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Apache could be a successful turnaround story of the year.

Apache is transitioning into a North America onshore focused E&P company on the back of massive divestitures.

There are two major catalysts that investors should watch out for, in the near term.

Last year, investors cheered when Apache (NYSE:APA) sold a significant portion of its operations in Egypt. This year, the exploration and production company's stock could rally again as it gears up to sell its LNG assets.

In a recent interview, Barclays' analyst Thomas Driscoll has said that investors should watch out for Apache in 2014-15 as the oil giant's turnaround story unfolds.

Apache has been working on a massive restructuring program, which includes asset sales, in order to cut down its debt and increase its focus on the lucrative North American onshore operations.

The Transition

In the early 1990s, Apache began international expansion by entering Egypt and Australia. By 2009, Apache was getting 34% of its output from North American onshore operations. Nearly 19% came from the Gulf of Mexico while the rest, 47%, came from Egypt, North Sea, Australia and Argentina. Back then, Apache decided that it is going to become a North American onshore focused exploration and production company, reducing its exposure towards international markets as well as deepwater resources. And this is exactly what it has done.

In the previous quarter, Apache got 62% of its production (pro forma basis) from its North American onshore business, just 2% from the Gulf of Mexico and the remaining 36% from Egypt, North Sea and Australia.

Data source: Company presentation.

Asset Sales

This transition is being powered by asset sales. Last year, the company sold $9.8 billion of assets, including some of its operations in Egypt and Gulf of Mexico, the Argentina business and shallow gas assets in Canada.

This year, on June 30, the company announced that it has completed the sale of its deep-water assets at the Gulf of Mexico, including Lucius and Heidelberg projects and 11 exploration blocks, to Freeport-McMoRan Copper & Gold (NYSE:FCX) for $1.4 billion.

Lucius and Heidelberg, operated by Anadarko Petroleum (NYSE:APC), are home to some of the deepest wells in the region and hold as much as 700 million barrels of oil. The Lucius development can start pumping oil as early as this year while Heidelberg is expected to begin commercial operations within two years. Apache, on the other hand, wants to focus on extracting oil from the continental shelf, from depths of less than 1,000 feet.

Two Projects - Two Catalysts

Although Apache has already become North American onshore focused exploration and production company, the asset sales are far from over. The company is looking forward to sell its two assets in particular: The 8.9 million tons per annum Wheatstone LNG project in Australia and the 10 million tons per annum Kitimat LNG project in Canada. Apache, which has partnered with Chevron (NYSE:CVX) for both projects, holds 13% and 50% stakes in the Australian and Canadian projects respectively.

During a conference held earlier in May, Apache's head Steve Farris said that the company was "in the process of trying to monetize" Wheatstone. The Wheatstone project is expected to begin production from the final quarter of 2016. For Apache, the project could generate $1 billion in annual cash flows for two decades.

However, Apache says that it is "better off taking that money today and invest it in its North American onshore operations. According to analysts estimates, the company's stake is valued at $2.5 billion. Apache might be able to attract some Chinese or Middle Eastern buyers.

As for Kitimat, Apache has said that it will sell it down "significantly over the next quarters." The company has said that it is not going to sell all of it, at least for the interim, but a major portion will be sold this year to either a downstream or upstream buyers, or to upstream investors looking for exposure towards Canada's LNG market.

Bottom Line

The asset sale, according to analysts' estimates, could cut down Apache's CapEx requirement by $1.4 billion for this year and $800 million for the next, and help the company in financing additional share buybacks. And that is just considering Wheatstone. As mentioned above, the company has also targeted to sell most of its Kitimat stake in the current year.

Last year, when Apache announced the sale of its Egyptian assets to Sinopec (NYSE:SNP), the company's shares shot up by nearly 9%. Something similar might happen this year as well if the company fetches a good price for its stake in Wheatstone and Kitimat LNG projects.

Apache appears seriously undervalued at the moment, meaning there is room for significant growth. The company's enterprise value to EBITDA ratio is significantly lower than the average ratio of its peers such as Noble Energy NBL, Range Resources RRC, Anadarko Petroleum and Devon Energy DVN.

Data Source: Yahoo! Finance.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.