A Canadian Natural Resources pump jack pumps oil out of the ground near Dorothy, Alberta, June 30, 2009.© Todd Korol / Reuters/Reuters
Toyota Tsusho Corp. is investing $602-million to acquire a share of Encana Corp.'s extensive coalbed methane reserves in southern Alberta, the latest in a series of partnerships that the Calgary-based company has formed.
Encana announced Friday that the Japanese company will acquire a 32.5 per cent royalty interest in about 5,500 existing and future Encana coalbed methane wells.
Canada's largest independent gas producer has formed several partnerships with Asian companies, which provide funds that enable Encana to tap the value of its assets and cope with low North American natural gas prices.
Natural gas has been trading at 10-year lows due to a number of factors including huge new supplies and soft demand during the winter, when unusually warm weather across much of North America reduced the need for home heating.
Coal-bed methane, or CBM, is another type of gas that can be burned or used in chemical processes.
"This investment from a global partner recognizes the significant value identified in Encana's CBM 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.
Under the agreement announced Friday, Toyota Tsusho paid $100-million with the closing of the transaction and will invest approximately $502-million over seven years to acquire a 32.5 per cent royalty interest in production from 4,000 existing wells and 1,500 potential future drilling locations.
Encana said earlier this month that it would continue to form partnerships to help develop its gas resources and would take a similar approach to develop its oil and liquids-rich assets.
Encana has been concentrating on natural gas since spinning off its oilsands and refinery business into a separate company called Cenovus Energy Inc.
However, like other natural gas producers, Encana has been increasing its focus on liquids-rich gas that has greater margins than conventional dry gas.
Crude oil has also been a more profitable side of the energy sector because huge new sources of natural gas in shale rock formations have kept gas prices low.
Encana has formed a number of multibillion-dollar partnerships in which it has sold off portions of its various natural gas projects, which the company continues to develop.
In February, for example, Encana said it it would sell a chunk of its undeveloped British Columbia natural gas lands to Mitsubishi Corp. of Japan for $2.9-billion. In that deal, Mitsubishi gets a 40 per cent interest in the Cutbank Ridge Partnership.