Encana to sell Haynesville natural gas assets
CALGARY, Alberta -- Encana Oil & Gas (USA) Inc. has reached an agreement to sell its Haynesville natural gas assets, in northern Louisiana, to GEP Haynesville, LLC (GeoSouthern), a joint venture formed by GeoSouthern Haynesville, LP and funds managed by GSO Capital Partners LP.
Total cash consideration to Encana under the transaction is $850 million. In addition, through the transfer of current and future obligations, Encana will reduce its gathering and midstream commitments, which will be substantially complete through 2020, by approximately $480 million on an undiscounted basis. Further, Encana will transport and market GeoSouthern's Haynesville production on a fee for service basis for the next five years.
Consistent with its strategy, Encana remains focused on growing high margin production. Over 80% of 2015 capital will be invested in the company's four most strategic assets in the Permian, Eagle Ford, Duvernay and Montney.
During the first half of 2015, Encana's Haynesville assets produced an average of 217 MMcfgd, contributed approximately 9% to company-wide production and less than 2.5% to Encana's first half operating cash flow, excluding hedges.
Encana's Haynesville natural gas assets include approximately 112,000 net acres of leasehold, plus additional fee mineral lands. Collectively, they represent Encana's total position in northern Louisiana. Encana operates approximately 300 wells in the area. Estimated year-end 2014 proved reserves were 720 Bcfe of natural gas.
Encana will use the total cash consideration to reduce its net debt.
"This transaction delivers significant proceeds that we'll use to strengthen our balance sheet,” said Doug Suttles, Encana's president & CEO. “In addition, it eliminates our midstream commitments in the Haynesville and captures ongoing revenue upside through a gas marketing arrangement."
The sale of Encana's Haynesville assets is subject to satisfaction of normal closing conditions, as well as regulatory approvals and post-closing adjustments, and is expected to close in the fourth quarter of 2015 with an effective date of Jan. 1, 2015.
