Encana Corp. (ECA,ECA.TO) said that it has entered into a joint venture arrangement with Phoenix Duvernay Gas, a wholly owned subsidiary of PetroChina Co. Ltd. (PTR), to explore and develop Encana's undeveloped Duvernay land holdings in west-central Alberta.
As per the terms of the agreement, Phoenix will gain a non-controlling 49.9% interest in Encana's approximately 445,000 acres in the Duvernay play for total consideration of C$2.18 billion.
At closing C$1.18 billion was paid to Encana and C$1.0 billion is payable over the next four years in the form of a carry of half of Encana's share of development capital. During this period, the joint venture partners plan to invest a total of C$4.0 billion in new drilling, completion and processing facilities.
Encana estimates that the Duvernay joint venture lands contain about 9 billion barrels of oil equivalent petroleum initially-in-place. Encana remains the operator of the joint venture with its 50.1% working interest.
Encana stated that it has drilled nine wells into the Duvernay, has five producing wells and currently has two rigs actively drilling additional wells. With the formation of this joint venture, Encana expects to more than double its planned pace of development in the Duvernay play beginning early in 2013.
Including the proceeds from the transaction with Phoenix, Encana expects to end the year with cash balances in excess of US$3.0 billion, well ahead of the targeted US$2.5 billion the Company projected in June 2012.
In addition, confirmed carry capital committed to Encana from joint ventures and other third party agreements for 2013 is now approximately US$750 million, and covers about half of Encana's projected costs in those areas.
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