CALGARY—Encana Corp. has announced a deal to sell some of its natural gas gathering and compression infrastructure in the Montney formation in northeast British Columbia, while ensuring it can make use of those services on attractive terms for its future production in the region.
Encana, which has a partnership with a unit of Japan’s Mitsubishi Corp. in the Montney, has agreed to sell the assets to Veresen Midstream LP, a newly created 50-50 partnership between energy infrastructure company Veresen Inc. and investment firm Kohlberg Kravis Roberts & Co. L.P. (KKR).
The price tag is $412 million, plus costs accrued in 2015.
Veresen Midstream will provide the gathering and compression services to Encana and Mitsubishi under a fee-for-service arrangement and has agreed to spend as much as $5 billion to expand its infrastructure to support development in the Montney, one of Encana’s core areas.
Encana and Mitsubishi plan to invest between US$600- and US$700 million in the Montney in 2015 as part of their Cutbank Ridge Partnership.
The deal with Veresen Midstream encompasses about 500 kilometres of pipelines and 675 million cubic feet per day of compression.
“We are pleased to expand our relationship with Veresen, and now KKR, with what we believe is one of Western Canada’s most innovative midstream service structures,” said Encana executive vice-president Renee Zemljak.
“We are unlocking value from our midstream infrastructure that we can redirect to strategic upstream opportunities while ensuring reliable, efficient midstream service to support our ongoing operations and development in the Montney.”
Veresen CEO Don Althoff said the agreements “pave the way for Veresen Midstream to be a leading and innovative midstream player in the heart of the Montney.”