Reuters: Hot Stocks: UPDATE 3-Encana, PetroChina take $2.2 bln stab at new joint venture

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UPDATE 3-Encana, PetroChina take $2.2 bln stab at new joint venture Dec 13th 2012, 20:30 Thu Dec 13, 2012 2:32pm EST * Second attempt at cooperation between the two companies * PetroChina gets 49.9 percent of Alberta gas joint venture * Encana shares rise 2.3 percent (Adds company comments, details on venture, lands) By Jeffrey Jones CALGARY, Alberta, Dec 13 (Reuters) - PetroChina will pay Encana Corp C$2.2 billion ($2.2 billion) for a 49.9 percent stake in a rich Alberta shale gas prospect owned by the Canadian company, a first test of Canada's new guidelines for major energy investments by foreign state-owned enterprises. Under the deal, which follows a failed joint-venture attempt by the pair in 2011, a unit of PetroChina known as Phoenix Duvernay Gas will take the nearly-half interest in Encana's Duvernay play in west-central Alberta, estimated to contain 9 billion barrels of oil equivalent It has already paid C$1.18 billion and the other C$1 billion is payable in the next four years by carrying half of Encana's share of development spending, Encana said. During the period, the partners will spend C$4 billion on drilling and processing facilities. With the agreement, Encana makes good on a big part of a high-profile effort to attract partners to help fund development of a host of prospects across North America that feature natural gas that is high in liquid hydrocarbon content as a way to reduce its on spending and protect is balance sheet. Such fuels are priced closer to crude oil than to dry gas, of which there is continent-wide glut that has driven down prices at times to decade lows. Encana shares were up 47 Canadian cents, or 2.3 percent, at C$20.91 on the Toronto Stock Exchange soon after the announcement. They are up about 12 percent this year. "A transaction of this magnitude keeps us on track to create a more diversified commodity portfolio and maintain our balance sheet strength," Encana Chief Executive Randy Eresman said in a statement. Encana announced the deal less than a week after Canada issued new guidelines for the takeover of resource assets by foreign state-owned companies. The guidelines were issued along with approvals for the takeovers of Nexen Inc by China's CNOOC Ltd and of Progress Energy Resources Corp by Malaysia's Petronas. The new framework effectively bans enterprises controlled by foreign governments from taking control of more businesses in Canada's oil sands, but it is not yet known how it will affect other takeovers and alliances. Encana does not cede control of its Duvernay assets in the joint venture and the deal includes no oil sands. Government officials were not immediately available for comment on which approvals might be necessary. CLOSING THE LOOP Encana and PetroChina tried to set up a C$5.4 billion joint venture on British Columbia gas assets in 2011, but the deal fell through over reported disagreements about asset value and development pace. "The difference here is that the money's actually in the bank now. It happened this morning," Encana spokesman Jay Averill said. "It's an opportunity to close the loop on that one." Since then the company has attracted partners to other parts of its business and has sought more for such assets as the Tuscaloosa Marine Shale in Louisiana and Mississippi and Eaglebine Shale in Texas. Bond rating agency DBRS said the new venture will strengthen Encana's cash position to $3 billion from $2 billion at the end of September, and that it expects proceeds from asset sales will keep funding large portions of the company's capital spending. Encana has drilled nine wells into its 445,000 acres (180,100 hectares) in lands in the Duvernay, where numerous companies have amassed large land positions through government land sales and takeovers. In October, Exxon Mobil Corp agreed to spend C$2.6 billion to take over Celtic Exploration Ltd, which has extensive acreage in the region. A study by the Alberta Energy Resources Conservation Board and Alberta Geological Survey said the Duvernay formation, which extends through much of central Alberta, contains 443 trillion cubic feet of total gas in place, 11.3 billion barrels of natural gas liquids and 61.7 billion barrels of oil, putting it on par with some of the continent's largest shale prospects. ($1=$0.98 Canadian) (Reporting by Jeffrey Jones; Editing by Janet Guttsman, Peter Galloway and Marguerita Choy) Link this Share this Digg this Email Reprints

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