Encana Corp. may sell its huge Jonah natural-gas field in Wyoming to a pair of U.S. private-equity firms in a $2-billion (U.S.) deal as it seeks to refocus efforts on its richest prospects, according to a Wall Street Journal report.
A sale of the assets to Carlyle Group and NGP Energy Capital Management LLC would come as Encana, under new chief executive Doug Suttles, pares its assets to concentrate on liquids-rich natural gas and oil, which have been fetching higher prices than the dry gas on which the company was founded to produce in large quantities. The newspaper cited people familiar with the matter for its report.
Encana is “testing the market” to see what assets in its overall portfolio it may be able to jettison, but it does not have a deal with Carlyle to sell Jonah, company spokesman Jay Averill told The Globe and Mail. Officials with Carlyle were not available to comment Sunday evening.
Under its restructuring devised last year, Encana has said it will concentrate on five major Canadian and U.S. regions. That’s down from about two dozen. Mr. Suttles had criticized the company’s scattershot approach to investment, which has hampered the stock price.
Jonah is one of the largest natural-gas fields in the United States. In 2013, the company produced 323 million cubic feet of gas and 4,700 barrels of gas liquids a day after royalties, according to Encana. Production declined there for the past year, however, as Canada’s largest gas producer has redirected spending from such operations to its more lucrative holdings.
Encana has said it intends to spend three-quarters of its 2014 budget, which rings in between $2.4-billion (U.S.) to $2.5-billion, on the Montney and Duvernay liquids-rich gas plays in Canada, and the DJ basin, San Juan basin and the Tuscaloosa marine shale in the United States.
Encana is also nearing the spinoff of its Clearwater royalty business in Western Canada, which takes in fees and royalties from other companies that operate on a vast tract of its acreage.
As part of that, the gas producer will launch an initial public offering by the middle of this year and retain a majority interest. By some estimates it will be worth more than $2.5-billion. The lands currently produce nearly 50 per cent natural gas, with the rest split between oil and gas liquids.
This winter, Encana has been buoyed by a sharp run-up in natural gas prices as frigid weather gripped much of the continent. Despite its renewed focus, dry gas makes roughly nine-tenths of the company’s output.
An acquisition of Jonah to Carlyle and NGP would mark the duo’s first since Carlyle bought a 47.5-per-cent interest in NGP, along with options to boost its stake, in 2012, according to the Journal.
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