Pipeline and gas systems operator Veresen Inc. has struck a deal with gas giant Encana Corp. (TSX:ECA) to buy the Hythe/Steeprock midstream gas gathering and processing complex for $920-million.
The assets being bought are in the Cutbank Ridge region of Alberta and British Columbia, the Calgary company announced Wednesday.
The plants process natural gas from the Montney, Cadomin and other geological formations in the area.
Veresen shares were halted on the TSX pending news from the company.
The transaction is slated to close in the 2012 first quarter and is one of many recent sales by Encana as it tries to raise money to finance development of its other properties.
The Hythe/Steeprock complex includes two natural-gas processing plants with combined capacity of 516 million cubic feet a day and include 370 kilometres of gas gathering lines.
The Hythe plant processes both sour and sweet natural gas, while the Steeprock plant is a sour gas operation.
Veresen and Encana have entered into a long-term deal under which Encana will supply the plants with natural gas. Veresen will operate the two plants following a transition period.
The buying company plans to keep on all employees working at the plants.
“This transaction establishes a high-quality, independent natural gas midstream business for Veresen which we expect will generate attractive returns and make a significant contribution to our cash flow,” said Stephen White, president and CEO of the company.
“The Hythe/Steeprock complex is strategically located in the heart of a high-growth region focused on Montney drilling, and is underpinned by a competitive, long-term gathering and processing fee agreement with an outstanding producer partner in Encana.”
In a related deal, Veresen said it has struck a $303-million bought deal financing which will help raise money to pay for the acquisition.
Veresen is a Calgary-based company that owns and operates energy infrastructure assets across North America – from pipelines and gas liquids plants to gas-fired power plants.
In Canada, the company has interests in the Alliance Pipeline and the Alberta Ethane Gathering System as well as interests in energy systems in Ontario and Prince Edward Island.
Veresen shares were halted late Wednesday afternoon at $14.66, up two cents on the day.
Wednesday’s sale by Encana is of many the company has made to shore up its balance sheet with badly needed cash.
Last month, Encana reached a deal to sell its North Texas natural gas properties for about $975-million (U.S.), putting the energy giant firmly within its targeted asset-sale range for the year.
Encana sold its Barnett Shale assets to partnerships managed by EnerVest Ltd., a private oil and gas company based in Houston. It has also sold other U.S. energy assets and some gas plant businesses in Canada as well.
Selling assets is one measure Encana has been taking to shore up its finances and ensure it is spending money on its highest-return areas. By year-end, Encana said it expects to have shed $1.7-billion in assets, putting it well in its $1-billion to $2-billion range.
Encana had been banking on a $5.4-billion cash infusion from a joint-venture deal with PetroChina centred around assets in northeastern B.C. and Alberta. But that deal fell through in June when the two companies couldn't see eye-to-eye on an operating agreement