It's been noted that at turbulent financial times such as these, cash is king in the A&D marketplace. And following an analyst day at Apache Corp. headquarters, it looks as if the big driller is quietly emerging as one of the kings. With a directive to consistently keep capex within cash flow, Apache is riding into this volatile era with a powder horn filled with $2.3 billion in dry powder consisting of $2 billion in cash and an undrawn $2.3 billion credit facility. As most other E&Ps were unprepared for the equity and credit market meltdown and misfiring with decidely wet powder, the sound of war drums are now coming from the Apache camp. Apache CEO Steve Farris told investors that his business development manager last week informed him that four asset deals had failed to close recently. Farris said, "Go back to your office and sit on your hands for three months then come back to me." Apache has been quiet for the better part of two years in the marketplace. The company's last significant acquisition was in March 2007 when it bought West Texas Permian assets from Anadarko Petroleum for $1 billion. That is about to change, and likely in a big way if insinuation ignites. One industry professional said, "The guys with cash---Apache in this case---are saying, "My cash is king and deals will probably be better in three months than they are now, so I'm going to wait and not enter the A&D market too strongly for a few more months. Let it get even worse." Said Farris: "The economic reality is a lot better today than it was four or five months ago." Analyst Jeb Armstrong with Calyon Securities said Apache is patiently waiting out the competition before pouncing. "With over $4 billion of liquidity, Apache is poised to make an acquisition at its leisure." He said possible acquisition targets are North Sea assets and domestically onshore or on the Gulf shelf, but not likely in the shale plays. Tudor Pickering & Holt Securities analysts David Heikkinen and Brad Pattarozzi cheer that they've "finally found somebody that loves this market." Apache is "biding their time" and in a possition of "deal-making strength." "Clearly the A&D market is a buyer's market and deals are going to get cheaper---much cheaper." Having $4 billion of firing power "is a strong hand which Apache will use to add value." The war drums are beating. Apache rides first-quarter 2009. Steve Toon, Editor, A&D Watch; The A&D Center, www.A-Dcenter.com; Contributing Editor, Oil and Gas Investor; www.OilandGasInvestor.com; stoon@hartenergy.com
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