Encana Said to Prepare for Sale of Deep Panuke ProjectScott Deveau and Rebecca Penty
Encana Corp. is preparing to sell its Deep Panuke offshore project in Nova Scotia later this year, according to people familiar with the matter, as Canada’s largest natural gas producer shifts production toward more oil. The company’s shares rose.
Encana is working with financial advisers as it explores a sale, which may raise $1 billion to $2 billion, the people said, asking not to be identified discussing private information. The Calgary-based company could begin a formal process in the coming months, with a transaction expected before the end of the year, said one of the people.
There is no guarantee a sale will occur at this point.
“We only provide comment on transactions once they’ve been confirmed,” said Jay Averill, a spokesman for Encana who declined to comment further.
Encana is selling off assets and purchasing new ones in an effort to rebalance its portfolio in higher-priced oil and gas liquids. The company has announced $7.3 billion in deals since the start of the year, according to data compiled by Bloomberg.
The stock climbed 1.4 percent to C$23.23 at 4 p.m. in Toronto, after jumping as much as 3.1 percent.
SBM Offshore NV, which operates Deep Panuke on behalf of Encana, started production at the project in December after three years of delays. Gas produced from Deep Panuke about 250 kilometers (155 miles) southeast of Halifax on the Scotian Shelf is processed offshore and transported through a subsea pipeline to Goldboro, Nova Scotia, where is connects with the Maritimes and Northeast Pipeline that supplies the U.S. Northeast.
Deep Panuke contributed more than 30 percent of Encana’s operating cash flow of about $1.1 billion in the first three months of the year, due to higher spot prices for gas in the U.S. Northeast triggered by a winter cold snap. The project delivered about 253 million cubic feet of gas a day in the first quarter, or about 9 percent of Encana’s total production.
The company didn’t expect the strong prices that benefited Deep Panuke in the first quarter to continue throughout the year, Mike McAllister, chief operating officer, said on a May conference call.
Still, it is Encana’s only offshore asset and also doesn’t produce the oil or higher-value gas liquids that Encana is seeking. Deep Panuke, “doesn’t really fit in our portfolio,” Chief Financial Officer Sherri Brillon told an investor conference in January.
Encana said in June it agreed to sell its Bighorn natural gas assets in Alberta for $1.8 billion to Apollo Global Management LLC’s Jupiter Resources Ltd. It also acquired Freeport-McMoRan Copper & Gold Inc.’s Eagle Ford shale assets for $3.1 billion, doubling its crude output.