Encana Corp. on Friday agreed to sell its natural gas assets in Colorado's Piceance Basin, including 550,000 net acres and 3,100 operated wells to Denver-based Caerus Oil and Gas LLC in a deal valued at $735 million.
The Calgary-based operator also is reducing its midstream commitments in the PIceance by $430 million on an undiscounted basis while marketing the Caerus production from the assets included in the sale.
"This transaction advances our strategy, makes the company more efficient and delivers significant proceeds that we will use to further strengthen our balance sheet," Encana CEO Doug Suttles said.
The assets being sold by Denver-based subsidiary Encana Oil & Gas (USA) Inc. during 1Q2017 produced on average 240 MMcf/d of natural gas and 2,178 b/d of liquids. The acreage package at the end of 2016 held an estimated 814 Bcfe of proved reserves.
The transaction is expected to be finalized during the third quarter with a Jan. 1, 2017 effective date.
David Ludlam, executive director of the West Slope Colorado Oil & Gas Association, called the deal "transformative" for the basin as it involves one of western Colorado's largest energy assets.
"Our association appreciates contributions made by Encana to western Colorado and looks forward to the leadership of Caerus as it integrates this tremendous acreage into its existing Piceance portfolio," Ludlam said. "Members will assist the Caerus team as it works to unlock additional value for the benefit of stakeholders and local communities."
In a recent conference call to discuss 1Q2017 results, Encana management outlined a 2017 strategy focused on developing the super independent's assets in the Permian Basin and Eagle Ford Shale in Texas, as well as the Montney Shale in Western Canada. The Piceance has had a lower priority for the last couple of years.
Encana also recently disclosed a plan for managing price risk for its Montney production. The company is planning to ramp-up in the Montney later this year, when new infrastructure is expected to come online.