Apache Gains $3 Billion, Partner In Egyptian JV With Sinopec
Formed JV; gain Egyptian oil and gas interests.
Apache Corp. (NYSE, Nasdaq: APA) has struck a partnership with Sinopec International Petroleum Exploration and Production Corp. that gives up a third of Apache’s interests in its Egyptian oil and gas interests in exchange for $3.1 billion.
Apache will continue to operate its Egypt upstream oil and gas business, which has a ballpark value of $9.3 billion.
The deal is a continuation of Apache’s efforts to streamline the company and enhance shareholder value, said Guy Baber, Simmons & Co. International vice president and head of integrated company research.
“We expected APA to consummate some sort of transaction in Egypt but thought it was more of a 2014 event,” he said. It is “impressive that the company was able to close this transaction in light of the ongoing political turmoil in the region.”
G. Steven Farris, chairman and chief executive officer for Apache, said Sinopec’s technical expertise complements Apache’s 20 years of operations experience in Egypt and creates an alliance that will continue to explore and deliver the tremendous hydrocarbon resources in the Western Desert.
“Sinopec is an ideal partner for us, and we look forward to the growth and value generation ahead for both companies through the expansion of our collaboration to other projects,” Farris said.
Apache's Egypt operations averaged 100,000 net barrels of oil and 354 million cubic feet (MMcf) of natural gas per day in 2012. Apache's exploration and production operations, which are located in remote, unpopulated areas, remain unaffected by political events in the region.
Apache employs about 9,000 Egyptians through direct employment, through participation in the Khalda Petroleum Co. and Qarun Petroleum Co. operating joint ventures with Egyptian General Petroleum Corp., and through employment with oil field service and construction contractors.
The Egypt partnership has an effective date of Jan. 1, and the deal is expected to close in the fourth quarter.
Apache continues to rebalance its portfolio toward assets with predictable growth rates and solid rates of return. In 2010, onshore North America contributed 31% of Apache's overall production and Egypt represented a quarter. The Gulf of Mexico shelf made up 17%.
“Our successful exploration and development programs in Egypt have been an important contributor to both growth and cash flow for many years. With today's partnership, we are ensuring they can continue this contribution in the future,” Farris said. “At the same time, we are taking meaningful steps to rebalance our portfolio to better deliver the full potential of our deep North America onshore resource inventory.”