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EnCana exits Syncrude Canada; could earn C$1.48 billion Company will focus on wholly owned oil sands ventures in northeastern Alberta, has launched world’s first large-scale synthetic crude operation Gary Park PNA Canadian Correspondent
Determined to control its own destiny, EnCana Corp. is pulling out of the world’s largest synthetic crude operation, but not the oil sands sector itself.
The high-flying Canadian independent struck a C$1.07 billion deal Feb. 3 to sell a 10 percent share of Syncrude Canada Ltd. to Canadian Oil Sands Trust, 'COST,' enabling the income trust to become the largest stakeholder in the operation by hurdling over Imperial Oil Ltd.
If other options are exercised, EnCana will dispose of its remaining 5 percent stake in Syncrude Canada by the end of 2003, including 3.75 percent to COST for C$417 million.
That would put ownership of the giant northern Alberta operation in the hands of COST 35.49 percent, Imperial 25 percent, Petro-Canada 12 percent, ConocoPhillips Canada Ltd. 9.03 percent, Nexen 7.23 percent, Murphy Oil Co. Ltd. 5 percent and Mocal Energy Ltd. 5 percent. The remaining 1.25 percent would be held by an undisclosed independent company.
The first phase of the deal boosts COST’s production at Syncrude by 46 percent to 74,000 barrels per day and adds 2.6 billion barrels to its reserve base.
The transaction raises COST’s enterprise value to C$3.8 billion, making it the fifth largest publicly-traded Canadian independent producer and the largest of Canada’s income trusts, which reported profits of C$270 million in 2002.
Trust could consolidate interests COST President and CEO Marcel Coutu said the trust is now positioned as the “natural consolidator of the Syncrude interests,” although he was not aware that any other Syncrude partners were seeking buyers for their holdings.
EnCana President and CEO Gwyn Morgan said his company wanted to devote more of its resources to “premium growth” projects.
“We are concentrating on operated, high-working-interest conventional oil and gas properties where we believe we can leverage our core competencies, control the pace of development and manage costs,” he said.
Syncrude, along with targeting operating costs of close to C$12 (US$7.80) a barrel — down from last year’s average C$17.40 (US$11.30) — is embarked on an ambitious expansion that is expected to see output rise to about 345,000 barrels per day in 2005 from 230,000 barrels in 2003 and climb to 550,000 barrels per day by 2013-2015, with a 50-year operating life.
But EnCana has opted to focus instead on its wholly owned oil sands ventures at Foster Creek and Christina Lake in northeastern Alberta, where reserves are estimated at 30 billion barrels.
It has launched the world’s first large-scale commercial project at Foster Creek, using steam-assisted gravity drainage to extract raw bitumen, and is employing the same technology at its Christina Lake demonstration plant. Its eventual goal is to produce 100,000 barrels per day from the two facilities.
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