Tuesday, July 13, 2010

Apache (NYSE:APA) Down on BP (NYSE:BP) Acquisition Reports

Reports that Apache Corp (NYSE:APA) is in negotiations with BP (NYSE:BP) to acquire assets held by the company in Alaska, valued at a little under $12 billion, caused the two stocks to go in opposite directions, with Apache getting the worst of the deal; at least temporarily.

As of 3:20 PM EDT, Apache was at $84.59a share, a decline of $3.26, or 3.71 percent.

BP surged by $2.60 a share, or 7.64 percent, to $36.65. They've added over $15 billion in market cap to the company in the last 10 days or so.

The drop in share price of Apache brought its market cap below $30 billion, and analysts are concerned the approximate $12 billion price tag on the Alaskan property may be too much for Apache to handle alone, even though they did have their debt to market capitalization operate below 25 percent in 2009. That would mean they may have some room for a deal of this size to be made.

But Apache still hasn't officially closed on their Mariner Energy deal last month, where they spend $2.7 billion for that, and they just before that spent another $1.05 billion to acquire the Gulf assets of Devon Energy (NYSE:DVN).

BP would be selling their 26 percent stake in Prudhoe Bay, which is the Alaskan asset being referred to, where their portion in the oil field yielded an average of 69,000 barrels a day in 2009, which would be a nice boost for Apache over the long term.

Continuing economic uncertainty does have analysts and investors nervous if Apache were to go ahead with this big of a deal.

The size of Apache, along with the size of the deal, could imply they are going to buy a portion of Prudhoe, or may have a partner to take up some of the extra costs and resultant stake in it.

1 comment:

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