Encana Corp. has struck a deal to sell a mature natural gas asset in British Columbia to an energy company controlled by one of the world’s largest private equity firms.
The natural gas giant has agreed to sell its Jean Marie project in the Greater Sierra resource play, although Encana will hold on to its Horn River assets in the region, the company confirmed. Endurance Energy Ltd., which is controlled by New York’s Warburg Pincus LLC, is buying the property, a source said.
Encana has been putting legacy assets on the auction block in order to focus on growth opportunities, such as oil and natural gas liquids plays. Encana’s competitors have been making similar moves, allowing smaller outfits like Endurance to pick up parcels of land the bigger companies neglect as they direct cash to projects with greater potential for growth.
Encana expects to close the sale at the end of June, said Jay Averill, a spokesman for Encana. The gas company announced the sale internally Wednesday. The package of land produces slightly more than 120 million cubic feet of natural gas a day, he said. The Jean Marie property is a mix of conventional and unconventional wells. Encana is not drilling there now and the deal is not “material” to the company, Mr. Averill said.
Encana, which did not disclose the deal’s price tag, wants to sell between $500-million to $1-billion in assets this year. This is designed to give it a financial cushion as natural gas prices continue to be volatile and as it revamps its strategy, pouring cash into new projects.
Warburg Pincus has invested roughly $6-billion (U.S.) into energy projects since the late1980s. It has seven investments in Canada’s oil patch, ranging from start-ups to established players. It recapitalized Endurance, which bills itself as an early-stage exploration and production company, last year. The storied investment firm has also invested in Black Swan Energy Ltd., Canbriam Energy Inc., West Valley Energy Corp., Osum Oil Sands Corp., Velvet Energy Ltd., and MEG Energy Corp., which is public.
About 65 jobs related to Encana’s Jean Marie property, which is near Fort Nelson in northeast B.C., will be transferred to the buyer, said Mr. Averill, who declined to name the purchaser. Endurance did not return calls seeking comment.
Encana shifted its focus to commodities, such as propane, ethane, and oil when natural gas prices languished. Natural gas, however, has rallied this year, spurring cautious optimism in the industry. Encana switched gears Monday, reiterating its commitment to natural gas and spoke more cautiously about its newer ventures.
“We think it’s really important not to overcapitalize some of these emerging plays, some are going to work and some won’t,” chief financial officer Sherri Brillon said Monday. “So we want to make sure that we’re approaching it quite cautiously and measured. And we will be using a milestone approach as we look at the pace and we’ll consider reallocation and perhaps additional funding in the event that we demonstrated success.
“It’s really important not to over shoot our capital program in light of the fact that our cash flow is still running less than our capital budget and so we’ll be very cautious relative to any additional capital being put forward,” she said.
Clayton Woitas, Encana’s interim chief executive, emphasized the company’s roots: “Encana is first and foremost a natural gas company.”
Editor's note: The value of Warburg Pincus' investment into energy projects has been corrected in the online version of this story.