Apache spending bulk of 2014 budget on North America wells

* E&P capex seen at $8.5 billion

* Apache to sell down stake in Kitimat

* Global production seen growing 5 to 8 percent

By Anna Driver

HOUSTON, Feb 26 (Reuters) - Apache Corp said on Wednesday it will spend two-thirds of its exploration and production budget drilling more oil wells onshore in North America as it aims to improve returns and show steady production growth.

Inconsistent oil and gas output and exposure to political risk in Egypt has weighed on the company's shares and depressed the Houston company's valuation.

To sharpen its focus on high growth, higher margin shale oil drilling in North America, Apache has sold assets in the Gulf of Mexico and Argentina and in August sold a stake in its Egyptian oil and gas business to China's Sinopec Group.

Investors have so far embraced Apache's plan, but recognize much more work remains to be done. Shares of Apache fell 3 percent following a meeting with investors in Houston on Wednesday.

"It's a fairly large (exploration and production company), so the remake of the company won't happen over night," said Ted Harper, fund manager and senior research analyst at Frost Investment Advisors, LLC.

Apache said it still has some acreage in Canada to divest and it plans to sell down its 50 percent stake in the Kitimat liquefied natural gas export project in British Columbia. Chevron Corp is Apache's partner in that project.

Reuters reported in November that Sinopec was in talks with Apache to buy a stake in Kitimat, citing an executive with direct knowledge of the matter.

Over the last two years, the stock has fallen 25 percent, compared with a 35 percent gain in the broader Standard & Poor's 500 index

"We definitely have reset the bar," Apache Chief Executive Steve Farris told investors. "We now are a North American growth company."

Apache plans to spend 64 percent of its $8.5 billion exploration and production budget in the Permian Basin in West Texas and the Anadarko Basin in Oklahoma and Texas. Oil and gas production is forecast to grow 5 percent to 8 percent.

Production of crude oil and natural gas liquids from the company's North American onshore properties in places like the Permian and Anadarko Basins are expected to rise 15 percent to 18 percent this year, Apache said.

Last year, Apache spent about $10 billion on exploration and production, but can may spend less this year to support its smaller asset base.

In addition to the budget for exploration and production, Apache will spend $1.4 billion on its Wheatstone LNG project in Australia and an undetermined amount on Kitimat.

Analysts at Simmons & Co International Inc told clients in a note that the company's capital expenditures and production forecast with in line with expectations.

Shares of Apache tumbled $2.87 to $80.22 in afternoon New York Stock Exchange trading.