Woodside buys Apache LNG stakes

Dec 15, 2014

Australia’s Woodside Petroleum will purchase Houston-based Apache’s interest in two LNG projects, Wheatstone and Kitimat LNG (pictured, right) for approximately US$2.75 billion.

Apache announced in late July that it would exit the two Chevron-operated projects to focus on its more lucrative onshore business. Speaking to OE at the time, GlobalData analyst Jonathan Lacouture said that Apache’s investors influenced the decision to leave the two projects.

“Apache’s divestiture (due to Jana Partners) is something they are pushing because they want low-risk money and US liquids is where that is at,” he said to OE in August.

The Houston company said it will be reimbursed about $1 billion for its net expenditure in the Wheatstone and Kitimat LNG projects between 30 June 2014 and the sale’s closing date, which is expected to close by 1Q 2015.

Chevron released a statement to OE, saying: “Chevron looks forward to welcoming Woodside Petroleum to the Wheatstone and Kitimat LNG projects. Chevron has a long history of working with Woodside, which has significant LNG expertise.”

Under the terms of the agreement, Woodside will pick up Apache’s equity ownership in its Australian subsidiary Apache Julimar Pty Ltd, which owns a 13% interest in the Wheatstone LNG project and a 65% interest in the WA-49-L block that includes the Julimar/Brunello offshore gas fields and the Balnaves oil development. Woodside will also pick up Apache’s 50% interest in Kitimat LNG and related acreage in the Horn River and Liard natural gas basins in British Columbia, Canada. The agreement will be effective as of 30 June.

Apache said that based on current estimates, the company’s net proceeds upon closing are expected to be approximately $3.7 billion.

"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,” said G. Steven Farris, chairman, Apache’s chief executive officer and president. “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.”

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.

Woodside CEO Peter Coleman called the acquisition "a natural fit" for the company's portfolio. “We have taken a disciplined and patient approach to identifying the right growth investment," he said on 15 December. "We are now in a position to take advantage of challenging market conditions and use cash reserves and existing debt facilities to acquire very high quality assets.

"Our capital commitments on both sanctioned projects and sustaining capital are expected to be at a low level of approximately $0.8 billion each year over the next three years,” he said.