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Encana sells Alberta methane gas fields stake to Toyota Tsusho

by Laura Board  |  Published April 20, 2012 at 10:23 AM
Gasfields_227x128.jpgCalgary oil and gas explorer Encana Corp. Friday, April 20, said it sold a 32.5% royalty stake covering production from coal bed methane fields in southern Alberta to trading company Toyota Tsushu Corp. for C$602 million ($607.2 million).

The transaction expands a hunt for investors launched on April 2 when Encana said it planned to sell stakes in five oil and liquids-rich North American properties, including its Alberta Duvernay shale interests in the northwest of the province. Friday's deal covers coal bed methane assets on the eastern edge Alberta's Horseshoe Canyon, and includes future drilling locations as well as existing properties.

In February, Encana agreed to sell 40% of its undeveloped British Columbia Cutbank Ridge natural gas lands to Mitsubishi Corp. for $2.9 billion. Earlier this month Bloomberg reported that Malaysia's Petroliam Nasional Bhd., or Petronas, is considering a making a Canadian acquisition and may attempt to take over either Encana or Talisman Energy Inc.

Encana President and CEO Randy Eresman hailed the Toyota Tsusho deal as a model for future alliances.

"This investment from a global partner recognizes the significant value identified in Encana's CBM (coal bed methane) lands, which rank among the company's lowest-cost, lowest-risk assets, and signifies another step as Encana pursues a range of opportunities to manage its portfolio and enhance the long-term value creation of its vast inventory," he added in the statement.

Encana said Toyota Tsusho paid C$100 million when the deal closed Thursday and will invest about C$502 million over seven years to acquire a 32.5% royalty interest, before deductions, in production from about 4,000 existing wells and another 1,500 or so potential drilling locations.

Elsewhere, Encana said Friday it "is advancing joint ventures, farmout arrangements and partnership opportunities to unlock value in the company's enormous reserve and resource base."

In its own statement Toyota Tsusho said it "regards North America a strategic business region for building a natural gas value chain through transactions."

Encana posted revenue last year of $8.47 billion. Net profit fell to $128 million from $1.17 billion because of increased losses on divestitures and write-downs. At year-end the company carried long-term debt of $7.59 billion.

RBC Capital Markets and Jefferies & Company, Inc. acted as financial advisers to Encana, which took legal counsel from Burnet, Duckworth & Palmer LLP. PLS Inc. advised Toyota Tsusho. Baker & McKenzie and McCarthy Tetrault LLP were its law firms.


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Tags: Alberta | Encana | M&A | Toyota Tsusho

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