1 Energy Company has Come Full Circle Looking for Growth
Sep 17th 2013 2:06PM
Updated Sep 17th 2013 2:08PM
With its growth options in the U.S. once limited, Apache turned its sights overseas. Over the course of 20 years the oil exploration and production company slowly built an impressive international operation. Then a strange thing happened. New technologies were developed that unlocked vast sums of oil and gas back in the U.S. Now that the tables have turned, Apache is coming back home to grow.
That's not to say the company is completely turning a blind eye to its international operations. Quite the contrary, it's using the cash flow generated by these assets to fund its growth back home. That point couldn't have been driven home more clearly by CEO Steven Farris at a recent conference as his number one message to investors and analysts seemed to be that the company is using the cash flow from its international assets to fund North American growth.
It has been a pretty remarkable transformation. Since 2009 its North American onshore business has grown from 32% of its production to 55% of production. The company sees that trend continuing in the future if for no other reason than it's sitting on a simply massive resource base. The company sees it's Permian and Central resources growing its reserves four fold as these plays are fully developed.
In looking at the Permian, Apache has about 1.6 million net acres and has identified 34,518 future drilling locations. That provides it with decades of liquids-rich growth. In fact, over the last year alone it has grown its liquids production by 25% over the previous year.
In one sense Apache is following in the footsteps of Devon Energy . The only real difference is that Devon completely exited its international operations to turn its full attention to its North American assets. Most of Devon's attention is now on delivering oil production growth out of the Permian Basin. It's using that play as a foundation to deliver 40% oil production growth in the U.S. this year.
Apache, on the other hand still sees more value in hanging on to its international operations. That is why it is still pursing international growth in Australia, especially through its interest in Chevron's Wheatstone LNG facility. It's also partnering with Chevron to build the Kitmat LNG facility in Canada. However, outside of its major projects in Australia the crux of its international operations going forward will be to use them as cash cows to fund its growth in North America.
Apache was actually able to accelerate some of those cash flows just a few weeks ago when it cashed in on a 33% stake of its Egyptian operations for $3.1 billion. What's even more significant about that deal, which was with China's Siniopec , is that it was more than just a simple sale of a stake in its Egyptian assets. It was actually the beginning of a global partnership that will eventually be expanded into other projects. Future expansions could include additional asset stake sales or even new international growth projects.
Still, the bottom line here is that Apache really has come full circle in its search for oil and gas. Its investments overseas have paid off handsomely over the long-term as evidenced by its 12% compound annual production growth rate over the past two decades. However, it is now beginning a new phase in its growth. That is because the real growth these days is in the U.S. as we are in the middle of quite an impressive energy boom.
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The article 1 Energy Company has Come Full Circle Looking for Growth originally appeared on Fool.com.Fool contributor Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Chevron. The Motley Fool owns shares of Devon Energy. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.