(By Balaseshan) Apache Corp. (NYSE: APA) said its Canadian unit has signed an agreement with Chevron Corp.'s (NYSE: CVX) subsidiary to build and operate the Kitimat LNG project and develop shale gas resources at the Liard and Horn River basins in British Columbia, Canada.
Chevron Canada and Apache Canada each will become a 50% owner of the Kitimat LNG plant, the Pacific Trail Pipeline and 644,000 gross undeveloped acres in the Horn River and Liard basins.
Chevron Canada will operate the LNG plant, which will be located on the northern British Columbia coast, and the pipeline; Apache Canada will operate the upstream assets.
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Chevron is the operator and led marketing efforts at Wheatstone, a two-train plant with capacity of 8.9 million tons of LNG per annum that is expected to commence operations in 2016. Chevron also operates the Gorgon LNG project in Australia and LNG Angola.
Encana Corp. (NYSE: ECA) and EOG Resources Inc. (NYSE: EOG) – currently 30% non-operating partners in Kitimat LNG and Pacific Trail Pipeline – will sell their interests to Chevron and exit the venture. As part of the transaction with Chevron, Apache will increase its ownership of the plant and pipeline to 50% from 40%.
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Apache will operate the new joint venture's development of 220,000 gross acres in the Horn River Basin and 424,000 gross acres in the Liard Basin. Chevron will purchase a 50% interest in undeveloped upstream assets in the Liard Basin from Apache and other Horn River assets from Encana, EOG and Apache.
As part of this transaction, Apache will sell to Chevron a 50% interest in its 100%-owned undeveloped Liard and Horn River acreage for $550 million. Apache will pay Chevron to equalize interests in other Horn River acreage owned by Apache, Encana and EOG.
Apache also will pay Chevron to increase Apache's ownership of the LNG plant and pipeline projects to 50%. Apache's net proceeds are expected to be about $400 million. The transaction, which is subject to certain government approvals, is expected to close in the first quarter of 2013.
APA is trading down 1.74% at $78.61 on Monday, while CVX trades down 1.08% at $108.53.