Encana Corp. on Wednesday checked off another item on its “to do” list after agreeing to sell two natural gas processing plants that service the Cutbank Ridge area, which straddles Alberta and British Columbia (BC), to Veresen Inc. for C$920 million.

Gas and natural gas liquids (NGL) in the region are produced from the prolific Montney Shale, as well as the Cadomin and other geological formations. Veresen is acquiring the Hythe/Steeprock complex, which includes two gas processing plants with combined functional capacity of 516 MMcf/d, as well as 40,000 hp of compression and 370 kilometers of gas gathering lines.

The Hythe plant processes both sour and sweet natural gas, while the Steeprock plant is a sour gas processing facility. The Steeprock plant is about 50 kilometers south of Dawson Creek, BC, and about 10 kilometers west of the Hythe plant.

“This transaction establishes a high-quality, independent natural gas midstream business for Veresen, which we expect will generate attractive returns and make a significant contribution to our cash flow,” said CEO Stephen White. “In an active and highly competitive midstream landscape, we remain focused on our strategy of growing our business through the selective development and acquisition of contracted, high-quality, long-life infrastructure assets that generate stable cash flows.

Veresen and Encana also completed a long-term midstream services agreement under which Encana would provide a “competitive, long-term, take-or-pay throughput commitment averaging 370 MMcf/d, representing 72% of the functional capacity of the Hythe/Steeprock complex,” said Veresen.

Veresen would operate the two interconnected gas processing plants following a transition period, and the company plans to retain all operational employees at the processing plants. Encana would be the contract operator of the compression and gas gathering system, which would allow the producer to coordinate its drilling program and gas production in the area.

Veresen, which like Encana is based in Calgary, owns and operates pipeline transportation, NGL and power facilities. It holds a stake in Aux Sable Liquids Products, which processes nearly all of the natural gas delivered by Alliance Pipeline, which Veresen owns with Enbridge Inc.

The Encana sale, which is expected to close early next year, is subject to regulatory approvals and normal closing conditions.

“This sale agreement marks the conclusion of the major components in our 2011 divestiture program, which, upon closing of all transactions, will result in proceeds of about US$3.5 billion,” said CEO Randy Eresman. “Although not all of our announced transactions will be completed this year, the expected proceeds will help us achieve our 2011 target range for net divestitures of between $1 billion and $2 billion.”

Encana has some sales transactions that are scheduled to close after the end of this year, which would give the company “a solid start on our 2012 divestiture program, which will be part of our 2012 capital investment program announcement in the first quarter,” said Eresman.

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