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Apache Canada, Chevron Canada Announce Joint Venture For Kitimat LNG Project

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.

As part of this transaction, Apache will sell to Chevron a 50 percent interest in its 100 percent-owned undeveloped Liard and Horn River acreage for $550 million. Apache will pay Chevron to equalize interests in other Horn River acreage owned by Apache, Encana and EOG. Apache also will pay Chevron to increase Apache's ownership of the LNG plant and pipeline projects to 50 percent. Apache's net proceeds are expected to be approximately $400 million. The transaction, which is subject to certain government approvals, is expected to close in the first quarter of 2013.

As is customary in LNG projects, Apache and Chevron will explore sales of equity interests in the plant and upstream assets to foundation customers.

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