Back to top

Analyst Blog

U.S. energy firm Apache Corp. recently claimed 14 leases in the central region of the U.S. Gulf of Mexico (GoM) in an auction under the U.S. Bureau of Ocean Energy Management. The addition will fortify its already significant foothold in the region.

Apache was apparently the highest bidder in nine shallow water blocks and five deepwater blocks in the lease sale. The auction took place in New Orleans and received 407 bids from 52 companies on 320 tracts.

Among the nine shallow water blocks, Apache formed joint ventures on seven in the Main Pass area as an operator and held 75% working interest in the same. Apache holds 100% working interest in the remaining two shelf leases.

In each of the five deepwater blocks – which were acquired in DeSoto Canyon, Green Canyon and Mississippi Canyon lease areas – Apache holds 50% working interest.

The company spent $2.2 million for the shelf and $24.6 million for deepwater blocks. With this addition, Apache will get hold of over 500 leases in the GoM region in total.

Apache currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.

We think Apache is in a better position to weather the current uncertain environment than many of its peers in the exploration and production space, given its solid production growth outlook, strong financial health and diversified asset base.

However, Apache’s long-term production and reserve growth primarily depends on its acquire-and-exploit model. Apache may find it difficult to complete accretive transactions in the future, which could negatively impact its growth rate.

Meanwhile, there are other energy explorers that offer value and are worth buying now. These include Range Resources Corp. , EPL Oil & Gas Inc. and Plains Exploration & Production Company . All these firms sport a Zacks Rank #1 (Strong Buy).
 

Please login to Zacks.com or register to post a comment.