Woodside buys Apache assets for $4.5bn

Woodside buys Apache assets for $4.5bn

Australian energy giant Woodside Petroleum has sealed the purchase of several oil and gas assets from US-based Apache Corporation just a week after reports the local firm had been chosen as the preferred bidder in the auction.

The deal includes Apache’s 13 per cent interest in the massive Wheatstone LNG project in WA as well as a 50 per cent stake in the Kitimat LNG venture in Canada and a 65 per cent position in both the Balnaves oil project and the Julimar-Brunello upstream gas development.

Shares reacted poorly to the news, with Woodside losing 2.15 per cent to $34.63 at the 10.15am (AEDT) official morning open, against a benchmark index fall of 0.39 per cent.

The agreement, which also sees associated upstream oil and gas reserves head the way of Woodside, has been sealed at a cost of $US2.75 billion ($A3.35bn), though Woodside will additionally be required to reimburse Apache’s costs at the two LNG projects from June 30 this year until the sale officially closes. 

Those costs could amount to a further $US1bn payment from Woodside to Apache, with the seller indicating its total reimbursement will be about $US3.7bn ($A4.5bn).

The deal does not include the Phoenix South Discovery in the Canning Basin, which earlier this year was touted as one of the biggest local oil finds in recent history. This asset, along with other Apache acreage in the Carnarvon, Exmouth and Canning Basins, was at one point tipped to be included in a deal that could have topped $6bn.

Woodside chief executive Peter Coleman said the purchase was made after an intensive due diligence process, with the firm looking to capitalise on a downturn in energy asset valuations on the back of a sharp recent fall in oil prices.

“We have taken a disciplined and patient approach to identifying the right growth investment," he said.

"We are now in a position to take advantage of challenging market conditions and use cash reserves and existing debt facilities to acquire very high quality assets."

The WA-based firm said it is confident its credit rating will be unchanged in the wake of the purchase.

The sale follows a push from activist investor Jana Partners for Apache to divest its non-US assets.

"Today's announcement marks the successful completion of one of our primary strategic goals of exiting the Wheatstone and Kitimat LNG projects," Apache boss G. Steven Farris said in a statement.

"I am confident that Woodside's participation will have a positive impact in seeing these world-class LNG facilities through to first production."

The transaction is expected to close by March next year.