Encana Corporation has announced that it has reached an agreement to sell its Gordondale assets in northwestern Alberta to Birchcliff Energy Ltd. for a total cash consideration of C$625 million.
The sale includes approximately 54,200 net acres of land and associated infrastructure. In addition, through the transfer of current and future obligations, Encana is reducing midstream and downstream commitments by more than C$100 million on an undiscounted basis. No drilling or completions capital has been spent or was planned for the area in 2016.
As highlighted at Encana's recent Montney Investor Day in May 2016, the company has a large inventory of high-quality potential drilling locations in the play. Following this sale, Encana's Montney play will comprise of over 9,000 potential drilling locations with two-thirds of those wells located in the condensate-rich part of the play.
"We are tightening our portfolio and sharpening our focus in the Montney where we expect to grow liquids production to 50,000 barrels per day by the end of 2018," said Doug Suttles, Encana President & CEO. "This transaction further strengthens our balance sheet and gives us greater financial flexibility as we look to the future."
Encana's Gordondale assets produced an average of 25,200 barrels of oil equivalent (BOE) per day on a net after-royalty basis during the first quarter of 2016, comprising 65 percent natural gas and 35 percent liquids. Based on Encana's development plan at year-end 2015, estimated proved reserves were approximately 50 million barrels of oil equivalent (MMBOE) on a net after-royalty basis.
The sale of Encana's Gordondale assets is subject to the satisfaction of normal closing conditions, as well as regulatory approvals and post-closing adjustments. The transaction is expected to close in the summer of 2016 with an effective date of January 1, 2016.
RBC Capital Markets advised Encana on the transaction.