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Apache Canada, Chevron Canada announce joint venture for Kitimat LNG project

Wednesday, Dec 26, 2012

HOUSTON, Dec. 24, 2012 /PRNewswire/ -- Apache Corporation (NYSE, Nasdaq: APA) today announced that its subsidiary Apache Canada Ltd. has signed a broad agreement with Chevron Canada Limited to build and operate the Kitimat LNG project and develop world-class shale gas resources at the Liard and Horn River basins in British Columbia, Canada.

Chevron Canada, a subsidiary of Chevron Corp (NYSE: CVX), and Apache Canada each will become a 50 percent owner of the Kitimat LNG plant, the Pacific Trail Pipeline and 644,000 gross undeveloped acres in the Horn River and Liard basins. Chevron Canada will operate the LNG plant, which will be located on the northern British Columbia coast, and the pipeline; Apache Canada will operate the upstream assets.

"This agreement is a milestone for two principal reasons: Chevron is the premier LNG developer in the world today with longstanding relationships in key Asian markets, and the new structure will enable Apache to unlock the tremendous potential at Liard, one of the most prolific shale gas basins in North America," said G. Steven Farris, Apache's chairman and chief executive officer.

"With experience developing LNG projects, marketing expertise and financial wherewithal, Chevron is the preferred coventurer to join Kitimat LNG," Farris said. "Apache has a proven record in finding and developing shale gas resources in Canada and is the logical operator for the upstream elements of the joint venture.

"We are pleased to expand our relationship with Chevron that began with the Wheatstone LNG project now under construction in Western Australia," Farris said. "Kitimat LNG is the first mover among British Columbia LNG projects, and we expect the momentum of this project will accelerate with this new joint venture."

Chevron is the operator and led marketing efforts at Wheatstone, a two-train plant with capacity of 8.9 million tons of LNG per annum that is expected to commence operations in 2016. Chevron also operates the Gorgon LNG project in Australia and LNG Angola.

Encana and EOG Resources – currently 30 percent non-operating partners in Kitimat LNG and Pacific Trail Pipeline – will sell their interests to Chevron and exit the venture. As part of the transaction with Chevron, Apache will increase its ownership of the plant and pipeline to 50 percent from 40 percent.

Apache, an experienced producer of unconventional oil and gas resources, will operate the new joint venture's development of 220,000 gross acres in the Horn River Basin and 424,000 gross acres in the Liard Basin. Chevron will purchase a 50 percent interest in undeveloped upstream assets in the Liard Basin from Apache and other Horn River assets from Encana, EOG and Apache.

"At Liard and Horn River, we have built substantial positions in two of the most prolific shale gas plays in North America, with more than 50 trillion cubic feet of resource potential," Farris said.

In June, Apache announced long-term test results from three wells at Liard, including the D-34-K well, which was drilled to a vertical depth of 12,600 feet with a 2,900-foot lateral and a six-stage hydraulic fracturing completion. The 30-day initial production rate averaged 21.3 million cubic feet of gas per day, or 3.6 MMcf per day per frac stage. The ultimate recovery from the D-34-K well is estimated to be 18 billion cubic feet of gas. "We believe this is the most prolific shale gas resource test in the world," Farris said.

About Apache

Apache Corporation is an oil and gas exploration and production company with operations in the United States, Canada, Egypt, the United Kingdom North Sea, Australia and Argentina. Apache posts announcements, operational updates, investor information and copies of all press releases on its website, www.apachecorp.com.

SOURCE Apache Corporation

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