Apache To Sell Stakes In Two LNG Projects To Woodside Petroleum For $2.75 Bln

(RTTNews) - Oil and gas producer Apache Corp. (APA) said Monday that it has agreed to sell its stakes in the Wheatstone LNG project in Australia and Kitimat LNG project in Canada, along with accompanying upstream oil and gas reserves, to Australian oil and gas producer Woodside Petroleum Ltd. (WOPEF.PK, WOPEY.PK, WPL.AX) for $2.75 billion.

Apache said it will be reimbursed for its net expenditure in the Wheatstone and Kitimat LNG projects between June 30, 2014, and closing which is estimated to be about $1 billion. Based on current estimates, Apache expects its net proceeds upon closing to be about $3.7 billion.

While reporting its financial results for the second quarter in July 2014, Apache said it plans to completely exit the Wheatstone LNG project in Australia and the Kitimat LNG project in Canada. Activist investor Jana Partners LLC has urged Apache to sell its international holdings and focus on drilling onshore in the U.S.

The transaction, expected to close in the first quarter of 2015, is subject to necessary government and regulatory approvals and customary post-closing adjustments. In addition, Apache noted that the sale of the Kitimat LNG project is subject to certain operator consents.

Under the terms of the deal, Apache will sell its equity ownership in its Australian subsidiary, Apache Julimar Pty Ltd. The Australian subsidiary owns a 13 percent stake in the Wheatstone LNG project and a 65 percent stake in the WA-49-L block, which includes the Julimar/Brunello offshore gas fields as well as the Balnaves oil development.

The transaction, which has an effective date of June 30, 2014, will also include Apache's 50 percent stake in the Kitimat LNG project and related upstream acreage in the Horn River and Liard natural gas basins in British Columbia, Canada.

According to media reports in Australia, Woodside Petroleum was left as the sole bidder for Apache's stakes in the Wheatstone and Kitimat LNG projects, after the falling oil price knocked other bidders out.

Steven Farris, chairman, chief executive officer and president of Apache said, "I am proud of Apache's legacy in advancing the Wheatstone and Kitimat LNG projects, and I am confident that Woodside's participation will have a positive impact in seeing these world-class LNG facilities through to first production. We look forward to the redeployment of the proceeds from this sale, which may be used to reduce debt, repurchase shares and to pursue other opportunities that enhance our asset base and drive profitable production growth."

Apache noted that receipt of proceeds from this transaction will trigger cash tax liability of an estimated $650 million, of which about $600 million is associated with the income tax due on Apache's Overall Foreign Loss account balance.

Upon incurring this income tax liability, Apache estimates it will have the flexibility to repatriate cash generated from foreign operations and future international strategic transactions with minimal U.S. cash tax impact.

Upon completion of the transaction, Apache will continue to hold upstream acreage offshore Western Australia in the Carnarvon, Exmouth, and Canning basins, along with related hydrocarbon reserves and production. Apache will also retain its 49 percent ownership interest in Yara Holdings Nitrates Pty Ltd and 10 percent interest in the related ammonium nitrate plant.

APA closed Friday's trading at $56.44. In Monday's pre-market activity, the stock is up $0.56 or 0.99 percent to $57.00.

On the Australian Securities Exchange, Woodside Petroleum shares closed Monday's trading at A$35.39, up A$0.79 or 2.28 percent on a volume of 3.12 million shares.