Mitsubishi Corp to invest C$2.9-bn in Encana's Cutbank Ridge gas project

Mitsubishi Corp, Japan's largest trading company will spend C$2.9 billion for a 40-per cent stake in a partnership with Canada's largest natural gas producer Encana Corp for developing the Cutbank Ridge gas assets in British Columbia.

The move comes after the Calgary, Alberta-based company last year called off a proposed C$5.4-billion deal to sell half of its holdings in Cutbank Ridge natural gas asset to PetroChina. (See: Canada's Encana Corp calls off C$5.4-bn shale gas deal with PetroChina)

Under the deal, Encana will own 60 per cent and Mitsubishi the remaining 40 per cent of the Cutbank Ridge partnership. Mitsubishi will pay C$1.45 billion on closing, which is expected later this month.

Tokyo-based Mitsubishi will invest an additional C$1.45 billion for developing the Cutbank Ridge gas assets, which reduce Encana's capital funding commitments to 30 per cent of the total expected capital investment.

The Cutbank Ridge gas assets in the partnership include about 409,000 net acres of undeveloped Montney lands in British Columbia, plus additional development potential in the Cadomin and Doig geological formations.

Encana will be the managing partner and operator of the partnership. The transaction does not include any of Encana's current Cutbank Ridge production of about 600 million cubic feet of natural gas per day, processing plants, gathering systems or its Alberta assets.

"We are excited to join Encana - a first-rate unconventional producer that has pioneered low-cost, continuous improvement and technical innovation across its premium portfolio of North American resource plays,'' said Jun Yanai, Mitsubishi's executive vice president, CEO of Mitsubishi's Energy Business Group.

Encana is a leading North American natural gas producer with about 95 per cent of its production being natural gas. It gas assets are located in key basins of northeast British Columbia, east Texas, Colorado, Wyoming and Louisiana.