Encana Corporation has announced that it will be selling its Haynesville natural gas asset, the asset owned by its subsidiary Encana Oil & Gas, Inc., for $850 million to GEP Haynesville LLC, a joint venture formed by GeoSouthern Haynesville LP and GSO Capital Partners LP, according to a press release issued by Encana.
The company also said that they plan to reduce their gatherings and midstream commitments, which will amount to about $480 million.
Encana will be using the total cash considerations from its sale and reductions to lessen its net debt and to further strengthen its balance sheet, according to the press release.
The company is focused on growing its high-margin productions.
Canadian Business adds that Encana, a leading North American energy producer, has been sharpening its focus on four strategic areas.
The company is focusing on two areas in the southern part of U.S. and the western part of Canada.
Doug Suttles, president and CEO of Encana, said in the press release that the transaction is "another step in advancing" the company's strategy.
"By further focusing our portfolio, we are making Encana more efficient as we proceed through the second half of 2015 and into 2016," he said. "This transaction delivers significant proceeds that we'll use to strengthen our balance sheet. In addition, it eliminates our midstream commitments in the Haynesville and captures ongoing revenue upside through a gas marketing arrangement."
Under the terms of the agreement, Encana will still be transporting and marketing GeoSouthern's Haynesville production on a fee for service basis for the next five years, according to the press release.
Encana also plans to substantially complete its reduction in gatherings and midstream commitments by 2020.
GEP Haynesville LLC will be acquiring Haynesville's natural assets, which includes approximately 112,000 net acres of leasehold, plus additional fee mineral lands, according to the press release.
The total lands represent Encana's total operations in Louisiana.
The deal is expected to close in the fourth quarter of 2015, according to the press release.
