CALGARY-Encana Corp. has announced its fully-owned subsidiary, Encana Oil & Gas Inc., will sell its natural gas assets in Haynesville, Louisiana for US$850 million.
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The properties, located in DeSoto and Red River Parishes, Louisiana, total 112,000 net acres and 300 wells in the Haynesville Shale. Encana said it will use the proceeds to pay down debt. 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 US$480 million on an undiscounted basis. As part of the deal, Encana agreed to transport and market GeoSouthern’s production on a fee-for-service basis for the next five years. It is expected to close in the fourth quarter of 2015.
“GeoSouthern is a company defined by its entrepreneurial spirit and results-oriented management team”, said President Margaret Molleston. The company said it remains focused on growing high margin production and that over 80 per cent of 2015 capital will be invested in the company’s four most strategic assets in the Permian, Eagle Ford, Duvernay and Montney.
The Woodlands, Texas-based GeoSouthern is a privately held oil and gas producer, founded in 1981 by George Bishop. “Our new joint venture with GSO, coupled with our history of successfully drilling and developing horizontal shale assets, gives us great confidence in our ability to enhance the value of these leases”. GSO Capital, GeoSouthern’s partner in the deal, is a credit division of Blackstone and manages approximately $81 billion of capital. Per the transaction metrics, Encana is selling the assets for $1.18/Mcf of proved reserves and $3,917/Mcf/d of flowing production.
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Oil Search Ltd said it is looking for acquisitions in Papua New Guinea, where it holds the bulk of its assets, but Managing Director Peter Botten said deals may take some time as buyer and seller expectations remain wide apart. “The company’s weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share”.
