(Adds detail from conference call)
By Anna Driver
HOUSTON, July 31 U.S. oil and gas company Apache
Corp, under pressure from activist investor Jana
Partners, said on Thursday it plans to sell interests in two
liquefied natural gas (LNG) projects as it sharpens the focus on
developing North American shale fields.
The move, a significant pullback from the LNG market,
relieved investors worried about the potential project costs.
Apache shares rose to their highest level in more than two
Apache reported that profits fell in the second quarter, but
still topped expectations.
Apache said it intends to completely exit LNG projects - in
which it partners with Chevron Corp - in Wheatstone in
Australia and Kitimat in Canada. Apache is also evaluating its
international assets for a potential spinoff to shareholders,
outright sale or other options, Chief Executive Officer Steve
Farris told analysts on a conference call.
"In our opinion, it makes sense that we reduce the size of
our international assets," Farris said, noting that the
company's North American and international units "are two
Jana, which disclosed in June it had a $1 billion stake in
Apache, has urged the Houston-based company to exit the Canadian
and Australian projects and focus on drilling onshore in the
Over the last year, Apache has sold $10 billion worth of
assets to focus its drilling on more profitable and predictable
shale oil wells in places like the Permian Basin and the Eagle
Ford in South Texas.
"Apache is really trying to focus on domestic oil
production," said Brian Youngberg, an analyst at Edward Jones in
St. Louis. "The question is, For a company the size of Apache,
do they need to be involved in big legacy LNG projects that need
a lot of cash upfront?"
The $15 billion Kitimat LNG project in British Columbia is
the most advanced of the dozen or more LNG plants that have been
proposed for Canada's Pacific coast, though rival projects by
Malaysia's Petronas and Royal Dutch Shell Plc
are gaining ground.
Originally proposed as a regasification facility for LNG
imports, the Kitimat site has environmental approvals in hand.
Early construction has begun, and plans for a pipeline from
northern British Columbia's shale-gas fields to the facility are
well under way and face limited opposition from Aboriginal
For companies that want to supply the Asian market, taking a
stake in the Kitimat facility could speed those plans.
CHEVRON TO DISCUSS KITIMAT
Still, Kitimat has yet to get a final investment decision
from Chevron and has been under review since the company bought
into the project alongside Apache in December 2012.
It also needs to finalize LNG sales agreements.
Chevron has said publicly it was concerned about costs,
given Kitimat's location in a remote part of British Columbia.
Chevron said in a statement that it will discuss its view
of the project when it reports earnings on Friday. Previously,
the San Ramon, California-based company has said that it has no
interest in becoming sole owner in the Kitimat project, or even
increasing its stake beyond 50 percent.
One source involved in LNG trade said Kitimat is struggling.
Apache's Farris said his company's exit from the project
will not affect its valuation.
"Frankly, Chevron and Apache are way ahead of anyone else in
that arena," Farris said.
Apache reported second-quarter profit fell to $505 million,
or $1.31 per share, from $1.02 billion, or $2.54, in the same
period a year earlier.
Excluding one-time items, Apache posted a profit of $1.67
per share. Analysts, on average, expected $1.65, according to
Thomson Reuters I/B/E/S.
Apache shares rose $1.00, or 1 percent, to $102.29 in
(Additional reporting by Scott Haggett in Calgary, Ernest
Scheyder in New York and Oleg Vukmanovic in Milan; Editing by
Terry Wade, Jeffrey Benkoe and Leslie Adler)