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Encana coughs up Jonah
Gary Park For Petroleum News
Among sailors, Jonah carries a reputation for bringing bad luck to any enterprise.
That’s not the kind of jinx Canadian-based natural gas giant Encana needs hanging over it these days as it tries to rebuild a bruised and battered company by narrowing its focus and turning the clock back more than four years on an untimely decision.
When Encana decided to spin off its oil and liquids holdings into Cenovus Energy and concentrate on its vast North American dry gas assets it delivered a double-whammy to itself.
Not only has Cenovus started to thrive on the oil sands holdings it inherited from Encana, but the parent company has been sideswiped by the dramatic arrival of shale gas.
Buyer for Jonah Now Encana has taken another large step towards reshaping and rebounding, consistent with the strategy aid out late last year by new Chief Executive Officer Doug Suttles.
It has found a buyer for Jonah, its gas field in Wyoming by negotiating a US$1.8 billion sale to TPG Capital, a global private equity firm.
The transaction involves about 1,500 producing wells in an area covering 24,000 acres and accounting for about 12 percent of Encana’s gas output in 2013.
What may have sweetened the deal for TPG is that Jonah is not strictly a dry gas play.
It produced 323 million cubic feet per day of gas in 2013, down 88 million cubic feet per day from 2012, while contributing 4,700 barrels of oil equivalent per day, up 600 boe per day from the previous year.
Encana’s latest management discussion and analysis said its average oil and NGL production during 2013 “increased primarily due to successful drilling programs in the DJ Basin, Piceance and the San Juan Basin and new and renegotiated gathering and processing agreements which resulted in additional NGL volumes primarily in the Piceance (play in northwest Colorado) and Jonah.”
Multiple asset holdings When Suttles moved into the executive suite last June, he estimated Encana had some 28 different asset holdings “with every single one of them being funded.”
TPG said it plans to open an office in Denver, retain Encana employees and existing oil and gas operations.
TD Securities analyst Menno Hulshof said the price tag may have been “marginally lower than expected,” but will allow Encana to help pay down debt.
Suttles said that by divesting Jonah, Encana is “unlocking value from a mature, high-quality asset and allowing our teams to focus on our five core growth areas (the Montney and Duvernay formations in Western Canada, the DJ Basin, the San Juan Basin and the Tuscaloosa Marine Shale in Mississippi Marine Shale in Mississippi and Louisiana).
Encana is also working on assembling a bundle of fee title lands in southern Alberta under the title of Clearwater and preparing for an initial public offering this summer that analysts are forecasting could fetch US$3 billion, while the 300 million cubic feet per day Deep Panuke gas project offshore Nova Scotia could also find itself on the auction block.
In a separate deal, Houston-based Apache sold gas assets in the Deep Basin of Alberta and British Columbia to Canadian Natural Resources for C$374 million.
That comes only a month after Canadian Natural spent C$3.1 billion to buy Devon Energy’s gas assets in Western Canada.
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