Encana Oil & Gas (USA) Inc. (Encana USA), a subsidiary of Encana Corporation (Encana), has agreed to sell its Fort Lupton natural gas processing plant in Colorado to Western Gas Partners for approximately US$303 million.
The Fort Lupton plant processes about 84 million cubic feet per day (MMcf/d) of natural gas and is located about 30 miles northeast of Denver. This midstream asset divestiture includes five natural gas gathering pipeline systems and associated compression facilities. As part of the transaction, Encana USA has negotiated natural gas processing fees that allow the company to continue capturing value by extracting about 3,500 barrels of natural gas liquids per day from its processed natural gas. The agreement also provides long-term gathering and processing cost stability for the company’s ongoing natural gas development in the Denver-Julesburg basin.
“This divestiture is part of Encana’s ongoing initiative to capture significant incremental value from its midstream assets – natural gas processing plants, pipeline gathering systems and compression facilities. We are looking to enter into long-term and competitive fee-for-service agreements with industry-leading midstream companies. These arrangements help us optimize value creation of our extensive North American natural gas resources and deliver natural gas to market in the most cost-effective manner,” said Renee Zemljak, Encana’s Executive Vice-President Midstream, Marketing & Fundamentals.
Cabin natural gas plant divestiture process underway
Encana recently issued a request for proposal to companies interested in buying and completing the construction of the Cabin Gas Plant, which has regulatory approval for two phases of development for total processing capacity of 800 MMcf/d. Encana, as operator, is building the Cabin plant to serve producers in the Horn River natural gas play in northeast British Columbia. The Cabin plant is in the early stage of constructing the first phase, which is designed to have capacity of about 400 MMcf/d and is scheduled to start processing natural gas from Horn River in 2012.
Midstream asset divestitures in Canada and the U.S.
“We have a variety of midstream assets serving our key resource plays in Canada and the United States and we plan to pursue opportunities that help us enhance value and efficiently deliver our growing natural gas production to market at a low-cost over the long term,” Zemljak said.
The Fort Lupton plant and midstream facilities divestiture, which is subject to certain regulatory approvals and customary closing conditions, is expected to close in the first quarter of 2011. Encana USA has owned and operated the plant since 2000 when one of its predecessor companies acquired the facility as part of a larger acquisition of exploration and production assets.