OREANDA-NEWS. May 16, 2014. In a bold strategic move, Encana (TSX:ECA)(NYSE:ECA) will significantly accelerate its plan to transition its portfolio and grow shareholder value through an agreement reached with Freeport-McMoRan for Encana's wholly owned subsidiary, Encana Oil & Gas (USA) Inc., to acquire approximately 45,500 net acres in Karnes, Wilson and Atascosa counties of south Texas for about USD 3.1 billion.

The acreage produced approximately 53,000 barrels of oil equivalent per day (boe/d) in the first quarter of 2014 and has an estimated drilling inventory of more than 400 locations. The area is widely known as being in the heart of the oil-rich Eagle Ford resource play. The deal, which Encana anticipates will be accretive to 2014 cash flow, will approximately double the Company's current oil production and significantly enhance its continuing efforts to reposition to a more balanced commodity portfolio.

"Gaining a position in a world class, oil-rich resource play like the Eagle Ford accelerates the transition of our portfolio and underscores our investment focus on high margin assets," says Doug Suttles, Encana President & CEO. "With this transaction, combined with our announced divestments of Jonah and properties in East Texas, we're replacing natural gas production with high margin oil and liquids production."

This transaction directly aligns with Encana's strategy by adding a sixth core growth asset in an established oil production basin that provides immediate impact on company-wide returns. The Eagle Ford is recognized as being among the most prolific and profitable resource plays in North America. In the first quarter of 2014 production from the acreage to be acquired by Encana included approximately 46,000 barrels per day (bbls/d) of total liquids production and 44 million cubic feet per day (MMcf/d) of natural gas, generating operating cash flow of US\\$327 million, with about 75 percent of the total production volumes for the period being oil.

The Eagle Ford assets offer a large contiguous land position in the core of the play, fitting well with Encana's technical expertise in developing resource plays. The Company expects the assets to be free cash flow positive in 2014, allowing Encana to execute its existing capital plan for 2014 without redirecting capital from its other five core growth plays. Through the second half of this year, Encana plans to start ramping up its activity in the play and exit 2014 with at least four drilling rigs running.

"In addition to the near term growth potential of this asset, we believe there are many opportunities to enhance the value of this world class position by applying our proven resource play expertise." adds Suttles. "Overall, this acquisition fully aligns with our strategy announced last November; it will significantly boost our oil and liquids output, improve our ability to generate cash flow and enhance our portfolio of world class resource plays."

With cash on hand combined with anticipated proceeds from previously announced transactions, Encana is well positioned to fund this acquisition.

The transaction is subject to satisfaction of normal closing conditions, as well as regulatory approvals, and is expected to close by the end of the second quarter 2014 with an effective date of April 1, 2014. Scotia Waterous advised Encana on this transaction.