Encana said to weigh sale of Western Canadian shale assets

By Scott Deveau on 5/11/2016

CALGARY, Alberta (Bloomberg) -- Encana Corp. is weighing the sale of some of its shale assets in Western Canada as part of an effort to bolster its balance sheet amid protracted low oil prices, people with knowledge of the matter said.

The Calgary-based producer could raise as much as C$1 billion ($774 million) for the Gordondale assets located in the Montney basin, said the people, who asked not to be identified because the information is private.

A spokesman for Encana said the company doesn’t comment on speculation.

Encana had a market capitalization of C$6.7 billion at the close Tuesday, compared with a peak of nearly C$70 billion in 2008. In June 2014, before oil prices collapsed, the company’s market value reached C$19.8 billion.

Douglas Suttles, Encana’s CEO, said last week the company may consider other options later this year as part of its ongoing efforts to simplify the business, transition to higher-margin production and become more efficient.

“We continue to believe in a focused portfolio,” Suttles said on a conference call with investors. “In the near term, any proceeds received from asset sales this year, including the proceeds from the sale of our DJ basin asset—which is expected to close by the end of this quarter—will be used to create further financial flexibility and balance sheet strength.”

Well Costs

The company also noted on the call the cost cuts it has achieved in the Montney basin. Encana said it had managed to lessen average well cost to $5 million per well, a 22% reduction compared with the 2015 average.

The Gordondale assets in the Montney are at an earlier stage of development than the Cutbank Ridge Montney properties, which Encana is developing in a joint venture with Mitsubishi Corp.

Encana is among producers finding ways to decrease costs as U.S. crude continues to languish almost 60% below its mid-2014 high. Measures have included dividend cuts, slashing jobs and reining in spending.

The company, which was in the middle of reorienting toward production of oil and liquids when the market collapsed, has continued to struggle with some pricier gas output than its peers.

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