Encana sells land to Birchcliff for $625M

CALGARY• Enc ana Corp. has struck a deal to sell land in one of its core focus areas to Birchcliff Energy Ltd. for $ 625 million, the two companies announced Tuesday afternoon.

The all- cash deal is for 54,200 acres that are currently producing roughly 26,000 barrels of oil equivalent per day in northwestern Alberta’s Montney formation — an area that has long been considered one of Encana’s “core four” focus areas.

“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,” Encana president and CEO Doug Suttles said in a release.

If the deal is approved, Encana plans to use the proceeds to pay down debt and strengthen its balance sheet. Suttles said it also “gives us greater financial flexibility as we look to the future.”

The company, once Canada’s l argest natural gas producer, has been selling assets across its portfolio in an effort to pay down debt in recent years, but has avoided selling assets in its focus areas.

The release said that Encana, which is trying to shift from being a natural gasweighted company to produce more oil, would still have 9,000 possible drilling locations in the play after the deal was done.

“This is an area t hat wasn’t getting funding in the Montney,” Encana spokesperson Jay Averill said. “It works better in somebody else’s portfolio.”

Averill declined to comment on whether Encana was considering selling acreage in any of the company’s other core focus areas, which include the Montney and the Duvernay in Canada, and the Eagle Ford and Permian formations in Texas.

Birchcliff vice- president, corporate development Jim Surbey declined to comment, citing the company’s decision to raise $ 530 million to fund the transaction in a bought-deal.

In addition, t he company’s largest shareholder, Seymour Schulich, will spend $ 18.75 million in a private placement, bringing the total amount of capital raised in the deal to $ 548 million.

A release from Birchcliff calls the acquisition “transformational” and will bring the company’s total production up to 65,000 boe/d.