Apache Corporation (NYSE, Nasdaq: APA) has agreed to sell producing oil and gas assets in the Deep Basin area of western Alberta and British Columbia for US$374 million.
The buyer was not disclosed. Incremental to Apache's earlier $2 billion share repurchase announcement, the company plans to use the proceeds of this transaction to buy back common shares under the 30 million share repurchase program that was authorized by Apache's board of directors in 2013.
Apache said it is selling primarily dry gas producing properties comprising 622,600 gross acres (328,400 net acres) in the Ojay, Noel and Wapiti areas in Alberta and British Columbia.
In the Wapiti area, the company will retain 100 per cent of its working interest in horizons below the Cretaceous, retaining rights to the liquids-rich Montney and other deeper horizons. During 2013, production from the fields to be sold averaged 101 mmcf of natural gas and 1,500 bbls of liquids per day.
"This transaction is part of Apache's portfolio rebalancing, which was undertaken last year to enable Apache to focus on growing liquids production from a deep inventory of crude oil and liquids-rich opportunities in North America," said Steven Farris, Apache's chairman, chief executive officer and president. "The sale of these natural gas assets and other Canadian gas producing properties sold last year will permit Apache's Canada Region to concentrate on liquids-rich opportunities that can provide more attractive rates of return and more predictable production growth."
The effective date of the transaction is Jan. 1, 2014, and it is expected to close on or about April 30. The transaction is subject to customary post-closing adjustments.
"I'm not sure who bought the assets. Since there was no corresponding company who announced the purchase to my knowledge, then it is either a privateco or a large company where this wouldn't meet the materiality threshold to be announced," said Geoff Ready, vice-president, senior analyst, oil and gas with Dundee Capital Markets.
He said it appears the price paid was just over six times cash flow and roughly $20,000 per boe a day with a large undeveloped contiguous land base.
"There is potential for Cretaceous gas development with horizontal multi-frac wells on some of the lands, however the liquids-rich Montney lands in Wapiti were not included in the deal," he added. "My guess would be that the purchaser is speculating on a macro theme of natural gas prices getting stronger in the future."
Don Rawson, managing director of institutional research with AltaCorp Capital Inc.,said that the company received roughly US$20,400 per boe a day on last year's production. He pointed out that production is probably being reported on a net royalty basis -- the custom for American companies -- so that would reduce production and make these metrics look higher than they would otherwise appear if reported on a Canadian convention, which is typically reported on a gross before royalty basis.
"[It] doesn't look like the buyer had to pay up for these assets, likely paying for production value in a blow-down scenario. Facilities involved, and operating costs could also impact the valuation here," Rawson said, adding that based on company disclosure, the 2013 net operating income was roughly C$60 million.
That implies about 6.8 times cash flow of lower netback production on 2013 commodity pricing, "so it doesn't look as cheap on cash flow."
Apache also unloaded properties in Canada in 2013 (DOB, Oct. 4, 2013).
