Here’a a tale of two a stocks, and what excites shareholder interest these days on US markets.
For grabbing the attention of investors, nothing beats a good old fashioned oil strike, as against the release of a new iPhone, or so it seemed overnight on Wall Street.
Overnight Apple revealed its latest iPhone range, a new iWatch and upgraded iPod in a multi media extravaganza in San Francisco and the shares eventually rose just on 0.6% to $US108.36.
That was a rather subdued reaction to what has become the world’s major annual product launch and the news failed to have any impact on the wider market which was lower for most of the session and closed with a small loss.
A few hours earlier, the small US oil and gas explorer, Apache, startled the market with news it had found a new major oil province in southwest Texas, in a almost unworked area of the Permian Basin, one of the most productive areas for oil and gas in America.
The company said that after drilling 19 wells in the area (called Alpine High) it had found an “immense” oil and gas reserve in the area that it estimated at around 3 billion barrels of oil and 75 trillion feet of gas.
The result – Apache shares charged higher, jumping more than 7% at one stage. By the close they were still up 6.7% at $US55.13 and Apache was the second best performing stock in the S&P 500 for the day.
It’s market cap topped $US21 billion, Apple’s ended close to $US585 billion.
Apple shares have risen 2% in the past week in anticipation of the release, but over the past month they have hardly moved. The new iPhone just doesn’t grab investors like it used to.
It makes you wonder if the new Apple products have become a bit humdrum for US investors – but then what is more prosaic than oil and gas – hardly the two most popular performers since mid 2014 when the great price slump started?
The new Apple products will be available shortly and will generate billions of dollars in revenue and profits by Christmas around the world – Apache will still be drilling in its huge area in southwest Texas.
The company has acquired nearly 1,243 square kilometres in the area and has boosted its 2016 capital budget by $US200 million, raising its full-year budget to about $US2 billion. Working the new area will absorb an estimated $US500 million this year, with more to be spent in coming years. The company has already spent more than $US400 million on buying the acreage in the discovery area and on 19 wells and other facilities.
Apache will drilling several thousand wells on two of the five formations in the Delaware Basin (a part of the much larger Permian basin) the Alpine High prospect.
The project is "an immense resource that we believe will deliver significant value for our shareholders for many years," said Apache chief executive and president John Christmann.
“We are incredibly excited about the Alpine High play and its large inventory of repeatable, high-value drilling opportunities,” he said in the statement overnight..
The discoveries so far are in two formations of the five , and Apache says there are high hopes of finding more oil and gas in the three other formation in the Delaware Basin.
Nine of the 19 wells so far drilled are producing oil and gas, but the company will have to spend hundreds of millions of dollars on infrastructure to connect the wells,as well as pipelines.
The Permian is on of the major oil and gas areas of the US having produced close on 30 billion barrels of oil in the last 90 years. There are estimated to be as many barrels left to produce and the Apache discovery will add to that belief.
The Apache news didn’t have any impact on oil prices. October West Texas Intermediate crude futures added 67 cents, or 1.5%, to settle at $US45.50 a barrel in New York, while in London, November Brent crude rose 72 cents, or 1.5%, to $US47.98 a barrel.
