EnCana Corp. said last Wednesday it successfully completed its $2.2 billion cash tender offer for the outstanding common shares of Denver, CO-based independent producer Tom Brown Inc. The transaction, which also called for the assumption of $500 million in debt, quickly expands EnCana’s Rocky Mountain presence, with its total U.S. natural gas production to reach 1 Bcf/d.

More than 95% of the outstanding Tom Brown shares (44.58 million) were tendered to EnCana for $48 cash per share, and were accepted for purchase and will be paid promptly, the Calgary-based producer said. An estimated 1.94 million shares still remained outstanding, it noted. All necessary U.S. and Canadian regulatory approvals have been received. Because more than 90% of the outstanding Tom Brown shares were tendered, the takeover does not require the approval of the Denver producer’s stockholders. Nor is approval by EnCana stockholders required.

EnCana said it intends to complete the $2.7 billion transaction through a merger in which all shares of common stock not validly tendered into the tender offer will be converted into the right to receive $48 per share.

“The acquisition of Tom Brown accelerates EnCana’s pursuit of North American resource plays…The U.S. Rockies have been EnCana’s highest growth region since 2000, with about 75% of the double-digit growth coming from the drill bit,” said EnCana COO Randy Eresman.

“We will move quickly to welcome the Tom Brown employees, integrate the acquired properties into our U.S. and Canadian operations and build upon the excellent accomplishments of Tom Brown and its people,” he noted.

The acquisition of Tom Brown will add about 325 MMcf/d of natural gas production to EnCana’s portfolio, bringing the Canadian producer’s total U.S. gas production to 1 Bcf/d this year. To assure “strong returns” on its acquisition, EnCana said it has hedged volumes equal to the forecasted production from Tom Brown’s U.S. assets at a Nymex equivalent price of about US$5.60/Mcf through 2006.

Noting that the Tom Brown purchase was the first step in a two-step process, EnCana — already considered to be the largest independent oil and gas producer in North America — said it plans to sell US$1 billion-$1.5 billion of Canadian conventional assets in the months ahead.

In another development, Roger Biemans, president of EnCana Oil & Gas (USA) Inc., told a Denver audience last week that it expects to announce an open season in the next few weeks for its fast-track Entrega Pipeline to tap the rapidly-developing Piceance Basin in western Colorado.

He made clear that building a pipeline business was not the main object. But, “as one of the most active producers in the U.S. Rockies, we felt, in times like this, it was necessary to step up and initiate a major infrastructure project. It’s as simple as that. It’s not part of a major marketing strategy.” Biemans said EnCana basically was interested in selling into the wholesale market at the wellhead “if we can.” EnCana first proposed the 1.3 Bcf/d line from the western slope in northern Colorado into Wyoming and ending in the Cheyenne Hub last February to get its steadily increasing production to market (see NGI, March 1). The line would set the gas on track for the Midcontinent and East.

Questioned after his presentation at GasMart 2004, Biemans carefully skirted the West-to-California versus East-to-Midcontinent debate, saying EnCana believed that “the incremental market is more likely to be better served to the East.” Also, as to whether the gas would be available to fill the 1.3 Bcf/d line, Biemans said it depended on how quickly the Powder River Basin was developed. Judging from permits being issued, “there are very promising signs” of production increases to come that will add to throughput.

Biemans said EnCana’s acquisition of Tom Brown was based on similar quality of assets, a very large land base and huge inventory of drilling locations. EnCana’s focus is on long-lived unconventional resource plays, continually lowering costs and extending the production life through new technology. Its “Resource Play Management System” focuses on “large scale, repeatable manufacturing-style developments.” Along with its growth mantra, EnCana has created a “Constitution,” and is dedicated to a constitutional meritocracy, Biemans said, that builds on strong character and ethical principles, accountability, achievements and teamwork.

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