Encana has reached an agreement to sell its interest in the Cabin Gas Plant in the Horn River Basin of northeast British Columbia to Enbridge Inc. for approximately C$220 million at closing, which is expected in December 2011. The agreement covers Encana's interest of approximately 52 percent in the first two phases of the natural gas processing plant, which has regulatory approval for total processing capacity of 800 million cubic feet per day (MMcf/d).
"This sale is another example of Encana redirecting midstream capital into our higher-return core business of growing natural gas and liquids production. Earlier this year, we sold our Fort Lupton gathering system and processing plant, and recently, we agreed to sell a portion of our Piceance midstream assets, also in Colorado. With the Cabin sale, proceeds totaling C$1.1 billion from these three midstream asset sales will strengthen our balance sheet, which will provide greater financial flexibility going into 2012," said Renee Zemljak, Encana's Executive Vice-President Midstream, Marketing & Fundamentals.
"When we divest of midstream assets such as this Cabin plant, we recoup the upfront infrastructure capital that is necessary to bring emerging natural gas developments such as Horn River into commercial production. We also avoid future capital commitments that will be required to expand these infrastructure facilities by entering into competitive, long-term gathering and processing fee agreements with top-tier midstream firms. These fee agreements provide cost stability for our ongoing natural gas developments and help us efficiently deliver natural gas and liquids to market. Beyond these three divestitures, we are also engaged in a process to divest of our Cutbank Ridge midstream assets in Canada. We look forward to completing all these divestitures and establishing long-term business relationships with industry-leading midstream companies," Zemljak said.
Encana, as operator, has led construction of the Cabin Gas Plant to serve producers in the Horn River natural gas play. The plant is located approximately 60 kilometers northeast of Fort Nelson, B.C. Construction of the first phase is about 70 percent complete. It has planned capacity of about 400 MMcf/d and is expected to be commissioned in the third quarter of 2012. The second phase, also designed to have capacity of about 400 MMcf/d, is estimated to be commissioned in the third quarter of 2014, resulting in a total planned capacity of 800 MMcf/d. The sale of Encana's interest in the Cabin Gas Plant is subject to certain regulatory approvals and customary closing conditions. Goldman, Sachs & Co. advised Encana on this transaction.
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