Encana/Petrochina Montney JV collapses. Encana in the hunt for new JV partners
Encana is looking for new partners to develop its Cutbank Ridge assets following the collapse of its C$5.4 billion deal with PetroChina. The companies were unable to achieve substantial alignment with respect to key elements of the proposed transaction, including the joint operating agreement.
The assets in the terminated JV included the majority of Encana’s Montney, Cadomin and other natural gas assets, on a portion of the company’s British Columbia and Alberta lands. According to Encana, the Cutbank Ridge assets hold reserves of: Proved-1.8 Tcfe, Probable-0.6 Tcfe and Possible- 0.4 Tcfe; and Contingent resources of 3.1 Tcfe, on a best estimate case.
Foreigners’ invasion into Montney Shale:
The Encana-PetroChina JV was the largest amongst several recent deals in the Canadian Shales. Following are the few snippets of the other significant Montney deals:
In early June 2011, Petronas agreed to form a Montney JV with Progress Energy Resources, to develop the Altares, Lily and Kahta shale gas assets in north-eastern British Columbia and acquire 50% of Progress’ interest in the three areas, for a total consideration of C$1,070 million.
Recently, Talisman clinched back-to-back Montney JVs with Sasol. In December 2010, Sasol agreed with Talisman to acquire a 50% interest in the Farrell Creek assets located in the Montney basin for C$1,050 million. In March 2011, Sasol agreed with Talisman to acquire a 50% interest in Cypress A acreage, located in the Montney basin for C$1,050 million.
In early 2010, Kogas agreed with Encana to spend C$565 million over three years to explore new shale gas reservoirs in largely undeveloped areas of Encana's land, in the Horn River and Montney formations.
This is an interactive chart to compare the Montney deals since 2007.
In April 2011, Encana announced plans seeking investors in two joint ventures on Encana assets outside Cutbank Ridge in northeast British Columbia – one on undeveloped Horn River shale lands and the other in the company’s Greater Sierra resource play. Discussions are well underway on these potential transactions, as well as on a potential divestiture of producing assets in the northern portion of Greater Sierra. Encana expects that these transactions, plus other divestitures and joint venture pursuits that the company has initiated, will generate proceeds and joint venture investments in 2011, of between $1 billion and $2 billion, a level that exceeds Encana’s net divestiture target of $500 million to $1 billion for 2011.
Potential buyers of Encana’s assets
The termination of this Encana-Petrochina JV opens doors for other companies who are interested in shale gas. These companies could be ExxonMobil, ConocoPhillips and other Asian investors like Kogas, Mitsui, Mitsubishi, CNPC, CNOOC, etc.
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