Calgary-based Encana Corp. is selling part of its stake in Canada’s natural gas fields to Japan’s Mitsubishi Corp. for $2.9 billion.
The sale will help Encana shore up its balance sheet in the wake of fourth-quarter losses.
Encana, one of Canada’s largest natural gas producers, has been hurt recently by lower demand this winter and the lowest gas prices in a decade. It reported a $251 million loss for fourth quarter 2011. Revenue totaled $2.5 billion and profit was $46.2 million for the same time period.
"Our 2012 investment plan targets a balance between cash flow, less dividends and our expected capital investment before acquisition and divestiture activity," Encana CEO Randy Eresman told reporters.
Eresman added that Encana will be focusing on oil- and liquids-rich natural gas production.
Encana had been hoping to develop a joint venture with PetroChina, which would have brought the company $5.4 billion, but the deal fell through in June 2011 when the two companies could not agree on how the new enterprise would be operated.
Mitsubishi Gets 40% of Cutbank Ridge Partnership
Encana is selling Mitsubishi 40% of its 409,000 acre stake in the Cutbank Ridge Partnership in northeastern British Columbia. The gas fields have approximately 900 billion cubic feet of undeveloped gas reserves.
Mitsubishi will pay $1.45 billion at closing, and an additional $1.45 billion over the course of the next five years.
The sale does not include any of Encana’s 600 million cubic feet per-day gas production nor does it include any of its gathering systems or processing plants. The sale should be finalized before March.
Key Statistics - Natural Gas in Canada (source: MarketLine)
- In 2010, the natural gas production industry in Canada had revenue of nearly $30 billion. For the time period 2006-2010, this represents a compound annual rate of change (CARC) of -12.7%.
- Between 2006 -2010 industry production volumes decreased, reaching a total of 196.4 million cubic meters by 2011, for a CARC of -2.8%.
- For the five-year period 2010-2015, the industry’s performance is predicted to accelerate, and should reach a compound annual growth rate (CAGR) of almost 3%. By the end of 2015, the industry is anticipated to be worth over $33 billion.