Apache To Sell 33% Stake In Egypt Oil And Gas Business To Sinopec For $3.1 Bln.

(RTTNews) - Oil and gas company Apache Corp. (APA) and Sinopec International Petroleum Exploration and Production Corp. said Thursday the two companies have launched a global strategic partnership to pursue joint upstream oil and gas projects.

As the first step in this partnership, Apache will receive $3.1 billion in cash in exchange for Sinopec gaining a 33 percent minority participation in Apache's Egypt oil and gas business. Apache will continue to operate its Egypt upstream oil and gas business.

The partnership results from several months of joint efforts between Apache and Sinopec. Given the sustained growth of its operations in Egypt, Apache said it has conducted an extended evaluation of a strategic partnership to ensure its ability to continue to deliver growth opportunities there while enhancing Apache's portfolio balance.

The Egypt partnership is subject to customary governmental approvals and is expected to close during the fourth quarter, with an effective date of January 1, 2013.

Apache said it continues to rebalance its portfolio toward assets with predictable growth rates and attractive rates of return. Pro forma for the partnership with Sinopec and the sale of Gulf of Mexico shelf assets, Apache's second-quarter 2013 production from North American onshore assets and from Egypt would have comprised about 55 percent and 15 percent, respectively. In 2010, onshore North America contributed 31 percent of Apache's overall production, Egypt represented 25 percent and the Gulf of Mexico shelf represented 17 percent.

As part of its portfolio rebalancing process, Apache has set out several capital allocation priorities with respect to the use of proceeds from strategic steps. As previously announced, the company intends to pay down debt in order to maintain its current credit ratings and buy back shares under a 30-million share repurchase authorization, as well as fund future capital expenditures including international projects.

Apache said net production from its Egypt operations averaged 100,000 barrels of oil and 354 million cubic feet (MMcf) of natural gas per day in 2012. Gross production during the period averaged 213,000 barrels of oil and 900 MMcf of gas per day. Apache's exploration and production operations, which are located in remote, unpopulated areas, remain unaffected by political events in the region.

Shares of Apache closed Thursday at $78.64, down $0.53 or 0.67%, on a volume of 1.7 million shares on the NYSE. In after hours, the stock gained $2.66 or 3.38%.