Growth-by-acquisition raises risk

Article Excerpt

APACHE CORP. $67 (New York symbol APA; Aggressive Growth Portfolio; Resources sector; WSSF Rating: Average) explores for and produces oil and natural gas in North America, the UK, Argentina, Australia and Egypt. Its reserves are roughly half oil and half natural gas. The company hedges just 10% of its production, which we feel is wise in today’s volatile energy environment. Not locking-in selling prices gives Apache more flexibility to adjust production to maximize profit. Apache likes to use acquisitions to expand its business and reserves. It recently acquired BP’s offshore operations in the Gulf of Mexico for $845 million. That’s down from an earlier price of $1.3 billion, since some investors exercised their options to purchase some of these fields. Other recent acquisitions include properties in Argentina (cost $1.1 billion) and Texas and New Mexico ($269 million). Apache’s sale of its Chinese operations for $260 million helped offset part of these costs. Thanks to these new assets, Apache’s total production rose 13% in the…

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