U.S.energy firm Apache Corp. (APA) has priced a public offering of bonds – 3.625% notes due 2021 and 5.25% notes due 2042 aggregating $1 billion ($500 million for each tranche of senior notes).
The company plans to use the net proceeds from this offering – expected to be approximately $977 million after the underwriting discount and estimated offering expenses – to pay back the outstanding debt as part of its purchase of Mariner Energy Inc. The offering is expected to close on December 3, 2010.
On November 10, Apache completed the acquisition of Texas-based deepwater Gulf of Mexico (“GoM”) operator Mariner Energy for about $4.3 billion in stock, cash and debt. The transaction, which was declared days before the April 20 blowout at BP plc’s (BP) Macondo well, was completed following Mariner shareholders’ vote of approval.
(Read our full coverage on the Mariner Energy acquisition: Mariner Energy Merges with Apache)
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.
As such, Apache currently retains a Zacks #3 Rank (short-term Hold rating), in line with its closest peers Anadarko Petroleum Corp. (APC) and Devon Energy Corp. (DVN). We are also maintaining our long-term Neutral recommendation on the stock.
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