Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Encana Inks $735M Deal To Offload Piceance Basin Assets

Published 06/11/2017, 09:08 PM
Updated 07/09/2023, 06:31 AM

Canadian natural gas producer Encana Corporation (NYSE:ECA) recently clinched a $735 million deal to offload assets in the Piceance Basin on Colorado’s Western Slope. This marks the end of Encana’s 15 years run in the basin.

The company will sell the assets to a Denver-based private upstream player Caerus Oil and Gas LLC. The deal will advance Encana’s strategy to concentrate on its four core basins.

Notably, Encana which once held the top position in the Piceance Basin in terms of acreage, unloaded 51,000 acres in northeastern Colorado and over 3000 wells to Crestone Peak Resources in 2016. Hit by weak commodity prices, a number of companies have exited Piceance to pursue oil-based projects elsewhere.

Deal Highlights

Per the deal, Encana will divest over 550,000 leased acres and 3,100 operated wells. The assets produced about 240 million cubic feet per day of natural gas and 2,178 barrels per day of liquids in the first quarter of 2017, with estimated proved reserves of 814 billion cubic feet of gas equivalent at the end of 2016. Further, Encana will also get rid of $430 million of contractual pipeline obligations, with Caerus taking over these commitments. Post the completion of the deal, around 140 employees working on Colorado’s Western Slope are likely to join Caerus.

The $735 million deal will be funded entirely by cash. The agreement is scheduled to close in the third quarter of 2017, subject to regulatory approvals and other satisfactory closing conditions.

Deal Motive

The agreement is in sync with the Encana’s strategy to streamline its portfolio and focus on its four chief asset plays – the Montney and Duvernay gas formations in British Columbia and Alberta and the Permian and Eagle Ford formations in Texas. The transaction will streamline the company’s portfolio through the sale of non-core assets and help them to refocus their production spending in core plays and fewer geographical areas.

In addition to the cash received, Encana will also benefit by reducing its midstream commitments by about $430 million. The sale of Piceance assets is likely to make Encana more efficient and strengthen financials. The proceeds from the sale are likely to be utilized by the company to repay the debt, which amounted to around $4.2 billion at the end of the first quarter.

With the deal, Caerus will acquire one of the biggest positions in Colorado’s western counties. Acquiring over 3,100 wells from Encana, Caerus will increase its existing number of wells by about four times. The transaction bodes well for Caerus as it is expected to gain synergies and leverage the high quality natural gas asset along with skilled manpower.

Caerus has been increasing its acreage in the Piceance basin over the years by entering into acquisition deals. In 2013, the company struck a $200 million deal with Denver’s PDC Energy, Inc (NASDAQ:PDCE) to acquire its oil and gas wells in the region. In 2014, Caerus increased its holdings in the basin by inking a deal with Noble Energy Inc. (NYSE:NBL) . Further, in Apr 2016, Caerus was the buyer of Marathon Oil Corporation’s (NYSE:MRO) $80 million divestiture in the region.

Zacks Rank

EnCana is one of the world's largest independent natural gas producers and gas storage operators. The company under the Zacks categorized Oil and Gas Exploration & Production Canadian currently carries a Zacks Rank #3 (Hold).

Encana Corporation Price

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>



Encana Corporation (ECA): Free Stock Analysis Report

Noble Energy Inc. (NBL): Free Stock Analysis Report

PDC Energy, Inc. (PDCE): Free Stock Analysis Report

Marathon Oil Corporation (MRO): Free Stock Analysis Report

Original post

Zacks Investment Research

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.