EnCana To Sell Ecuador Interests to Andes Petroleum Company
EnCana has reached an agreement to sell all of its shares in subsidiaries which have oil and pipeline interests in Ecuador to Andes Petroleum Company, a joint venture of Chinese petroleum companies, for approximately US$1.42 billion cash. The sale will have an effective date of July 1, 2005 and is expected to close before year-end. It is subject to prior approval by the Government of Ecuador, normal closing conditions and regulatory approvals.
"This planned sale marks essentially the final step in sharpening the focus on our unparalleled portfolio of unconventional natural gas and oil resources in North America. It is also about concentrating our efforts and investment where we have clear competitive advantage. Since EnCana was formed in early 2002, we have reached agreements to divest of more than $10 billion in non-core assets. We are proud of what our Ecuador team has accomplished since entering the country in 1999 - substantially expanding production while setting new higher standards in protecting the sensitive rainforest environment. EnCana has also sponsored numerous environmental, health and sustainable farming initiatives aimed at helping local communities," said Gwyn Morgan, EnCana's President & Chief Executive Officer.
The net book value of EnCana's investment in Ecuador is approximately $1.4 billion. Proceeds from the sale are expected to be directed to debt reduction and the continuation of EnCana's share purchase program pursuant to EnCana's current Normal Course Issuer Bid.
(EnCana's production and reserve volumes are net after royalties.)
- 100 percent interest in Tarapoa Block, production: about 38,000 barrels of oil per day
- 40 percent non-operated economic interest in relation to Block 15,
production: about 30,000 barrels of oil per day
- Interests in Block 14 (75 percent), Block 17 (70 percent) and Shiripuno Block (100 percent); production from three blocks: about 7,200 barrels of oil per day
- Proved reserves at December 31, 2004: 143 million barrels
- 36.3 percent interest in OCP Pipeline, 500 kilometres in length, capacity 450,000 barrels of oil per day
Harrison Lovegrove & Co. Limited has advised EnCana on the entire divestiture transaction. Merrill Lynch acted as a strategic financial advisor to EnCana.
EnCana is continuing with the previously announced divestiture of its natural gas liquids business and its gas storage assets in North America. Both divestitures are expected to be completed over the next six months.