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Apache Inks Deal to Enrich Alpine High Midstream Prowess

Zacks

Apache Corporation APA recently inked an agreement to build a new natural gas liquids (NGL) project, in a bid to advance the infrastructural development in its Alpine High play in the Permian Basin. The project, titled SCM Alpine, LLC, will be developed by Apache’s subsidiary Apache Midstream, ARM Energy Holdings LLC and its affiliate Salt Creek Midstream LLC. Notably, Salt Creek is a joint venture formed last month by Ares Management and ARM Energy to develop midstream infrastructure in the Delaware Basin.

Per the agreement, ARM Midstream Management LLC, a subsidiary of ARM Energy, will handle the management and operation of the SCM Alpine project. Apache Midstream has also signed an option to purchase 50% interest in the $100 million project.

The firms intend to build a NGL header system with a takeaway capacity of 445,000 barrels per day for catering to the growing production in the Delaware sub-basin of the Permian play. The project will include two pipeline segments, originating at the Salt Creek and Apache processing facilities in Reeves County, Texas. SCM Alpine is supported by 10-year commitments from both Salt Creek and Apache, which are open to renewal twice for an additional five years. With the construction work already been commenced, the project is likely to become functional in the first quarter of 2019.

The pipeline will transport NGLs to the Waha Hub, where it would interconnect with the downstream pipelines, providing access to Mont Belvieu and Corpus Christi fractionation facilities in Texas. By gaining access to the emerging Waha area, Apache’s long-term opportunities and optionality will be enhanced, providing it a competitive edge.

The project holds much significance for Apache, as Alpine High has been the most important discovery of the company in the recent times. Estimated to hold massive oil/natural gas reserves, Alpine High is viewed as a game changer that is expected to generate top-tier returns for the company. The company’s production in the Alpine high region totaled 26,000 barrels of oil equivalent per day in the last reported quarter, witnessing 33% growth from the fourth quarter of 2017.

Since the discovery of Alpine High, Apache has been spending heavily in the play and a midstream infrastructure development is very crucial for the company to remain on the growth trajectory in the region.

Zacks Rank and Key Picks

Currently, Apache has a Zacks Rank #3 (Hold).

Apache Corporation Price


Apache Corporation Price | Apache Corporation Quote

Some better-ranked players in the same industry include Bonanza Creek Energy, Inc. BCEI, Eclipse Resources Corporation ECR and Geopark Ltd. GPRK, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bonanza Creek delivered an average positive earnings surprise of 215.36% in the last four quarters.

Eclipse Resources delivered an average positive earnings surprise of 133.33% in the trailing four quarters.

Geopark’s 2018 earnings are expected to witness year-over-year growth of 745.516%.

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