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Apache Exits Argentina in $800 Million Asset Sale to YPF

Apache Corp. (APA), seeking to reduce debt and fund a share buyback, agreed to sell its Argentine energy assets to state-run YPF SA (YPF) for $800 million in cash.

The assets include estimated reserves of 540 billion cubic feet of natural gas equivalent and average output of 256 million cubic feet a day, Houston-based Apache said in a statement yesterday. The deal includes the assumption of $52 million in bank debt as of June 30. YPF paid a $50 million deposit. The transaction is expected to close in the next 30 days.

“Over the past year, Apache has taken steps to focus its portfolio on repeatable and profitable long-term growth in areas where the company has industry-leading positions,” Chief Executive Officer Steven Farris said in the statement. “This transaction is consistent with that strategy.”

Apache, which entered Argentina in 2001, has raised $7 billion in the last two quarters from asset sales worldwide, according to the statement. The company said in August that it had sold a one-third stake in its Egypt operations to China Petrochemical Corp. for $3.1 billion. In July, Apache sold Gulf of Mexico assets to Riverstone Holdings LLC for $3.75 billion.

“Argentina wants capital commitments right now and Apache is not going to outspend cash flow in that country,” James Sullivan, an analyst with Alembic Global Advisors in New York, said in an e-mail message. “The assets work for someone who wants to make a big, long-term, management-attention getting investment. That is not Apache right now.”

Rare Storm

Apache fell 0.4 percent to $80.96 at the close in New York. YPF’s American depositary receipts, each worth one ordinary share, rose 4.9 percent to $26.74 in New York.

Apache’s fourth-quarter profit fell on asset sales and a rare winter storm in West Texas that curbed production, the company said in a statement today.

Net income slid 73 percent to $174 million, or 43 cents a share, from $649 million, or $1.64, a year ago. Excluding one-time items such as property writedowns and deferred taxes on earnings outside the U.S., profit was $1.57 a share, 23 cents less than the average of 31 analysts’ estimates compiled by Bloomberg.

The acquisition will increase YPF’s oil reserves by 14 percent and its gas reserves by 15 percent, the Buenos Aires-based company said in a regulatory filing. The purchase of Apache assets in the Neuquen, Rio Negro and Tierra del Fuego provinces, is the largest by YPF since President Cristina Fernandez de Kirchner seized a 51 percent stake from Spain’s Repsol SA in April 2012.

‘Excellent Opportunity’

“This is an excellent opportunity to add important gas reserves and non-conventional resources to YPF,” Miguel Galuccio, YPF’s chief executive officer, said in a separate statement.

Argentina had a record $6.1 billion energy deficit last year after posting a surplus for 20 years ending in 2010. The purchase will make YPF Argentina’s main gas producer and help reduce imports, Argentine Cabinet Chief Jorge Capitanich told reporters in Buenos Aires today.

YPF also said it sold part of the acreage it acquired from Apache in the vast shale deposit known as Vaca Muerta in western Argentina to Pluspetrol SA for $217 million.

“Both deals are positive for YPF as it will allow the company to consolidate its upstream position and production trend, the price paid for Apache’s stake was lower than the market’s ratio for YPF and it shows shale assets potential to bring partners in the future,” Raymond James Financial Inc. analysts Santiago Wesenack and Santiago Ruiz Guinazu said in a note to clients dated today.

To contact the reporters on this story: Daniel Cancel in Buenos Aires at dcancel@bloomberg.net; Bradley Olson in Houston at bradleyolson@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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