Apache Strikes Liquid Gold
In this clip from Industry Focus: Energy, Motley Fool analysts Sean O'Reilly and Taylor Muckerman talk about three of this month's biggest news stories in energy: Apache's (NYSE: APA)gargantuan finds in the Permian, Spectra Energy's (NYSE: SE)buyout from Enbridge(NYSE: ENB), and EOG's (NYSE: EOG)acquisition of a small private company for some $2 billion.
A full transcript follows the video.
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This podcast was recorded on Sep. 8, 2016.
Sean O'Reilly: What's up with this couple billion barrel find out in theDelaware basin?
Taylor Muckerman: Yeah, Apache striking liquid gold. Two billion barrels found --
O'Reilly: I thought it was three. It's a lot.
Muckerman: At least two billion barrels of oil. They're saying it's a new West Texas field,it's in a far-off corner of the Permian basin. Two billion,that's the biggest fine in several years.
O'Reilly: So,what did you mean when you said that just now? It'd beendrilled 100 years ago, and everyoneforgot about it?
Muckerman: I guess,geologistsfigured that it really wasn't conducive to fracking,but now Apache is looking at what could be an $8 billion oil field. Hence, they were up double-digit percent yesterday.
O'Reilly: Yeah. That's pretty good. Speaking ofdouble-digit percentage gains, Spectra Energy getting bought out for $33 billion.
Muckerman: Something like that.
O'Reilly: Thisshocked everybody, right?
Muckerman: Yeah,I think it did. Neither company is struggling. I think Enbridge justwants todiversify. It's traditionally more oil heavy, and Spectra is very much more natural gas heavy. So, they decided to pony up andcreate the largest energy infrastructure companyin North Americaa very wide margin. Take that,Kinder Morgan (NYSE: KMI)!
O'Reilly: Poor Kinder Morgan.
Muckerman: Womp womp. First theycut their dividend,now their secondbest. Well,second biggest. Best is a different argument.
O'Reilly: They'regoing to have to buyONEOKor something [laughs].
Muckerman: Who knows. Theyneed to worry about that debt that they cut their dividend to pay off.
O'Reilly:So,this was just a stock deal, right?
Muckerman: All-stock deal. I think Enbridge shareholders own around 57% of the company, Spectrashareholders will own 43% of the company, give or take a tenth or a hundredth somewhere along the lines.
O'Reilly: Everybody's buying stuff this week.
Muckerman: Big week.
O'Reilly: EOG announced over the weekend, was it? Monday?
Muckerman: It came out on the 6th.
O'Reilly: They bought a small privateoil and gas producer. By small, I mean $2.3 billion. Is this the sign that things are turning?
Muckerman: It could be. EOG istraditionally not acquisitive company, becausethey like what they own and theyfigure they could get a higher return on just drillingwhat they know they have, which has shown to besuperior to most other companies' land holdings. Butthis company had some acreage. I say some,it's a considerable amount,obviously, if you're paying over $2 billion for it, that bordered on some of their acreage. So,now they can drill longer horizontal wells to access that oilwithout having to drill multiple wells. It'skind of just supplementing the acreage they already own,expanding their footprint rather than buying upsomewhere else in the country. It's basically just, their blob is growing.
O'Reilly: Right. So,this still fits within their corporate culture.
Muckerman: Absolutely.
Sean O'Reilly has no position in any stocks mentioned. Taylor Muckerman owns shares of Spectra Energy. The Motley Fool owns shares of and recommends Kinder Morgan, ONEOK, and Spectra Energy. The Motley Fool owns shares of EOG Resources. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.