EnCana (ECA) Enters JV with PetroChina (PTR) Unit in Alberta; Will Receive C$2.18B
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EnCana Corp. (NYSE: ECA) has entered into a joint venture arrangement with Phoenix Duvernay Gas (Phoenix), a wholly owned subsidiary of PetroChina (NYSE: PTR), to explore and develop Encana's extensive undeveloped Duvernay land holdings in west-central Alberta. Under the terms of the agreement, Phoenix will gain a non-controlling 49.9% interest in Encana's approximately 445,000 acres in the Duvernay play for total consideration of C$2.18 billion.
At closing C$1.18 billion was paid to Encana and C$1.0 billion is payable over the next four years in the form of a carry of half of Encana's share of development capital. During this period, the joint venture partners plan to invest a total of C$4.0 billion in new drilling, completion and processing facilities. Encana estimates that the Duvernay joint venture lands contain about 9 billion barrels of oil equivalent petroleum initially-in-place. Encana remains the operator of the joint venture with its 50.1% working interest.
Including the proceeds from the transaction with Phoenix, Encana expects to end the year with cash balances in excess of US$3.0 billion, well ahead of the targeted US$2.5 billion the Company projected in June 2012. In addition, confirmed carry capital committed to Encana from joint ventures and other third party agreements for 2013 is now approximately US$750 million, and covers about half of Encana's projected costs in those areas.
To date, Encana has increased its hedge position for 2013 to approximately 1.5 billion cubic feet per day (Bcf/d) at an average price of US$4.39 per million cubic feet (Mcf).
"Our enhanced risk management position combined with our significant expected cash balance for the end of the year puts us in a solid position to execute on our plans for 2013. We expect these joint venture arrangements will help us achieve higher capital efficiencies which will enable us to reduce the amount of capital that we initially projected to spend next year," adds Eresman.
Financial and Legal Advisors
RBC Capital Markets acted as financial advisor and Burnet, Duckworth & Palmer LLP acted as legal advisor to Encana for this transaction.
At closing C$1.18 billion was paid to Encana and C$1.0 billion is payable over the next four years in the form of a carry of half of Encana's share of development capital. During this period, the joint venture partners plan to invest a total of C$4.0 billion in new drilling, completion and processing facilities. Encana estimates that the Duvernay joint venture lands contain about 9 billion barrels of oil equivalent petroleum initially-in-place. Encana remains the operator of the joint venture with its 50.1% working interest.
Including the proceeds from the transaction with Phoenix, Encana expects to end the year with cash balances in excess of US$3.0 billion, well ahead of the targeted US$2.5 billion the Company projected in June 2012. In addition, confirmed carry capital committed to Encana from joint ventures and other third party agreements for 2013 is now approximately US$750 million, and covers about half of Encana's projected costs in those areas.
To date, Encana has increased its hedge position for 2013 to approximately 1.5 billion cubic feet per day (Bcf/d) at an average price of US$4.39 per million cubic feet (Mcf).
"Our enhanced risk management position combined with our significant expected cash balance for the end of the year puts us in a solid position to execute on our plans for 2013. We expect these joint venture arrangements will help us achieve higher capital efficiencies which will enable us to reduce the amount of capital that we initially projected to spend next year," adds Eresman.
Financial and Legal Advisors
RBC Capital Markets acted as financial advisor and Burnet, Duckworth & Palmer LLP acted as legal advisor to Encana for this transaction.
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