This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Deal: Sinopec Strikes $3.1B Deal With Apache in Egypt

NEW YORK ( The Deal) -- China Petrochemical Corp. (SNP - Get Report) has agreed to pay $3.1 billion for a 33% stake in Apache (APA - Get Report) Egyptian oil and gas business, reducing the Houston-based seller's exposure to the troubled country and providing further evidence of China's willingness to take on political risk to expand its oil reserves.

Beijing-based China Petrochemical, known as Sinopec, will be entitled to a one-third share of Apache's daily Egyptian output of about 100,000 barrels of oil and 354 million cubic feet of natural gas. Apache will retain a 67% stake in the operation and continue in its role as the site operator.

"A game changer transaction in our view as it further bolsters the momentum for change at APA Apache and secures value from a key asset that the market was significantly discounting due to political unrest in country," noted Deutsche Bank AG analysts Stephen Richardson and Ryan Todd.

The sale leaves Apache with an unexpected surplus to its targeted $4 billion of assets sales that were announced in May as part of a plan to raise cash and rebalance its portfolio. Apache in July agreed to sell Gulf of Mexico assets to private equity-backed Fieldwood Energy for $3.75 billion, not including about $1.5 billion of asset retirement obligations linked to the assets.

The deal values the Apache's Egyptian oilfield assets at $6.2 billion, or 4.2 times their forecast cash flow for 2014, Morgan Stanley analysts Evan Calio, Benny Wong and Jacob Dweck wrote in a note published Friday, Aug. 30. "We believe Apache shares should now trade at a higher multiple given that some Egyptian overhang is now alleviated."

The acquisition does not include about $1.2 billion of assets, such as working capital and inventory, associated with Apache's Egyptian operations.

Apache will use the cash "to pay down debt in order to maintain its current credit ratings and buy back shares under a 30 million share repurchase authorization, as well as fund future capital expenditures including international projects," the company said.

Those capital expenditures are likely to flow into nascent Canadian assets, which Apache's management has said it would like to convert into a new growth region, and into shale gas operations in the west Texas Permian Basin.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
APA $61.41 -1.79%
SNP $91.62 0.65%
AAPL $129.62 -2.20%
FB $79.34 -1.50%
GOOG $532.32 -1.44%

Markets

DOW 18,041.54 -190.48 -1.04%
S&P 500 2,104.20 -21.86 -1.03%
NASDAQ 5,032.7510 -56.6110 -1.11%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs