Wholly-owned subsidiaries of EnCana Oil & Gas (USA) Inc., which is an indirect wholly-owned subsidiary of EnCana Corporation, have reached agreement to purchase Colorado assets from subsidiaries of El Paso Corporation for approximately C$461 million (US$292 million) in cash. The acquisition includes developed and undeveloped reserves, a gathering system, a gas plant and approximately 180,000 net acres of undeveloped land in the Piceance Basin. The acquisition complements EnCana's current Piceance Basin gas production at Mamm Creek and the surrounding area near Rifle, Colorado.
"The U.S. Rockies are a major component of our North American natural gas growth strategy and this acquisition solidifies our position as a leading producer in the region," said Randy Eresman, President of EnCana's Onshore North America division. "These are high working interest operated properties containing liquids-rich reserves in the early stages of development. EnCana has achieved great success applying its tight gas development expertise to multi-zone formations of this nature. These properties offer growth potential similar to our Mamm Creek field where we have significantly expanded production and reserves since we acquired it about 15 months ago."
EnCana estimates the assets have approximately 500 billion cubic feet of proven plus one-half probable (established) gas equivalent reserves. Approximately 85 percent of the reserves are gas, with the balance associated natural gas liquids. Current daily production is about 38 million cubic feet of gas equivalent. During the remainder of 2002, EnCana plans to drill an estimated 50 wells on the acquired lands, and anticipates increasing daily production to about 55 million cubic feet of gas equivalent by the end of 2002. Production, which is centerd in the North Douglas Creek Arch north of Grand Junction, Colo., is sold under short-term agreements.
"This acquisition is of a similar character to our previous U.S. Rockies acquisitions. In-fill drilling and further exploitation have the potential to triple production from this property in the next three years," said Roger Biemans, President of EnCana Oil & Gas (USA) Inc.
Subject to receipt of regulatory approvals and certain other conditions, the transaction is expected to close by the end of May 2002. The transaction will be funded from cash on hand and available credit facilities.
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