Apache Australia Pty Ltd. - an affiliate of
Apache Corporation
(
APA
) - awarded a supply contract to oilfield services firm Subsea 7.
The contract, worth $100 million, will be utilized for the Julimar
gas project in the offshore region of Western Australia.
The scope of the deal covers the transportation, installation and
pre-commissioning of subsea umbilicals and manifolds as well as
diver-less tie-in spools. U.K.-based Subsea 7 will immediately
start rendering project management and engineering services from
its office in Perth. The company's offshore activities related to
the contract are expected to begin by late 2014.
Located in the Carnarvon Basin, Julimar along with Brunello natural
gas field is in the exploration permit WA-356-P, about 112 miles to
the west-northwest of Dampier. Apache controls 65% operating
interest in the Julimar and Brunello development, while the
remaining 35% is with Kuwait Foreign Petroleum Exploration Company.
The Julimar and Brunello fields are touted as one of Apache's
biggest natural gas discoveries in Australia. These ventures are
expected to contribute immensely to Apache in setting up a strong
foothold in the rapidly growing global liquefied natural gas (LNG)
market. Apache expects to generate nearly 2.1 trillion cubic feet
of sales gas from the Julimar and Brunello fields.
Houston, Texas-based Apache is a leading independent energy company
engaged in the exploration, development and production of natural
gas, crude oil and natural gas liquids.
Apache - which partners
Chevron Corporation
(
CVX
) in another Australian natural gas venture, Wheatstone Project -
currently retains a Zacks #3 Rank (short-term Hold rating). We are
also maintaining our long-term Neutral recommendation on the stock.
We believe that Apache is in a better position to weather the
current uncertain environment than many of its peers in the
exploration and production space, given its solid production growth
outlook, strong financial health and diversified asset base.
However, Apache's sensitivity to gas/oil price volatility, its
drilling results, inflationary cost conditions, geo-political risks
and project timing delays continue to be an overhang on the stock.
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