Mariner Energy Completes Merger With Apache

 |  Includes: APA, ME
by: Zacks Investment Research

U.S. energy firm Apache Corp. (NYSE:APA) has closed its previously announced acquisition of Texas-based deepwater Gulf of Mexico (“GoM”) operator Mariner Energy Inc. (ME) for about $4.3 billion in stock, cash and debt. The transaction, which was declared days before the April 20 blowout at BP plc’s (NYSE:BP) Macondo well, was completed following Mariner shareholders’ vote of approval.

Per the final agreement, Apache paid approximately $800 million in cash and issued 17.5 million shares of common stock to Mariner shareholders. Additionally, Apache assumed $1.6 billion in debt. Post closure of the deal, former Mariner stockholders will hold about 5% of Apache's outstanding shares.

Mariner Energy is an oil and gas explorer having principal operations in the Permian Basin, the Gulf Coast and the GoM. It specializes in deepwater exploration, with interests in nearly 100 blocks, seven discoveries in development and more than 50 prospects.

The acquisition will allow Apache to extend its deepwater projects in the GoM. By combining its global presence and strong financial resources with Mariner's track record of successful deepwater exploration and an inventory of developments and prospects, Apache would be able to jump-start its position in one of the world's most prolific oil exploration basins. Apache is already involved in the 2008 deepwater Geauxpher discovery and development at Garden Banks 462 with Mariner.

Together with the company’s $7 billion acquisition of the financially troubled U.K. major BP's oil and gas assets in the U.S., Canada, and Egypt and its earlier $1 billion acquisition of Devon Energy Corp's (NYSE:DVN) GoM Shelf assets, the Mariner merger will provide Apache with a rich inventory of growth and shareholder value creation opportunities for years to come.

Founded in 1954, Houston, Texas-based Apache is one of the world's leading independent energy companies engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids.

Apache shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.