Energy giant will use funds to pay down debt and reinvest in core assets
CALGARY—Encana Corp. has announced its fully-owned subsidiary, Encana Oil & Gas Inc., will sell its natural gas assets in Haynesville, Louisiana for US$850 million.
Encana’s interests in Haynesville include approximately 112,000 acres of leases, plus additional fee mineral lands. The company operates approximately 300 wells in the area and the 2014 year-end estimated proven reserves were 720 billion cubic feet of natural gas. The assets are Encana’s only possession in northern Louisiana.
“This is another step in advancing our strategy. By further focusing our portfolio, we are making Encana more efficient as we proceed through the second half of 2015 and into 2016,” Doug Suttles, Encana president and CEO, said. “This transaction delivers significant proceeds that we’ll use to strengthen our balance sheet. In addition, it eliminates our midstream commitments in the Haynesville and captures ongoing revenue upside through a gas marketing arrangement. I’d like to congratulate GeoSouthern on securing a high-quality natural gas asset along with a talented, safety-conscious field staff.”
GEP Haynesville LLC, or GeoSouthern, a joint venture formed by GeoSouthern Haynesville LP and funds managed by GSO Capital Partners LP will pay $850 million in cash in the deal. In addition, the company projects the deal will substantially scale back its gathering and midstream commitments by an additional $480 million. Encana will also transport and market GeoSouthern’s Haynesville production on a fee for service basis for five years as part of the agreement.
Encana noted it would use the funds raised in the deal to reduce its net debt and strengthen its balance sheet. The company said it remains focused on growing high margin production and that over 80 per cent of 2015 capital will be invested in the company’s four most strategic assets in the Permian, Eagle Ford, Duvernay and Montney.
The sale of is subject to satisfaction of normal closing conditions, as well as regulatory approvals and post-closing adjustments. It is expected to close in the fourth quarter of 2015.