Canada’s Encana Corp calls off C$5.4-bn shale gas deal with PetroChina

Encana Corp, one of North America's largest natural gas producers, yesterday terminated a proposed C$5.4 billion deal to sell half of its holdings in a shale gas region of northeastern British Columbia to PetroChina.
 
''After close to a year of exclusive negotiations with PetroChina, we were unable to reach alignment on the planned transaction,'' said Randy Eresman, Encana's president and CEO.

In February 2011, PetroChina, the world's second-most valuable oil and gas company, said that it would acquire a 50-per cent stake in Canada's biggest natural gas producer Encana's gas assets for C$5.4 billion ($5.46 billion). (See: PetroChina to acquire 50-% stake in Canada's Encana's gas assets for $5.46 billion) http://www.domain-b.com/industry/oil_gas/20110211_petrochina.html

The deal was for 50-per cent interest in Encana's Cutbank Ridge natural gas assets in British Columbia and Alberta that cover 1.3 million acres of land, approximately 700 mmcf/day processing capacity, 3,400km of pipelines and an underground gas storage.

Beijing-based PetroChina had offered to pay around $8,500 per net acre or about 20-per cent more than the US benchmark gas price.

Separately, both companies had agreed to invest 50 per cent each into a joint venture, in proportion to their equal investment, to increase natural gas production and market all the production under the direction of a joint management committee.

The transaction was subject to due diligence, signing of the joint venture agreement, and approval by the company's board of directors as well as that by the Canadian and Chinese regulators.

Although Encana did not give detailed reasons for pulling out of the deal, it did say that it will look for potential investors in the upcoming months for these very attractive assets.

Calgary, Alberta-based Encana is a leading North American natural gas producer with about 95 percent of its production being natural gas. It gas assets are located in key basins of northeast British Columbia, east Texas, Colorado, Wyoming and Louisiana.