The last several years have been a difficult time for Apache Corporation. The company has seen its stock price plummet – like many of its peer companies – as the U.S. industry’s success in creating a new abundance of both oil and natural gas has led to chronic low commodity prices. That in turn has resulted in a vicious cycle of diminishing returns to investors and, consequently, diminishing access to new capital as banks and other third-party funders turn their focus to higher-return endeavors.
Apache’s specific situation has been exacerbated by the reality that its discovery of a major new resource in the Delaware Basin of Texas, the Alpine High, has been unfairly characterized in much of the energy media as just a natural gas play, even though, as I detailed in a January, 2019 piece, it is quite rich in multiple grades of liquids. That focus on the Alpine High has also led to the media and investment community giving short shrift to the company’s overall portfolio in the Delaware/Permian Basin, and its diverse and balanced global portfolio that CEO John Christmann recently said “affords the flexibility to allocate capital across all three hydrocarbon streams and among conventional and unconventional assets as warranted by market conditions.”
Apache’s common stock traded above $65 as recently as November, 2016, but had fallen all the way to below $21 in early December of last year. While other companies in Apache’s peer group have also seen their stock prices decline in recent years, Apache’s dropoff was more severe than most, causing rumors to swirl about the company possibly becoming a takeover target in 2020.
It was amid all of this confluence of factors that news broke on January 7 that the company, in a 50/50 partnership with French multi-national Total, had made a major new oil discovery offshore Suriname, a tiny nation on the north central coast of South America. Apache Corp.’s stock price jumped by 27% in the wake of the announcement on Tuesday, and rose again by $.22 per share on Wednesday amid a general selloff in oil stocks that resulted from the deescalation of the conflict between the U.S. and Iran.
The discovery well Maka Central-1 was drilled on Block 58 using the drillship Noble Sam Croft. According to Christmann, “Block 58 comprises 1.4 million acres and offers significant potential beyond the discovery at Maka Central. We have identified at least seven distinct play types and more than 50 prospects within the thermally mature play fairway.” Christmann went on to add that the partners’ preliminary formation evaluation data “indicates the potential for prolific oil wells. Additionally, the size of the stratigraphic feature, as defined by 3-D seismic imaging, suggests a substantial resource.”
