NYSE: APA) announced a deal to acquire some of BP's (NYSE: BP) global assets. Apache is acquiring estimated proven reserves of 385M boe (a bit below my 400M - 500M estimate) for a total consideration of $7B - a somewhat better price than I had assumed.
The acquisitions make a lot of sense at first look - Apache is getting all of BP's business in the Permian Basin (W. Texas / New Mexico) and Egypt's Western Desert, plus an upstream natural gas business in western Canada.
To pay for this, Apache will be launching a joint cash/debt offering soon.
Seems like a no-brainer to me for Apache. They have operations in the Permian and Egypt already, so there should (or at least could) be some relatively simple synergies to be had there. Moreover, at well below $20/boe, the price is certainly favorable for Apache. Seeing this price, I can understand why BP did not want to throw in their Alaskan operations - I know BP needs the money (and likely needs to raise more than this $7 billion), but management cannot sell off too many of their assets for that kind of price.
I suspect that part of the reason for the favorable price was the fact that these properties are not producing all that much - 83K/boe per day according to Apache. So, that will add about 13% or so to production near-term, and you have to think that Apache (and its reputation for squeezing out every drop) will be able to boost that, as well as deliver on the unexplored acreage.
All in all, a good (if not great) deal for Apache and a necessary deal for BP. Reminds me of why Apache is always one of my go-to energy stocks.
Here was my original post on the rumored get-together:
http://kratistoinvesting.blogspot.com/2010/07/apache-might-profit-from-bps-troubles.html
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