Encana to sell Haynesville assets for $850mn

OREANDA-NEWS. August 26, 2015. North American oil and natural gas producer Encana has agreed to sell its gas-producing assets in Louisiana's Haynesville shale to an affiliate of GeoSouthern Energy for \\$850mn in cash.

Those assets include 112,000 acres in the Haynesville, a gas-rich formation underlying parts of northern Louisiana and east Texas, with current output of 217mn cf/d (6mn m?/d). GeoSouthern, a privately held independent, will also acquire 300 producing wells and proven reserves of 720 Bcf of natural gas equivalent. The transaction is scheduled to close in the fourth quarter of this year.

The deal underscores efforts by large oil and gas producers such as Devon Energy and Chesapeake Energy to focus on their most lucrative assets following a collapse in energy prices. Spot prices at the Henry Hub this month are averaging \\$2.79/mmBtu, down by 28pc from a year earlier. Oil futures are plumbing six-year lows.

"This is another step in advancing our strategy," said Encana chief executive Doug Suttles. "We are making Encana more efficient as we proceed through the second half of 2015 and into 2016."

Encana said it plans to concentrate on west Texas' Permian basin, south Texas' Eagle Ford shale and western Canada's Duverney and Montney shales — the four areas where it achieves the highest margins on production.

In addition, the transaction will eliminate Encana's Haynesville-related pipeline and gas gathering commitments, which will save the company \\$480mn, and it will receive a fee for marketing GeoSouthern's Haynesville production for the next five years.

Encana was an early pioneer in the Haynesville and its efforts there helped lift production from the field to 10.6 Bcf/d by November 2011, making it the top gas-producing field in the US, according to data from the US Energy Information Administration. But Haynesville production last month had slumped to about 6.8 Bcf/d as new output there failed to offset declines from aging wells.

Despite the recent declines, there has been some renewed interest in the field thanks to efficiency gains that are boosting the profitability of some wells. The Haynesville is also close to planned LNG terminals on the Gulf coast, which will soon increase demand for US natural gas.