OXY May Acquire Apache -- May 19, 2016

Updates

Later, 3:55 p.m. Central Time: sounds like someone screwed up, letting "the proverbial cat out of the bag." From The Street:

A representative for the website told Real Money they decided to pull down the story after Occidental denied the rumor.

(To be sure, Occidental told Reuters it had no knowledge of any pending transaction.)

A representative from Apache told Real Money that it does not comment on M&A rumors.

Meanwhile, Melissa Schoeb, a spokeswoman for Occidental, said the company has no knowledge of the Oil and Gas People report. This latest rumor lends some weight to talk of consolidation in the oil and gas space following nearly two years of low oil prices.

On Monday, for example, Range Resources announced plans to acquire Memorial Resource Development in a deal valued at $4.4 billion, inclusive of debt. Some have speculated that Royal Dutch Shell's solid earnings of late puts it in a strong financial position to make an acquisition. And Apache was approached by Anadarko Petroleum last November but ultimately rejected the offer to explore a tie-up.  

Original Post

 

Zacks is reporting that Apache may get acquired by Oxy. I don't know much about either, but the little I know suggests that this is not surprising.

The estimated deal value could be at least $25 billion.   

The source mentioned that the deal will be beneficial for both players as the combined entity would be a major energy firm. It is to be noted that the merged company will likely produce 1.1 million barrels of oil equivalent every day which is below 50% of the production of Chevron Corporation, one of the largest integrated energy companies in the world.

OXY is said to have denied knowledge of this story.

Some key statistics for OXY from Yahoo!Finance (numbers rounded):

• enterprise value: $60 billion
• debt: $8 billion
• cash: $3 billion
• operating cash flow: $3.5 billion

From wiki (numbers rounded):

• US operations: 300,000 boepd, about 50% of its total global production 
• 260,000 boepd from the Permian Basin
• 145,000 boepd of that 260,000 boepd in the Permian Basin from CO2 EOR

Back in November, 2015, Anadarko had approached Apache about a possible merger.

I think if one wants to "understand" Apache, the best place to start is to read up on the Permian.

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Notes to the Granddaughters

In this week's The New Yorker issue a Jonathan Franzen writes about "The End of the End of the World: an uncle's legacy and a journey to Antarctica." The caption to the artist's drawing of the Antarctic icebergs reads: "I had never before had the experience of beholding scenic beauty so dazzling that I couldn't process it, couldn't get it to register as something real."

Wow, did I "connect" with that. I immediately thought of my first day in Point Barrow, Alaska, decades ago. That, too, was so dazzling I could not process it. I wasn't smart enough then (or now) to phrase it quite that way, but Jonathan Franzen said it perfectly: "unable to process it." In addition to everything else, I also couldn't process the "midnight sun," watching the sun simply stay "hung" for 24 hours for a day or two.

On my bike, rarely, I have a dazzling experience, also, but it's always "olfactory." When big machinery is breaking new ground / turning (relatively) virgin prairie for a new development, the smell of the earth is incredible. It brings back memories that cannot be processed. The smell does not elicit a specific memory or "vision" but it elicits something visceral that overwhelms me -- at least for a few minutes.

I was going to keep a list of the various smells that affect me that much while riding -- freshly mown hay is another example -- but then I couldn't put a list together. It was too short. Maybe the ozone smell after a rainstorm. But after that it becomes difficult. A freshly bathed infant but that was years ago.

Speaking of biking and the smell of fresh earth: it is incredible how much development is occurring northwest, north, and northeast of DFW airport. One of my biking destinations is downtown Southlake, TX, which is exactly a five-mile bike ride one direction. The map below is very, very busy, but it gives you an idea how much activity is going on.

The big news is the new TD Ameritrade "campus" that will be going up soon. TD Ameritrade has outgrown its space in Fort Worth and needs to expand.

Other highlights on the map:

• a ten-year, $17 million highway project to widen the 4-lane divided highway to a 6-lane highway
• two new hotels: a Westin Hotel, and a Cambria Hotel and Suites
• Granite Properties office building
• a $65 million renovation project at The Vista at Solana business park

Grapevine, where we live, is south and east of Southlake. According to their publication released today, the city purchased a 185-acre tract of land in December, 2013. In a little over two years, the city has brought in new building and property investments of $100 million and over 500 jobs with $40 million annual payroll. Some highlights: Kubota Tractor Corporation moved its headquarters from California to Grapevine, TX; Mercedes Benz will build two facilities for their regional Parts Distribution Centers: one to support sales and distribution of spare parts; the other a Learning & Performance Center which is relocating from Houston, TX. 

I see Morley Safer died today, 84 years old. If I can reach his age, I have about 20 more great years of experiencing those smells that are impossible to process.