Apache exits LNG business through sale to Woodside

Source: OGInsights

On 15 December 2014, Apache announced the sale of its interests in the Wheatstone and Kitimat LNG projects to Woodside for USD2.75bn. The move was widely anticipated with Apache announcing in its Q2 2014 results its intention to completely exit LNG; this message was reinforced in the company’s Q3 results on 7 November 2014.

The divestment follows a period where Apache’s share price has underperformed its North American focused peers. In July 2014, activist shareholder Jana Partners attributed this to the company’s international diversification and pushed for the company to divest its international assets. A re-focus on US onshore shows a retreat back to Apache’s core portfolio and historical strengths, where operating and political risks are lower and costs are also lower. The divestment proceeds can now be reinvested in the US onshore and at the same time, Apache’s cash flow is also improved with the exit of capital intensive LNG projects.

For Woodside, the Wheatstone LNG project complements its existing positions in Western Australia with potential synergies with Pluto LNG. The Canadian LNG position will become a new core area which will utilise Woodside’s strong LNG experience. The move has partly been driven by investor pressure to grow following the termination of a farm-in to the Leviathan development offshore Israel.

Transaction details

Australian assets

• 13% in Wheatstone LNG
• 65% in Julimar-Brunello gas development
• 65% in the Balnaves oil project

Canadian assets

• 50% in Kitimat LNG and associated upstream positions in the Horn River and Liard Basins

Transaction value

• USD2.75bn
• Expected to trigger c.USD650mm cash tax liability
• Effective date 1 July 2014

Approvals

• Pre-emption approvals on Balnaves and Kitimat
• JV consent on Kitimat
• Regulatory approvals