By Melissa Mott
July 25 (IFR) – Credit default swaps (CDS) in Apache Corp
have barely moved since the oil and gas company last week
announced a major sale of assets that has drawn a mixed reaction
from analysts.
The company’s CDS was at 71bp on Thursday at midday, close
to the middle of a 12-month range of 53bp-97bp. It has narrowed
just 4.5% since Apache announced the USD3.75bn sale of
operations and properties in the Gulf of Mexico, a muted
response given the significant size of the transaction as well
as the fact that it happened within three months of Apache
announcing its asset divestiture program.
While many analysts saw the sale as a needed clean-up of
Apache’s portfolio, strategists at Bank of America Merrill Lynch
and Barclays were leery of the fact that the company now has a
bigger percentage of its assets in Egypt, which has seen
significant unrest in recent months.
“On the margin, this makes Egypt a larger part of the
remaining portfolio, underlining perhaps the regional risk
program that remains a material overhang for sentiment,” BofA
Merrill analysts said.
Barclays said Apache’s CDS indicated that the market is
“pricing in a larger geopolitical risk premium than cash”.
Since the announcement of the sale to Fieldwood Energy,
Apache’s 3.625% bonds due February 1, 2021 have increased
modestly to $104.01. The 1.75% bonds due April 15, 2017 climbed
to $101.11 from par over the same time.
Proceeds of the asset sale are earmarked to pare debt,
expand financial flexibility and repurchase shares.
Apache is will report earnings on August 1. According to
Thomson Reuters data, earnings per share for the second quarter
are forecast between $1.75 and $2.31.
