Encana Corp. last week put a “for sale” sign on its Barnett Shale properties in North Texas, a 52,000 net acre swath of natural gas-rich land that currently produces 125 MMcfe/d.

The Calgary-based independent’s U.S. subsidiary, Encana Oil & Gas (USA) Inc., has retained Scotia Waterous (USA) Inc. to assist in the sale, which would include associated processing and pipeline facilities.

Although Encana did not disclose what it is asking for the Barnett properties, a similar deal was done in April by Range Resources Corp., which sold a slightly less amount of production (110 MMcfe/d) and a near-identical amount of acreage (52,000 net) in the same area to a private company for $900 million (see NGI, March 7).

“The initiation of the process to sell Encana’s North Texas assets is a continuation of the company’s ongoing divestiture program, which is well under way and is targeting net divestitures of between $1 billion and $2 billion for 2011,” said Jeff Wojahn, president of the company’s U.S. division. “These North Texas assets are high-quality, relatively mature producing properties that hold strong potential for future development.”

The sale is expected to be completed by early next year. Although Encana has several properties up for sale, the gassy Haynesville Shale assets in East Texas and northwestern Louisiana are off the table.

“We acquired our core position in the Barnett Shale play in 2004 as a result of a corporate acquisition that was focused on building a major land and production position in the U.S. Rockies,” Wojahn said. “Alongside developing this strong asset, over the years we built a suite of high-growth, early-life resource plays in the Midcontinent, led by about 295,000 net acres of land in the Haynesville Shale play, where our production is now more than 500 MMcfe/d.

“In East Texas, our production is about 250 MMcfe/d and our 240,000 net acres hold strong growth potential. Our Midcontinent resource play teams and operations, based in Dallas, will continue to be a leading contributor to Encana’s long-term growth strategy.”

The Barnett Shale “provided Encana with high-quality natural gas growth and foundational knowledge, which the company has applied across its U.S. and Canadian portfolio of newer resource plays,” the company said. “That foundational knowledge will continue to provide Encana with operational expertise as the company applies multiple advanced technologies to manage costs over the long term and pursue maximizing the margins from all of its natural gas production.”

The Barnett sale would be subject to receiving an “acceptable bid,” along with approval by the board of directors and regulatory approvals.

Energy analysts with FirstEnergy noted that the Barnett properties accounted for about 4% net production for Encana. And other analysts said the sale matches statements by Eresman in recent months — that natural gas prices at their current levels are unsustainable.

“The announcement is consistent with their message they will be selling more mature assets — and Barnett fits that description,” said BMO Capital Markets analyst Randy Ollenberger. “You can’t keep spending $5 billion or $5.5 billion a year without higher gas prices.”

Encana said it remains “actively engaged with a number of parties in a competitive process to divest midstream and producing assets in the U.S. and Canada that no longer fit” the company’s development plans. The company is also “in discussions with a number of potential partners looking to make third-party investments aimed at accelerating the value recognition of Encana’s enormous resource potential on its undeveloped lands.”

Encana, like many of its gas-weighted peers, has been hammered by prices and tight labor and supply costs. During a conference call last month CEO Randy Eresman said the company has been fighting cost creep — and persistently low gas prices — by cutting out the middle man and in many instances buying its steel and fuel, as well as striking long-term service agreements (see NGI, July 25). Encana also continues to use state-of-the-art technology in its gas fields.

Encana has “adapted to this prolonged period of soft natural gas prices by taking meaningful steps and applying advanced technologies to manage costs over the long term as we pursue margin maximization on all of the natural gas that we produce,” Eresman said.

The company is the biggest gas producer in Canada and one of the leading independents in the United States with around seven million net acres of undeveloped land that holds resource potential. Based on an independent assessment of its proved reserves and a low estimate of economic contingent resources, Encana said its gas inventory currently could last around 30 years based on 2010 annualized production.

©Copyright 2011Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.