Encana reaches $2.21 billion joint-venture deal with PetroChina
TORONTO--Just days after Canada clarified investment rules for foreign state-owned investors, one of the biggest and most active in the energy patch--PetroChina Co. --said it would pay 2.18 billion Canadian dollars (US$2.21 billion) to buy into a natural-gas project with Calgary-based Encana Corp.
Encana said Thursday it has reached a deal with Phoenix Duvernay Gas, a wholly owned subsidiary of PetroChina, for the development of Encana's Duvernay natural gas and liquids play in west-Central Alberta. The deal gives China's largest listed energy producer a 49.9% stake in the asset, in exchange for an initial C$1.18 billion, with the remaining payable over the next four years.
The deal comes less than a week after Ottawa cleared the US$15.1 billion acquisition by China's Cnooc Ltd. of oil-sands operator Nexen Inc. At the same time, Canada approved a US$5.2 billion deal by Malaysia's Petroliam Nasional Bhd. to buy Progress Energy Resources Corp., a Canadian natural gas producer.
Even as Canada approved those blockbuster deals, the government of Prime Minister Stephen Harper also said the country would dramatically increase scrutiny on other investments proposed by state-owned entities. Mr. Harper said Canada would all but rule out foreign government-controlled investors from buying a majority stake in any oil-sands operator, and he said the government would beef up the review of other deals in other sectors.
The PetroChina deal now stands as an early test of what that new scrutiny will look like.
Encana said it estimates the joint-venture assets contain about nine billion barrels of oil equivalent. The companies plan to invest C$4.0 billion in new drilling, completion and processing facilities, it said.
Encana, a gas-focused company, has been stung by a sharp fall in natural gas prices across North America. The company has embarked on an aggressive bid to draw in joint venture partners and shed assets.
"Phoenix's investment demonstrates the tremendous value that Encana has created in this early life liquids rich play," says Encana Chief Executive Randy Eresman, "and enables us to accelerate the pace at which the full production potential of our Duvernay lands can be achieved."
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