Why Did This Oil Company Sell a Promising Prospect?

Normally, when an energy company sells its stake in a field, we tend to think of two things -- either the play has outlived its value, or the company is in financial trouble and needs the cash. But Anadarko Petroleum's (NYSE: APC  ) recent $2.6 billion sale of part of its Mozambique gas find doesn't seem to fit the mold of those two explanations. So why exactly is the company looking to sell?

As promising as Mozambique may be as an LNG-export hub, it will take several years to develop the facilities and infrastructure. Anadarko may be a large exploration and production company, but sitting on those assets for a long time without generating cash just didn't make sense. Tune into the video below where contributor Tyler Crowe explains why this sale makes sense in the grand scheme of things, and how Anadarko isn't alone in making these sorts of moves.

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  • Report this Comment On August 29, 2013, at 8:35 PM, MARKETSURFER wrote:

    Please be aware that Anadarko only sold a portion of their holdings in this investment. They sold

    about 10% out of their approximately 35% holding in this investment and they still remain the largest

    percentage holder of an interest here with about a 25% interest left. In addition to raising capital with a partial sale they are also diversifying their holdings around the world which reduces their overall risk.

    The LNG plant to be built to service this field requires an investment of tens of billions of dollars and with this sale they gain access to additional capital required for building the pipelines and the LNG processing plant so they are not stuck with a massive investment to be made on their part of tens of billions of dollars.

    Very smart move on Anadarko's part.

  • Report this Comment On August 30, 2013, at 9:39 AM, akuofia wrote:

    I agree with marketsurfer - this is pure portfolio risk management.

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