Encana May Sell Wyoming Assets - Analyst Blog

Per media reports, exploration and production company, Encana Corporation ECA plans to sell its Wyoming assets. The company is in advanced talks with the private equity firms, The Carlyle Group LP CG and NGP Energy Capital Management LLC, about the sale for a consideration of approximately $2 billion.

Encana has been planning to sell its stake in the Jonah field, located in southwest Wyoming's Green River Basin, according to the report. This is in accordance with the company's strategy to shift focus from weakly priced natural gas to the more lucrative oil-linked assets.

The Jonah resource play is one of the largest gas fields in North America. In 2013, Encana produced 323 million cubic feet per day of natural gas and 4.7 thousand barrels of oil per day from the field. While oil production was higher than the 2012 level, natural gas output declined substantially. The company stated that the negative result was due to lower capital investment and natural field declines.

This move by Encana may not come as a surprise as many big names are reducing their natural gas exposure to tackle the suppressed natural gas pricing environment. In 2012, BP plc BP also sold its Jonah holding for about $1.03 billion to Linn Energy, LLC LINE.

Encana has one of the largest natural gas resource portfolios in North America, providing a diverse and high quality inventory of reserves. The company has a solid long-term future as demand for natural gas improves, spurred by its cost effectiveness and abundant supply in North America. However, at the same time, Encana's sizeable exposure to volatile natural gas prices remains a key area of concern.

Encana currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months. Carlyle Group, BP and Linn Energy also carry the same Zacks Rank as that of Encana.