Encana Oil & Gas (USA) Inc., a wholly owned subsidiary of Calgary-based Encana Corp., has agreed to sell its DJ basin assets in Colorado to a new entity 95% owned by Canada Pension Plan Investment Board and 5% by Broe Group, Denver, for $900 million.
The deal includes the entirety of Encana’s 51,000 net acres in the basin, where the company reported first-half production of 52 MMcfd of natural gas and 14,800 b/d of crude oil and natural gas liquids. Based on Encana’s development plan at yearend 2014, estimated proved reserves were 96.8 million boe, of which more than 40% was gas.
The deal, with an effective date of Apr. 1, is expected to close in the fourth quarter. Encana, which reported a $1.3-billion impairment charge for the second quarter (OGJ Online, July 27, 2015), says it will use the cash proceeds to further strengthen its balance sheet and create greater flexibility in this market environment.
“As we advance our strategy we continue to focus our portfolio and capital on our four most strategic assets, the Permian, Eagle Ford, Duvernay, and Montney,” said Doug Suttles, Encana president and chief executive officer.
Encana last year invested more than $10 billion to acquire assets in the Permian and Eagle Ford, with its purchase of Ft. Worth-based Athlon Energy Inc. (OGJ Online, Sept. 29, 2014); and assets from an affiliate of Freeport-McMoRan Oil & Gas LCC (OGJ Online, Oct. 8, 2014).
The company this year sold its Haynesville gas assets to GEP Haynesville LLC, a joint venture formed by GeoSouthern Haynesville LP and funds managed by Blackstone Group LP’s GSO Capital Partners LP (OGJ Online, Aug. 25, 2015); and, along with Cutbank Ridge Partnership, certain natural gas gathering and compression assets supporting Montney development to Veresen Midstream LP (OGJ Online, Apr. 1, 2015).
Combining the sale of its DJ assets with net proceeds from the previously reported sales, cash proceeds from divestitures in 2015 will total $2.7 billion. The company expects to have reduced its net debt in 2015 by $3 billion by yearend.