EnCana Closes Sale of Gulf of Mexico Assets to Statoil
EnCana has closed the previously announced sale of its Gulf of Mexico assets to Statoil for approximately US$2 billion, resulting in net proceeds of approximately $1.45 billion after tax and other adjustments.
EnCana's total investment in the Gulf of Mexico assets was approximately $540 million. The gross proceeds of this transaction will be credited to EnCana USA's full cost pool, which is expected to result in a reduction in the U.S. depreciation, depletion and amortization rate by approximately 15 percent. Proceeds from this divestiture and the recently-announced $326 million sale of conventional Western Canadian properties will be directed primarily to a combination of debt reduction and the purchase of EnCana shares. EnCana has been purchasing common shares pursuant to its current Normal Course Issuer Bid (NCIB). Following the recent split of EnCana common shares on a two-for-one basis and including purchases made pursuant to the NCIB, as of May 25, 2005, the company had approximately 871 million shares outstanding. The company's normalized debt-to-capitalization target is between 30 and 40 percent.
EnCana's Gulf of Mexico interests included six significant deepwater discoveries and an average 40 percent working interest in 239 gross blocks comprising about 1.4 million acres. At December 31, 2004, EnCana had 41 million barrels of oil equivalent proved reserves booked at the most advanced discovery - Tahiti. All the assets are in the development and appraisal phase, and accordingly there is no current production. EnCana was advised on the Gulf of Mexico sale by Morgan Stanley and Randall & Dewey.
EnCana is continuing with the previously-announced divestiture of its Ecuador assets and select conventional producing properties in Western Canada. Both divestitures are expected to occur this year.
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