Monday, July 21, 2014

Buy Apache: Turnaround Of The Year With 2 Major Catalysts

This article was originally published by Seeking Alpha on July 14, 2014

Summary: Apache could be a successful turnaround story of the year. Apache is transitioning into a North America onshore focused E&P company on the back of massive divestitures.

There are two major catalysts that investors should watch out for, in the near term. Last year, investors cheered when Apache (NYSE:APA) sold a significant portion of its operations in Egypt. This year, the exploration and production company's stock could rally again as it gears up to sell its LNG assets.

In a recent interview, Barclays' analyst Thomas Driscoll has said that investors should watch out for Apache in 2014-15 as the oil giant's turnaround story unfolds.

Apache has been working on a massive restructuring program, which includes asset sales, in order to cut down its debt and increase its focus on the lucrative North American onshore operations.

The Transition

In the early 1990s, Apache began international expansion by entering Egypt and Australia. By 2009, Apache was getting 34% of its output from North American onshore operations. Nearly 19% came from the Gulf of Mexico while the rest, 47%, came from Egypt, North Sea, Australia and Argentina. Back then, Apache decided that it is going to become a North American onshore focused exploration and production company, reducing its exposure towards international markets as well as deepwater resources. And this is exactly what it has done.

In the previous quarter, Apache got 62% of its production (pro forma basis) from its North American onshore business, just 2% from the Gulf of Mexico and …. read full article at Seeking Alpha