Leading independent energy company Apache Corporation (APA) announced plans to construct a compressed natural gas (CNG) refueling station at Bush Intercontinental Airport in Houston. The unit, which is expected to come online in 60–90 days, will be utilized for the ecopark fleet of buses carrying passengers to and from the city’s economy parking areas.
Management commented that the CNG station will not only lead to a cleaner and healthier Houston but will also be cost-effective for the company. Additionally, the more America uses clean-burning natural gas, the less its dependence will be on imported crude oil.
Apache targets to double the volume of its CNG-powered vehicle fleet (from 111 at the year-end 2010) as well as number of stations (7 stations as of last year).
Houston, Texas-based Apache is engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. The company’s U.S. operations are focused on some of the nation’s most prolific producing basins, including the outer continental shelf of the Gulf of Mexico, the Anadarko basin of Oklahoma, the Permian basin of West Texas and New Mexico, the Texas-Louisiana gulf coast and East Texas.
We believe that Apache’s large and geographically diversified reserve base, its balanced exposure to natural gas and crude oil, as well as healthy financial position provide long-term growth visibility.
However, taking into account the company’s sensitivity to gas/oil price volatility, high drilling costs, geo-political risks and project timing delays, we foresee limited upside potential for the shares. As such, we expect Apache to perform in line with the broader market and, therefore, maintain our Neutral recommendation.
Apache, which competes with peers such as Anadarko Petroleum Corporation (APC) and BP plc (BP) currently retains a Zacks #3 Rank (short-term Hold rating).
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