APACHE CORP. $102 (New York symbol APA; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 382.5 million; Market cap: $39.0 billion; Price-to-sales ratio: 2.7; Dividend yield: 1.0%; TSINetwork Rating: Average; www.apachecorp.com) plans to sell its 13% stake in Chevron’s Wheatstone LNG project in Australia, as well as its 50% interest in a proposed LNG export terminal in Kitimat, B.C.; Chevron owns the remaining 50%.
These moves are partly due to pressure from activist investment firm Jana Partners, which owns about 1.0% of the company. Jana feels selling these assets would give Apache $3 billion to $4 billion that it can use to buy back shares. It could also use the cash to expand its U.S. oil and gas operations.
The company has already sold $10 billion of less important assets in the past 18 months as part of its plan to focus on its less risky North American onshore operations.
These sales cut Apache’s production by 14.9% in the second quarter of 2014, to 635,814 barrels a day (59% oil and natural gas liquids, 41% gas) from 747,452 barrels a year earlier. However, its realized oil price rose 5.1%, while gas prices gained 5.3%.
As a result, Apache’s earnings fell 20.8%, to $644 million from $813 million. Per-share earnings fell 18.1%, to $1.67 from $2.04, on fewer shares outstanding.
Revenue fell 18.4%, to $3.5 billion from $4.3 billion. Apache will likely hold on to some of its overseas operations. For example, it recently announced a new discovery off Australia’s west coast that could contain 300 million barrels of oil. The company will drill more test wells to determine if commercial production is viable.
The company’s shift away from risky overseas projects in Egypt and Argentina has helped lift its shares by 28% in the past six months. Apache now trades at 15.1 times its likely 2014 earnings of $6.76 a share. The $1.00 dividend yields 1.0%.
Apache is still a hold.
