- Apache rejected unsolicited offer and is working with Goldman
- Buyer couldn't be identified, unclear if talks will resume
Apache Corp., the oil explorer worth more than $18 billion, has received an unsolicited takeover approach for a deal that would be the largest for an independent producer in the U.S. this year, according to people familiar with the matter.
Apache rejected the initial offer and is working with Goldman Sachs Group Inc. on a defense strategy, said the people, who asked not to be identified because deliberations are private. The potential buyer, who couldn’t immediately be identified, sent a letter to Apache in the past few weeks and it’s unclear whether talks will resume, one of the people said.
A high-flying producer during the shale boom of the 2000s, Apache has chronically under-performed in recent years, largely because of bad bets on major projects in Argentina and Australia that didn’t pan out. The company, which appointed a new chief executive in January, has been selling off lackluster properties in Texas and Australia amid a sustained depression of crude prices.
Castlen Kennedy, a spokeswoman for Apache, said in an e-mail Monday that the company does “not comment on rumors.” A representative for Goldman Sachs declined to comment. Apache shares jumped 13 percent to $54.03 at 3:01 p.m. in New York. The Houston-based company’s stock had plunged more than 50 percent from its 2014 peak as of Nov. 6.
Lower oil prices are forcing producers to reduce costs, making the ones that have strong balance sheets attractive targets to larger ones, Charles Robertson, an analyst at Cowen & Co., said. Apache’s $1.6 billion “in cash and low leverage would help a larger company by strengthening their balance sheet and funding a dividend,” he said.
Apache last week reported a smaller-than-expected adjusted loss and boosted its 2015 production forecast. It’s one of the biggest leaseholders in the Permian Basin in western Texas, the largest U.S. shale play and the only one where oil output has continued to grow even as drillers slash spending and idle rigs. It also explores in Egypt, the Gulf of Mexico, Canada and in other shale basins.
International oil companies looking to strengthen their balance sheet, such as Statoil ASA and ENI SpA, would make the most sense for a number of reasons, including Apache’s assets in the North Sea and Egypt, Robertson said Monday in a phone interview. It would be more challenging for a U.S. oil company to buy Apache because of the costs to repatriate its foreign assets, he said.
Apache’s falling shares have been part of a larger sell-off in exploration and production companies, with an S&P index of 17 drillers down 28 percent in the past year. The previous largest deal in the U.S. this year came in July, when Noble Energy Inc. bought Texas shale driller Rosetta Resources Inc. for $3.9 billion, including assumed debt, in an all-stock transaction.
Apache had a net loss of about $5.7 billion in the third quarter, compared with a loss of about $1.3 billion a year earlier. The company has cut its 2015 capital budget by more than 60 percent from a year earlier, according to an investor presentation in September.
“There are not a lot of guys that can write this kind of check,” Leo Mariani, an analyst at RBC Capital Markets in Austin, who rates Apache shares the equivalent of a buy and owns none, said Monday in a phone interview. “You need someone who can come in there with $30 billion. That thins out the list to begin with.”
Mariani said he sees one of the major oil companies such as BP Plc or Exxon Mobil Corp. as logical candidates for buying Apache.
(An earlier version of the story corrected the amounts in the ninth paragraph.)