Calgary-based Encana Corp. confirmed Monday that it is looking for a partnership to help finance some of its North American oil and liquids-rich opportunities.

The news comes as the price of natural gas holds at decade lows and gas storage facilities remain filled to the brim. At the close of trading Monday the gas-weighted producer’s share price was up 11 cents at $19.76/share.

“We continuously look for opportunities to manage our asset portfolio and enhance the long-term value creation of those assets,” said CEO Randy Eresman. “Accelerating the rate of development on our oil and liquids-rich land holdings can be achieved by leveraging third-party capital, which shortens our development timelines, reduces our cost structures and allows us to realize the value we have captured in these opportunities at an earlier stage.

“At the same time, we continue to believe in the long-term future of natural gas and are investigating the potential for additional long-term partnerships targeting the future development of portions of our natural gas lands.”

In the USA Division, Encana plans to “accelerate the commercialization” of about 1.2 million net acres within its holdings in the Tuscaloosa Marine Shale, which straddles the Mississippi and Louisiana border; the Utica/Collingwood formations in Michigan; the Eaglebine play in East Texas; and the Mississippian Lime in Oklahoma and Kansas.

In the Canadian Division, Encana plans to market “partnership opportunities” that cover around 375,000 net acres in Alberta’s Duvernay shale.

“At this point, it is premature to speculate on the size or value of any potential transaction,” said Eresman. “We are marketing an interest in these assets in which Encana would continue to operate and retain majority ownership.”

Encana’s 2012 capital budget directs more than half (55%) of upstream expenditures toward “the exploration, delineation and development of our oil and liquids-rich opportunities,” he noted. “Over the past two years, we have increased our prospective oil and liquids-rich holdings, and we plan to develop them using the same methodology we apply to our natural gas plays — through a low-cost entry approach and a firm focus on improving operating efficiencies and lowering our cost structures.”

Last week Eresman said in Singapore the company was hoping to find a partner or partners to help develop some of the portfolio. He told reporters that he would prefer to do something similar to the transaction secured by Devon Energy Corp. early this year with China’s Sinopec International Petroleum Exploration & Production Corp. to invest $2.2 billion in exchange for one-third of Devon’s stake in five venture plays (see Daily GPI, Jan. 4).

Encana is no stranger to partnerships with foreign entities. In February it sold for $2.9 billion a 40% stake in 409,000 net acres of its prospective Cutbank Ridge leasehold in British Columbia to Mitsubishi Corp. (see Daily GPI, Feb. 21a). Cutbank Ridge holds estimated proven undeveloped reserves of about 900 Bcfe.

At the time of the Mitsubishi announcement, Eresman said, “You could see Mitsubishi-like deals,” said the CEO. “We also are evaluating a Devon-like deal…as a means to advance multiple oil and liquids-rich plays in North America.”

Encana could be eyeing Petroliam Nasional Berhad, otherwise known as Petronas, Malaysia’s state-owned oil company, as a partner for a Canadian project. In addition to the latest effort to secure a partner for liquids developments, Eresman said he might be open to commercializing the company’s 30% stake in KM LNG, a liquefied natural gas export (LNG) terminal to be sited in Kitimat, British Columbia with units of Apache Corp. (40%) and EOG Resources Inc. (30%) (see Daily GPI, Feb. 21b).

Petronas CEO Shamsul Azhar Abbas told reporters last week that the company was looking for natural gas acquisitions in Canada worth more than C$5 billion in an effort to secure LNG supplies for Asia. A possible transaction, he said, could be announced within three months.

The likely candidate for an outright takeover by Petronas is Progress Energy Resources Corp., which last year agreed to sell a half stake in some Montney Shale land in British Columbia for C$1.07 billion (see Daily GPI, June 3, 2011). The joint venture (JV) agreement included developing LNG opportunities.

“For Petronas, Progress is the most logical acquisition target, if they truly are looking for a West Coast LNG solution, because they’ve already JV’d with them,” said Sprott Asset Management’s Eric Nuttall, a portfolio manager. However, Petronas may be looking for “five $1 billion JVs…versus one corporate,” which would make Encana’s latest offers possibly more enticing.

Canaccord Genuity’s Phil Skolnick said Petronas may look to Encana for more LNG expertise — especially since Encana already is a partner in an LNG export facility that has been approved, and it’s Canada’s largest gas producer. “Partnering up with national companies would help to expedite an LNG movement out of Canada,” said Skolnick.

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