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EnCana Puts More Conventional Assets on Auction Block

EnCana Corp. said it is drawing strong interest in the conventional oil and gas producing assets and the gathering and processing assets that it plans to auction to the highest bidder over the next few months. Among the assets on the block are about 15 properties in central and southern Alberta, 1.4 million acres offshore in the Gulf of Mexico, five production blocks in Ecuador, and some gathering and processing facilities in the Rocky Mountain region.

The asset sales are part of the divestiture plan launched following EnCana's acquisition of Tom Brown last April. It announced plans to sell assets producing between 40,000 and 60,000 boe/d, which were expected to generate $1-1.5 billion in proceeds for debt repayment. Over the last nine months, however, the company has far exceeded those plans in an effort to pay down debt and focus on onshore unconventional resources, such as tight gas and oilsands, which EnCana classifies as "resource plays."

"These divestiture plans are consistent with EnCana's sharpened focus on our North American resource play holdings in Western Canada, the U.S. Rocky Mountain states and Texas," said EnCana CEO Gwyn Morgan. "Last year we divested of conventional properties with production of about 76,000 boe/d for total proceeds of approximately US$3.5 billion. Our remaining conventional oil and gas properties are attracting substantial interest from potential buyers. The sale of these conventional assets is expected to further strengthen our position as the industry leader in North American natural gas and in-situ oilsands resource plays."

Morgan believes that conventional North American production has entered into a period of increasing costs and accelerating decline rates. As a result, EnCana has turned to resource plays because their decline rates and costs decrease over time while their cumulative booked reserves increase.

Among the assets currently on the block are 15 conventional properties primarily located in central and southern Alberta. Collectively, the properties produce 17,700 bbl/d of oil and natural gas liquids and about 27 MMcf/d of gas for a total of about 22,000 boe/d. Bids are due Feb. 8. Inquiries should be directed to Waterous & Co.

Also being sold are an average 40% working interest in 239 gross blocks in the Gulf of Mexico, totaling 1.4 million acres. Included is a 25% working interest in the ChevronTexaco-operated Tahiti discovery. Recently completed production tests of the Tahiti discovery well produced at a restricted rate of 15,000 bbl/d and pressure analysis indicate that the well is capable of sustained flow of as much as 30,000 bbl/d, EnCana said. Also included are five other significant nonoperated discoveries currently under appraisal -- Tonga, Jack, St. Malo, Sturgis and Sawtooth -- plus a large inventory of exploration prospects. Offers are expected in April. EnCana has retained Morgan Stanley and Randall & Dewey to coordinate the divestiture.

EnCana has retained Harrison Lovegrove & Co. to coordinate the divestiture of its Ecuador assets which include interests in five Oriente Basin blocks plus an interest in the OCP Pipeline. The Ecuador assets are producing about 78,000 bbl/d and proved reserves total 162 million bbl.

In addition, EnCana subsidiary EnCana Oil & Gas (USA) Inc. plans to sell three natural gas gathering and processing properties in the Rocky Mountain states -- Fort Lupton and Dragon Trail in Colorado, and Lisbon in Utah. The gas plants have a total processing capacity of 210 MMcf/d and each one has extensive gas gathering pipelines. Fort Lupton, which is located in the Wattenberg Field about 20 miles northeast of Denver, processes up to 90 MMcf/d of gas. Dragon Trail, located in the Piceance Basin in northwestern Colorado, processes about 60 MMcf/d, and Lisbon, located in the western Paradox Basin in Utah, has processing capacity of 60 MMcf/d.

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