UPDATE: UBS Investment Research Downgrades Apache Following Announcement of Egyptian Assets Sale

In a report published Wednesday, UBS Investment Research analyst William A. Featherston downgraded the rating on Apache Corporation (NYSE: APA) from Buy to Neutral, but reiterated the $90.00 price target.

In the report, UBS Investment Research noted, “APA has outperformed on the recently announced sale of 33% of its Egyptian assets and, to a lesser degree, following its $3.75 billion sale of shallow Gulf of Mexico assets. But both deals are at prices dilutive to APA's EV/2014E DACF, pushing its valuation from a traditional 1 point discount to slightly above peers on both EV/DACF and P/NAV. We expect Egyptian proceeds to largely remain abroad to fund a ~$3 billion FCF deficit in Australia from 2013-15, making any increase in the planned 30 MM share buyback unlikely. We also expect APA to divest its deepwater GoM assets for $2.5 billion, which should be accretive but in line with market expectations. Post-restructuring, we expect APA to guide to 5-7% per annum ‘organic' production growth, albeit at a cost of a material FCF deficit (UBSe $3.0bn in '14).”

Apache Corporation closed on Tuesday at $87.26.