Canada's largest natural gas producer Encana Corporation ( ECA ) announced that its affiliate Encana Oil & Gas ( USA ) Inc has dispensed with most of its natural gas producing assets in North Texas. Encana received proceeds of $860 million from the assets divestiture to EnerVest, Ltd.
In early November, Encana announced that it has signed a deal to sell the Barnett Shale assets for approximately $975 million. The company will get the remaining proceeds, following the closure of some additional conditions, which are expected to be completed in the first quarter of 2012.
The divested assets in the North Texas generate daily production of about 125 million cubic feet equivalent and include the connected gathering pipelines on about 50,000 net acres of land in the Fort Worth Basin.
Recently, Encana completed the sale of its majority stake at the Cabin Gas Plant in Horn River Basin to Enbridge Inc. ( ENB ) for $215 million. With the completion of these two divestures, Encana's total proceeds from sale in 2011 reached approximately $1.1 billion, which is within the projected range of $1 billion to $2 billion. Encana expects to generate proceeds of about $3.5 billion from the entire announced asset sales.
These transactions highlight EnCana's strategy of reforming its asset portfolio for long-term gain. The company is targeting to divest its low-profit generating assets and focus on the lucrative core business of growing natural gas and liquids production. Proceeds from these dispositions are expected to strengthen the company's balance sheet and render greater financial stability in 2012.
Headquartered in Calgary, Alberta, EnCana is the second largest gas producer in North America, and holds a highly competitive land and resource position in a number of the region's most promising shale and tight gas resource plays. This provides the company with a low risk, long-life and sustainable growth profile.
We are maintaining our long-term Neutral recommendation on the stock. EnCana shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating.
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