Buy Apache: Turnaround Of The Year With 2 Major Catalysts

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

By Sarfaraz A. Khan

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 

Will Asset Sales Boost Occidental's Stock?

This article was originally published by TheStreet on April 14, 2014.

By Sarfaraz A. Khan and Gohar Yousuf

NEW YORK (TheStreet) -- Occidental Petroleum (OXY_) is looking to sell about 40% of its assets in the Middle East and North Africa, perhaps in the hope that a sale will help lift its stock, the way asset sales boosted the stock of Apache (APA_), another U.S.-based energy company.

Despite the asset sales, the two companies will continue to go after growth in the Middle East. Occidental will spend an additional $300 million in its core markets in the Middle East while Apache has applied for additional leases in Egypt.

This Permian-Focused MLP Can Be a Healthy Addition to Your Portfolio

This article was originally published by TheStreet.com

NEW YORK (TheStreet) -- Legacy Reserves (LGCY_) is a Texas based small-cap MLP that is engaged in exploration and production from oil and gas properties located in the Permian Basin, Mid-Continent and Rocky Mountain regions. However, Legacy Reserves is essentially a Permian Basin-focused MLP. It has amassed a healthy liquids-rich portfolio on the back of a history of successful acquisitions. Over the last few years, the business has increased its liquid production and has reported reasonable growth of its revenues and income. Moreover, Legacy Reserves has rewarded its unit holders through consistent growth of cash distributions and a healthy dividend yield of 8.4%.

Its units are trading at 118 times its trailing earnings but Wall Street is expecting double-digit growth of its revenues in the next two years, which will be followed by earnings growth. Therefore, due to its growth prospects, attractive yield and growing cash distributions, this Permian-focused exploration and production MLP can be a healthy addition to your portfolio.

Low-Risk Acquisitions

Since 2006, Legacy Reserves has spent as much as its current market cap ($1.6 billion) on 119 acquisitions. The company now boasts an impressive 83.2 million barrels of reserves, which are weighted 68% toward oil and natural gas liquids.

Over the last few years, Legacy has spent an average of $200 million annually on acquisitions. Then in 2012, it spent a record level of $635 million, which includes a single purchase of $503 million at the Permian Basin. This year, Legacy has spent $100 million on acquiring properties through 11 transactions. Most of these have been fairly low-risk acquisitions as the company generally buys assets that are located around its existing acreage. By the end of 2012, Legacy's net developed and undeveloped acreage was 349,836 acres and 70,108 acres respectively.

What Is the Permian Basin?

The Permian Basin is at the heart of Legacy's overall operations. It is one of the oldest and largest oil and gas producing areas in the world. Last year, Occidental Petroleum (OXY_) was the leading operator here in terms of oil production, followed by Pioneer Natural Resources(PXD_) and Apache Corp. (APA_).

Oil production from this region peaked out in the 1970s but following the arrival of new and sophisticated drilling techniques, like horizontal drilling and fracturing, the oil production started rising from 2008. Last year, the crude oil production from Permian stood at 312 million barrels, still below the production in the early 1990s, but 24% above the lowest levels of the mid-2000s ... read full article at TheStreet

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Apache Readjusts Its Portfolio; What About Its Exposure To Egypt?

By Sarfaraz A. Khan and Mehreen Tanveer

Apache Corporation (APA) is one of the leading oil and gas exploration and production companies of America. After divesting all non-energy related investments in 1988, Apache expanded its operations through acquisitions in America, Europe, Canada, Australia and Egypt. But now, Apache has been undergoing massive restructuring and is narrowing its focus on its home market. 

Image source: www.ApacheCorp.com

Apache has significant operations in Canada, Egypt, Australia and Argentina. However, in its previous quarter, Apache increased its production in the United States and reported production drops in all other markets (in terms of barrels of oil equivalent per day).

(figure 1)

After spending more than $16 billion on acquisitions since 2010 in the Gulf of Mexico (GoM), Permian basin, Canada and Egypt, Apache announced that it will sell $4 billion of its non-core assets by the end of the current year, nearly doubling its previous divestiture target. The company will use the proceeds to reduce its leverage, buyback 30 million shares, and fund its capital expenditure.

More recently, Apache is now planning to sell its Canadian assets through two separate transactions for $112 million. These assets are mainly dry gas properties in Saskatchewan, and Alberta, that include 4,000 operated and 1,300 non-operated wells with recent production of 38 million cubic feet per day and 750 barrels of oil and other liquids per day.

In July 2013, Apache agreed to sell Gulf of Mexico operations, which it acquired from Occidental Petroleum (OXY) in 1986, to Riverstone Holdings' Fieldwood Energy for ….. Read full article with images at Seeking Alpha

Should You Add These Energy Firms To Your Portfolio?

From Seeking Alpha

By Sarfaraz A. Khan

According to Robin West of PFC Energy, Apache Corp (NYSE:APA), Anadarko Petroleum (NYSE:APC) and Occidental Petroleum (NYSE:OXY) are three energy firms who are on track to join the "million barrel club" - i.e. their daily production would touch at least one million barrels of oil equivalents (boepd), by 2018.

These relatively smaller exploration and production companies have typically attracted investors with their impressive growth numbers, unlike the oil majors such as ExxonMobil or Chevron who generate enormous cash flows keep their shareholders satisfied .... Read more