The Chinese are the world's insatiable energy asset buyers. In their most recent deal with a U.S. company, they took a stake in Apache Corp.'s Egyptian holdings. What's next?

In August, Apache Corp. beat the odds and the market, making a $3.1-billion joint venture deal in Egypt—a country the U.S. government has warned U.S. citizens to avoid as it is rocked by political unrest and violent demonstrations. Apache wanted a partner for its Egyptian operations, but it wasn't immediately clear which company would step into such a pricey venture, in such a volatile place.

Perhaps not surprisingly, the world's insatiable buyers, the Chinese, showed up yet again. Sinopec International Petroleum Exploration and Production Corp. not only paid to join with Apache in Egypt, but paid more than some industry observers thought the assets were worth.

In the deal announced at the end of August, Houston's Apache sold a third of its Egyptian oil and gas interests to Sinopec, a de facto arm of the Chinese government. More deals between the two are possible, including a North Sea transaction, according to analysts.

Apache will continue to operate its Egyptian upstream oil and gas business, which has a ballpark value of $9.3 billion. Despite the lag in overall M&A transaction value compared to 2012, Apache pulled off a solid trade in the estimation of industry analysts and the Chinese are expected to continue their role as a power player in the global energy market.

From Australia to Angola to the U.S. Eagle Ford shale, the Chinese are generally assumed to be all in when a deal is in play. Spending by Chinese companies reached more than a quarter of global M&A in 2012, with the $15-billion buyout of Calgary's Nexen Inc. by China's CNOOC Ltd. among the largest transactions. Of $116 billion in deals, Chinese companies spent more than $31 billion, according to Wood Mackenzie.

In September, when reports emerged that Occidental Petroleum Corp. was seeking a buyer for its Middle East assets, which it values at $20 billion, China's shadow loomed.

Pavel Molchanov, a Raymond James analyst, said in a report it's a good bet that whoever steps up to the plate for the assets will be one of China's major players: Sinopec, CNOOC or PetroChina.

Apache's deal set “a clear precedent with its recent sale of a 33% Egyptian stake to China's state-controlled Sinopec,” Molchanov said. “At the risk of overly generalizing, we have come to expect that Chinese oil and gas companies will invest anywhere, at any time, and at (practically) any price in order to support their global accumulation of natural resources.”

While other non-Chinese investors are potential bidders for Occidental's Mid-East/North Africa division, “we think that any plausible buyer would be a government-sponsored enterprise, Chinese or otherwise,” Molchanov said.

Apache itself has been on a roll after a $5.3-billion Gulf of Mexico Shelf sale to Fieldwood Energy LLC, Houston, earlier this year. Adding the Egyptian sale, Apache will have generated proceeds of $6.85 billion when that deal closes.

The Egyptian megadeal is a continuation of its efforts to streamline the company and enhance shareholder value, said Guy Baber, Simmons & Co. International vice president and head of integrated company research. It is “impressive that the company was able to close this transaction in light of the ongoing political turmoil in the region.”

David Tameron, Wells Fargo Securities senior analyst, noted in a report that Apache's assets are well removed from the instability in Cairo. But the deal was still impressive, since the company received about six times free cash flow, beating market expectations that it would net, at best, three or four times free cash flow.

“We believe the Street valuation for APA's Egyptian assets was below the implied $9.3-billion value from this deal,” Tameron said. “Our all-in Egyptian valuation was approximately $20.80 per share, while this deal implies $23.50 per share. Not a substantial upside to our former level, but certainly well above what the market was giving APA for these assets.”

Tameron is bullish on the company, saying Apache is one of the best-run companies in the business and “belongs in every portfolio.” He added that the company's assets and exploration opportunities have set it up to outperform over the coming quarters. Proceeds from the sale will not be taxed if the funds are not repatriated to the U.S., the analyst noted.

Apache's deal could alleviate market skepticism that no one is willing to invest in the volatile region, according to a report from Evan Calio, lead analyst for Morgan Stanley. It also will have ramifications for Occidental's possible sale.

“Recall that we believe the price paid in a Middle East sale for Oxy's sale or partial sale is the key to unlocking value for Oxy and is likely a fourth-quarter 2013 outcome,” Calio said.

And that's where China comes in. Molchanov said Chinese companies have the advantage of outbidding Western producers, which have to worry about how trading multiples look and the risk of quarterly earnings choppiness.

“CNOOC, PetroChina and Sinopec have the luxury (if we can call it that) of taking a substantially long-term, highly strategic approach to resource accumulation,” he said. “Quite simply, Beijing is using these companies (plus its sovereign wealth funds) as geopolitical instruments to reduce dependence on energy imports, as well as expand political influence.”

Bottom line, China's companies are highly motivated buyers but also valuable partners.

G. Steven Farris, chairman and chief executive of Apache, said at the time of the deal announcement that Sinopec's technical expertise complements Apache's 20 years of operations experience in Egypt.

“Sinopec is an ideal partner for us, and we look forward to the growth and value generation ahead for both companies through the expansion of our collaboration to other projects,” Farris said. Apache is the largest acreage holder in Egypt's Western Desert.

On August 1, the company reported seven oil and gas discoveries, including wells with tests indicating 14,700 barrels of oil and 28 million cubic feet (MMcf) of production per day.

Apache employs about 9,000 Egyptians through direct employment, through participation in the Khalda Petroleum Co. and Qarun Petroleum Co. operating joint ventures with Egyptian General Petroleum Corp., and through employment with oilfield service and construction contractors.

The company plans to use proceeds from the venture to pay down its debt as it seeks to buy back shares. It recently disclosed it has bought back more 200,000 shares and was awaiting further cash to buy more aggressively.

The Egypt partnership has an effective date of January 1, 2013, and the deal is expected to close in the fourth quarter. Apache continues to rebalance its portfolio toward assets with predictable growth rates and solid rates of return.

“Our successful exploration and development programs in Egypt have been an important contributor to both growth and cash flow for many years,” Farris said. With the partnership, “we are ensuring they can continue this contribution in the future. At the same time, we are taking meaningful steps to rebalance our portfolio to better deliver the full potential of our deep North America onshore resource inventory.”

Sinopec may consider additional deals with Apache. Bob Brackett, Bernstein Research senior analyst, noted in a report that Apache's talk of a “global partnership with Sinopec” could mean more collaboration to come. Brackett thinks more deals are in the pipeline for Apache, including a potential exit from the deepwater Gulf of Mexico.

Sinopec has acquired North Sea assets from Talisman Energy Corp., giving Apache's North Sea assets “strategic sense in the new global partnership with Sinopec,” Brackett said.

He noted that Sinopec International is state-owned, which means, bluntly, “Apache's partner is now a direct arm of the Chinese government. As such, government actions such as changes to fiscal terms or expropriation would take on a diplomatic bent and are therefore in our view much less likely.”

China has long been investing overseas, using the economic downturn for acquisitions in the Middle East, North America, Latin America, Africa and Asia, according to the U.S. Energy Information Administration.

From 2002 to 2010, Chinese companies participated in $65 billion worth of deals, according to the International Energy Agency (IEA).

Among other recent deals, Sinopec bought Nigerian assets from Total for $2.5 billion, CNOOC spent AU$2 billion for interest in Queensland Curtis LNG, and PetroChina paid BHP Billiton $1.6 billion for an interest in an Australian LNG project.