EnCana sells Gulf of Mexico assets to Statoil

Sale includes interests in six deepwater discoveries, 41million barrels at Tahiti, five other discoveries are under appraisal

Petroleum News

Calgary-based EnCana Corp.’s U.S. affiliates have reached an agreement to sell all of their interests in the Gulf of Mexico to Statoil for approximately US$2 billion cash, making the deepwater Gulf a core area for the Norwegian energy giant.

For EnCana, North America’s largest gas producer at about 3 billion cubic feet per day, the divesture is a continuation of the company’s “sharpened focus” on its huge unconventional onshore North America natural gas and oil resources, company President and Chief Executive Officer Gwyn Morgan said in an April 28 press release.

The deal includes six significant deepwater discoveries including a 25 percent working interest in the ChevronTexaco-operated Tahiti discovery, one of the largest discoveries in the deepwater Gulf of Mexico. As of Dec. 31, EnCana had 41 million barrels of oil equivalent proved reserves booked at Tahiti.

The other five significant non-operated discoveries — Tonga (25 percent), Jack (25 percent), St. Malo (6.25 percent), Sturgis (25 percent) and Sawtooth (25 percent) — are currently under appraisal.

Jack and St. Malo lie in the Walker Ridge area. A production test is planned for 2006 and first oil is expected in 2013.

Sturgis lies in the Atwater Valley area and appraisal drilling is planned this year. Clustered with other prospects, a Tahiti type development is possible with first oil estimated after 2011.

100,000 boe per day after 2012

The acquisition, which includes an average 40 percent working interest in about 1.4 million acres, “builds upon last year’s entry and drilling success in the region” and “positions the company well for future license opportunities,” Statoil said.

“The Gulf of Mexico has recently delivered several world-class discoveries, and there is a significant remaining potential. We have the skills, experience and technologies that will contribute to efficient development of these complex deepwater projects and add value to the partnerships,” said Helge Lund, Statoil CEO.

“U.S. production, with its attractive fiscal regime and stable political environment, provides an attractive balance to our overall international portfolio,” said Peter Mellbye, head of international exploration and production for Statoil. EnCana said its total investment to date in the Gulf of Mexico assets is approximately $540 million. It will realize approximately $1.5 billion after tax and other adjustments from the deal with Statoil, which is expected to close on or before June 1, 2005, the company said.

Proceeds from the sale are expected to be directed to debt reduction and the continuation of EnCana’s share purchase program.

EnCana is continuing with its previously announced divestiture of its Ecuador assets and select conventional producing properties in Western Canada. Both divestitures are expected to occur this year, EnCana said.

In Alaska, the company has all its oil and gas properties up for sale — all of which are conventional.

Sitting on a mountain of proved reserves, unbooked resource potential and vast land holdings, EnCana is confident it is ready to take advantage of a continued slide in North American conventional gas production before the arrival of more liquefied natural gas and Arctic gas.

Morgan said earlier this year that North America’s conventional supplies peaked two years ago, leaving only unconventional resources to offset the decline. He said there was no sign of early relief from LNG or the twin Arctic projects on the North Slope and Mackenzie Delta.

Given that outlook, he said EnCana has a “clear and sustainable competitive advantage” with its access to unconventional resource plays, including coalbed methane, in Canada and the United States.