Following through on previously announced divestiture plans, EnCana Corp. announced the sale of 66 Bcfe of conventional natural gas reserves in northeastern Alberta for US$219 million (C$292 million). The properties currently produce about 7,250 boe/d after royalties (9,400 boe/d before royalties). The Calgary-based buyer was not disclosed.
EnCana said the sale of “mature, non-core assets,” is part of a divestiture program it announced when it bought Tom Brown Inc. in April. Since then, the company has reached agreements to sell close to US$900 million in assets, producing 28,000 boe/d. With this sale, the proportion of its North American production sourced from long-life, low-decline resource plays reaches 75%, the company said.
So far this year, EnCana has sold conventional, non-core properties producing about 50,000 boe/d for total proceeds of $1.3 billion. Including all 2004 acquisitions and divestitures, EnCana still expects to grow production by 15% this year to between 725,000 and 765,000 boe/d.
Ratings agencies are keeping the fire hot under EnCana’s feet because of its mounting debt ratio over the last couple of years. Moody’s Investors Service last week downgraded EnCana’s long-term debt rating, warning the company of “aggressive production growth targets” and increased debt.
Even with more property sales, Moody’s warned that “there is an element of execution risk and potential timing delays. Over the near term, taking the asset sales into account, we expect debt/PD boe to be around $5 at the end of 2004 and remain above $4 in 2005, despite a relatively high commodity price environment, which is not consistent with a Baa1 rating.”
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