Apache announces “prolific” oil discovery in South America, shares jump 25%


Global oil markets are pretty tense right now, as fresh news of a strike on American soldiers in Iraq will likely send oil, as well as other commodities and equities, either plunging or surging depending on what kind of asset they are. Amidst these tensions, there was actually a major oil discovery in South America which could provide a new source of oil to the international markets.

Major oil discovery and production company Apache (NYSE: APA) announced in a joint press release alongside its partner Total SA (NYSE: TOT) that they made found a “significant” discovery of oil off the coast of Suriname in Guyana, South America. This is a pretty big deal, as this could be the second major discovery in this region after a major find from Exxon Mobil off the coast of Guyana.

“We are very pleased with results from Maka Central-1. The well proves a working hydrocarbon system in the first two play types within Block 58 and confirms our geologic model with oil and condensate in shallower zones and oil in deeper zones,” said John J. Christmann, Apache CEO and President. “Preliminary formation evaluation data indicates the potential for prolific oil wells. Additionally, the size of the stratigraphic feature, as defined by 3-D seismic imaging, suggests a substantial resource.”

It was a delightful surprise for many investors, as Apache had previously released a pretty barren progress report in December, which raised questions about whether the company was struggling to make discoveries. Shares of Apache ended up tumbling quite a bit in December, but today’s spike more than made up for any previous losses. At the moment, analysts predict that this discovery could add an extra $1 billion to the overall valuation of the project, possibly more if further tests prove successful as well.

Both of these projects could push Guyana, a relatively small country with a population of less than one million, into becoming one of the largest oil producers in Latin America with a daily output of 750,000 barrels of crude.

Despite Apache’s position as a large-cap stock with a $12 billion market valuation, shares of the oil discovery company surged by over 25% in response to the news. For the most part, however, Wall Street analysts have been pretty neutral about the stock, adopting a wait and see approach to see how the company turns out. Around 17 out of the 29 Wall Street analysts covering the stock have a neutral “hold” position on the company, while eight have a “buy” and four have a “sell” rating. In light of this new discovery, however, Apache is likely to have an excellent year going forward.


Apache Company Profile

Apache, based in Houston, is one of the largest independent exploration and production companies in the world. Its asset base includes conventional and unconventional resource plays throughout North America as well as oil and gas projects in Egypt and the North Sea. At year-end 2018, proved reserves totaled 1.2 billion barrels of oil equivalent, with net production of 466 mboe/d. Liquids (oil and natural gas liquids) made up 66% of production and proved reserves. – Warrior Trading News