Encana sells US oil and gas assets worth $900 mn
09 October 2015
Canadian oil and gas major Encana Corp said yesterday that it has agreed to sell some of its US oil and gas assets for about $900 million to a new joint venture led by Canada's biggest pension fund to boost the company's financials amid plunging crude oil prices.
The buyers include Canada Pension Plan Investment Board (CPPIB) which will have a 95-per cent interest in the joint venture, while the remaining 5 per cent will be held by the Denver-based investment firm Broe Group.
The move is aimed at strengthening the company's balance sheet, and create greater flexibility in the current market environment, Encana said in a statement.
The assets earmarked for sale are located in Colorado's Denver Julesburg basin. The 51,000-acre property produced an average 52 million cubic feet per day of natural gas and 14,800 barrels per day of crude oil and natural gas liquids.
Proven reserves of the assets were around 97 million barrels of oil equivalent as at the end of 2014.
Encana is targeting to achieve a $3-billion debt reduction by the end of 2015. Including the current asset sale, cash proceeds from divestitures in 2015 will reach $2.7 billion.
Encana CEO Doug Suttles said in a statement, ''Our efforts to transform our portfolio, improve efficiency and grow margins are increasing returns and strengthening our balance sheet, positioning Encana for success throughout the commodity cycle.''
CPPIB's head of natural resources Avik Dey said, ''The DJ Basin is one of the leading oil and natural-gas plays in North America, and Encana's assets and operations have long been regarded as top-tier by industry standards.''
''This investment offers attractive economics and aligns well with our strategy for the energy sector.'' Dey further stated.
The transaction is expected to close in the fourth quarter of 2015, subject to customary closing conditions and regulatory approvals.
Calgary-based Encana is a leading North American energy producer with assets in Canada and in the US.
Badly hit by the plunge in oil prices, the company has been selling assets and streamlining its portfolio to bolster its balance sheet. It has identified four key oil-and-gas plays, which include the Eagle Ford and Permian shale-oil assets in Texas and the Duvernay and Montney natural gas liquids plays in Western Canada.
Two months ago, the company agreed to sell its natural gas assets in Louisiana for $850 million.
The company reported a steep loss of $1.6 billion in the second quarter compared to a profit of $271 million a year ago, accounting for significant impairment charges. Revenues plunged nearly half to $830 million during the quarter from $1.6 billion.