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Apache to Sell Stake in Kitimat LNG

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Recently, U.S. energy firm Apache Corporation (APA) announced its decision to divest 20% stake in Kitimat liquefied natural gas (LNG) export project.

This $15 billion venture is led by Apache (with 40% share) in partnership with Encana Corp. (ECA) and EOG Resources Inc. (EOG) (with 30% stake each). Among the various gas-liquefaction projects announced so far, the Kitimat LNG facility is considered to be the most sophisticated, while the remaining are still in their initial development phases. This enables Canadian exporters of oil and gas to expand out of the North American market.

Management at Apache stated that the company and its partners will reduce their shares in the Kitimat LNG project proportionately to offer the 20% stake. They also added that major buyers are from North Asia but the company intends to offer equity to foundation buyers or large investors.

The companies are expected to take a decision within the first quarter of 2013 and operations are likely to commence from 2017.

Founded in 1954, Houston, Texas-based Apache is one of the world's leading independent energy companies engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids.

Apache is noted for growing through the acquisition and development of existing reserves. Its long-term production growth visibility significantly improved following the recent BP Plc (BP) asset acquisition, the purchase of a portion of Devon Energy Corporation’s (DVN) Gulf of Mexico assets and the deal to acquire Mariner Energy. These new acreage positions further complement the company’s diversified asset base.

We are maintaining our Neutral recommendation on the stock, as we see limited upside over the near term. Currently, it retains a Zacks #3 Rank (short-term Hold rating).


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