Apache Corporation (APA) will finish exiting its Canada operations following the closing of a sale of three sets of assets. The sale was comprised of a slate of properties in Alberta and British Columbia to Paramount Resources (ticker: POU); the sale of its Provost assets in Alberta to an undisclosed private company; and the sale of its Midale and House Mountain assets to Cardinal Energy Ltd. (ticker: CJ).
The Cardinal transaction was announced in June and closed July 6th, 2017. In its portion of the acquisition, Cardinal paid a total of approximately $300 million. Cardinal noted that the acquisition was in line with its intent to increase light oil production.
The Midale and House Mountain locations are conventional light oil plays, as opposed to the typical unconventional Montney play. Cardinal reported that the properties should add approximately 5,000 BOEPD of production to its total production, with 50 identified drilling locations.
Paramount—which recently merged with Trilogy Energy Corp.—made its acquisition for approximately $459.5 million for cash on hand, and without assuming additional debt. The Paramount and private transactions are expected to close in August, 2017.
Apache’s Canadian assets averaged approximately 300 Mmcfe per day during the second quarter of 2017.
The three transactions totaled approximately $713 million. The funds will be used for Apache’s 2017-2018 capital budget and debt reduction, the company said. In a statement Apache CEO and President John Christmann IV outlined that Apache was “streamlining [its] portfolio and focusing on assets in the United States, United Kingdom North Sea, and Egypt,” and that the exit from Canada was consistent with those goals.
Apache’s Canadian assets had been allocated $125 million for capital expenditures, which will now be re-allocated to other assets in its portfolio.
The three sales went for approximately $14,000 per BOEPD, well below the average for Canadian asset sales—which typically fall around $30,000 per BOEPD.
Revised production following sale
UBS Investment Bank noted that Apache plans to provide updated 2017-2018 guidance following the closing of the three transactions, and the bank said it had updated its own estimates for Apache. UBS’s new estimates were revised downward to approximately 476 MBOEPD from 495 MBOEPD for 2017, and the bank revised its estimates to approximately 512 MBOEPD from 577 MBOEPD for the 2018-2019 year.
