U.S. energy firm Apache Corp. (APA) closed its previously announced public offering of 30-year bonds – 5.10% notes due 2040 – totaling $1.5 billion in aggregate principal amount.
The company plans to use the net proceeds from this offering – approximately $1.47 billion after the underwriting discount and estimated offering expenses – to pay back the outstanding indebtedness under its bridge loan facility and commercial paper program, which were used to finance the purchase of certain assets from beleaguered oil giant BP Plc (BP).
On August 10, Apache completed the acquisition of BP’s Permian Basin assets (including oil and gas operations, acreage and infrastructure) in West Texas and New Mexico for approximately $3.1 billion. The transaction is part of a broader agreement between the two companies as per which BP – the financially troubled U.K. major – will offload $7 billion worth of oil and gas assets in the U.S., Canada, and Egypt to Apache to help pay for the cleanup of the Gulf of Mexico oil spill.
(Read our full coverage on the Permian asset acquisition: Apache Completes Permian Asset Buy)
Founded in 1954, Houston, Texas-based Apache is one of the world’s leading independent energy companies engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids.
We are confident about Apache’s ability to continue creating shareholder value, based on the balanced commodity mix, geographically-diversified asset base, growth momentum of its acquired assets, strong balance sheet, and prudent investment approach. However, the unfavorable macro backdrop, international business risk and the company’s dependence on long lead-time type projects somewhat overshadow our positive sentiment.
Apache currently retains a Zacks #3 Rank (short-term ‘Hold’ rating). We are also maintaining our long-term Neutral recommendation on the stock.
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