Encana to Sell Certain Midstream Assets for C$412 Million - Analyst Blog

Canadian energy firm, Encana Corporation (ECA) has entered into an agreement with Veresen Midstream LP to sell certain midstream assets that it jointly owns with Cutbank Ridge Partnership. Encana would receive about C$412 million from the deal, in addition to actual costs accrued in 2015. The deal is likely to close in the first quarter of 2015.

The transaction involves sale of natural gas gathering and compression facilities located in Dawson British Columbia. The assets include pipelines spread across 500 kilometers and also have compression capacity of about 675 million cubic feet per day.  

Moreover, Veresen Midstream has agreed to provide gathering and compression services to Encana and Cutbank Ridge for a fee.

However, post completion of the deal, Encana will continue operating the assets and would also oversee associated future expansion work on behalf of Veresen Midstream. This new sale arrangement not only reduces Encana's long-term risk exposure but also gives the company additional financial flexibility.

Encana intends to invest between $600 million and $700 million for the development of the Montney Shale assets in 2015. Meanwhile, Veresen plans to invest up to C$5 billion on expansion projects toward development of the play.

Encana is a focused pure-play natural gas exploration and production company. It is the second largest gas producer in North America, and holds a highly competitive land and resource position in some of the most promising shale and tight gas resource plays of the region.

Last week, Encana announced its 2015 capital budget and provided an outlook on its 2015 operations (read more: Encana Rises on Higher 2015 Capex and Positive Outlook).

Currently, Encana carries a Zacks Rank #3 (Hold).

Better-ranked stocks include Seadrill Partners LLC (SDLP), Spectra Energy Partners, LP (SEP) and SandRidge Mississippian Trust I (SDT), all of which sport a Zacks Rank #1 (Strong Buy).