Chevron Canada Limited - a subsidiary of U.S. energy behemoth
) - has agreed to buy 50% operating interest in the Kitimat
liquefied natural gas (LNG) project and the planned Pacific Trail
Pipeline (PTP) for exporting energy to the rapidly growing
Asia-Pacific region. Moreover Chevron is also set to acquire 50%
ownership in an exploration area, spanning roughly 644,000 acres,
in the Horn River and Liard shale-gas fields in British Columbia.
All these agreements are still subject to regulatory approvals.
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As a part of the deal, Chevron will take over the respective 30%
stakes owned by
EOG Resources, Inc.
) in the project. Subsequently, Chevron will sell 10% of its
acquired interest in the development to
) for $150 million. This will increase Apache's share in the
project from 40% to 50%. Following the transactions, Chevron
Canada Ltd. will assume operatorship of both the pipeline and the
The proposed two-train Kitimat LNG Project carries a license from
the Canadian National Energy Board for exporting roughly 10
million tons of LNG annually.
In addition, Chevron Canada Limited is acquiring around 110,000
net acres in the Horn River basin from Apache, EOG and Encana.
Chevron will also buy approximately 212,000 net acres of land in
the Liard Basin from Apache. Along with Apache, Chevron Canada
will share 50% operating ownership in both of these projects.
Apache will be the operator of the natural gas developments.
San Ramon, California-based Chevron Corporation is one of the
largest publicly traded oil and gas company in the world, in
terms of proved reserves. It is engaged in oil and gas
exploration and production, refining and marketing of petroleum
products, manufacturing of chemicals, and other energy-related
Chevron shares currently retain a Zacks #3 Rank, which translates
into a short-term 'Hold' rating. We are also maintaining our
long-term 'Neutral' recommendation on the stock.
The company's current oil and gas development project pipeline is
among the best in the industry, boasting large, multiyear
projects. Additionally, Chevron possesses one of the healthiest
balance sheets among its peers, which helps it to capitalize on
investment opportunities with the option to make strategic
acquisitions. However, due to its integrated nature, Chevron is
particularly susceptible to the downside risk from any weakness
in the global economy. We are also concerned by the company's
high level of capital spending, which may result in reduced
returns going forward.