Apache Tilts to U.S. From Egypt With $2.85B Shale Buy

Apache (APA_) is buying privately held Cordillera Energy Partners for $2.85 billion in a big shale push by the independent oil and gas company in the gas-rich Anadarko Basin.

With Cordillera Energy Partners, Apache will double its assets in the Anadarko basin, adding 14,000 potential drilling wells, in addition to other shale assets in the Granite Wash, Tonkawa, Cleveland and Marmaton formations of Oklahoma and Texas. The deal will add to Apache's U.S. portfolio of assets, paving the way for it to make the U.S. its biggest long-term oil and gas production region after a push into Egypt was unsettled by the Arab Spring.

Houston-based Apache saw its shares drop over 20% in 2011, significantly underperforming the Dow Jones U.S. Select Oil Exploration & Production Index after the Arab Spring social protests across the Middle East jeopardized its Egyptian oil production, the biggest producing region for the company accounting for over 20% of assets, according to figures on its Web site as of the year ended in December 2010. When the Cordillera Energy purchase is completed, it will make the U.S. Apache's biggest long-term oil and gas producing region, while also significantly bolstering its shale presence.

"This is an important growth step for Apache -- a unique bolt-on opportunity that more than doubles Apache's acreage in a highly liquids-rich fairway in the Anadarko Basin," said Apache CEO Steven Farris in a statement announcing the deal.

Apache's is buying into assets that are similar to those of Chesapeake Energy (CHK_), which may bode well for long-term returns according to Bank of America Merrill Lynch analyst Doug Leggate. "[On] a first pass basis we believe the value of the play under Apache's ownership could be at least $5.5bn - our analysis suggesting APA could potentially double its money with this deal if our preliminary estimate of value was to be fully realized," wrote Leggate.