Continuing with its strategy of focusing on unconventional natural gas and oil reserves in North America, Calgary-based EnCana Corp. announced that it has reached an agreement to sell conventional oil and gas assets producing approximately 6,400 boe/d after royalties, (6,750 boe/d before royalties) to StarPoint Energy Trust for approximately US$326 million before adjustments.
Expected to close on or about June 30, the transaction includes properties in central and southern Alberta. Encana noted that production from the assets is about 86% oil and natural gas liquids.
Encana's Alberta sale comes as the company's second divestiture in two weeks. In late April, EnCana announced that it planned to sell all of its Gulf of Mexico interests to Norway's Statoil ASA for US$2 billion (see NGI, May 2).
With this most recent transaction, EnCana has divested itself of approximately 84,000 boe/d of conventional production since the start of 2004, generating proceeds of about US$6 billion. This planned sale to StarPoint is the company's third substantial divestiture of Western Canadian conventional oil and gas assets in the past year and it is part of EnCana's planned disposition of 20,000, plus or minus, boe/d of Canadian conventional assets in 2005.
"Together with the 2004 sale of our U.K. North Sea assets and our recent agreement for the $2 billion sale of our Gulf of Mexico interests, EnCana is continuing to sharpen its focus on long-life North America resource plays where we expect to achieve reliable, profitable growth in reserves and production from unconventional gas and oil reservoirs," said Gwyn Morgan, EnCana's CEO.
EnCana said the planned sale to StarPoint had an effective date of May 1 and is subject to typical closing adjustments. The company said it plans to use the proceeds to pay down debt and purchase shares pursuant to the company's Normal Course Issuer Bid program.
The asset sales are part of the divestiture plan launched following EnCana's acquisition of Tom Brown Inc. in April 2004 (see NGI, April 19, 2004). It announced plans to sell assets producing between 40,000 and 60,000 boe/d, which were expected to generate US$1-1.5 billion in proceeds for debt repayment. 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 the company classifies as "resource plays."
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