Apache shares were up on Tuesday after activist investor Jana Partners revealed a major stake and began agitating for changes at the Houston-based independent.
The hedge fund disclosed late on Monday that it had taken a stake in Apache worth more than $1 billion. It subsequently sent a letter to shareholders calling for the company to sell out of expensive international ventures, in particular the capital intensive Wheatstone and Kitimat liquefied natural gas projects in Australia and Canada, respectively.
Jana wants Apache to refocus its efforts on areas like the Eagle Ford shale and Permian basin in Texas, where profits are more predictable and near-term. Apache holds around 1.7 million acres in the Permian and about 180,000 acres in the Eagle Ford.
If Apache does not unload stakes in those international ventures, Jana urged the company to sell itself, according to reports.
"A value-unlocking opportunity this obvious and extraordinary is unlikely to persist," Jana reportedly wrote in the letter.
Apache has already made progress in unlocking shareholder value, selling off some $10 billion worth of international assets in the past year and a half. It has also indicated efforts to find a buyer for its 50% stake in Kitimat, which it operates alongside US supermajor Chervon, and has reportedly engaged in talks to sell its 13% stake in Wheatstone.
"We welcome Jana Partners' investment in Apache," Apache spokesman Pat Cassidy said. "We are focused on continuing to execute our strategic plan to rebalance our portfolio and to focus our strategy on more predictable and profitable production growth in our North American onshore assets."
Apache's New York-listed shares closed down on Tuesday at $98.56, but rose 5.4% in after-hours trade. The stock was at $103.60 at midday in Houston. The company has a market capitalisation of $40.38 billion.
Jana has had success as an activist investor recently, successfully lobbying management at QEP Resources to sell off non-core assets in the Midcontinent region and in the Williston basin earlier this year.
Analysts viewed the proposed moves as positive for Apache's stock.
Capital One Southcoast analyst Richard Tullis said Apache "could benefit from a more focused asset base that should allow the company to better highlight" its shale assets.
Energy investment bank Tudor Pickering Holt said a sale of the LNG stakes could be worth as much as $2.5 billion to Apache, "depending on sale timing".
However, Tudor Pickering said a sale "would more likely be a positive for optics" than net asset value
"Certain parts of North American portfolio could take more capital... but we suspect any proceeds would go largely towards additional share buybacks and/or dividend increases," Tudor Pickering said.
Apache spent more than $2 billion to buy back its own stock in the past year and the board has authorised repurchasing of additional shares.