Nexen buys EnCana's UK oil business

Oct 29, 2004 02:00 AM

Nexen, a Canadian energy and chemicals company, agreed to buy the UK oil business of EnCana for $ 2.1 bn, giving it control of the biggest British oil discovery in more than a decade. Calgary, Canada-based Nexen will pay for the purchase with $ 600 mm of cash, bridge loans and disposals, it said.
EnCana, also based in Calgary, is exiting the UK to focus on natural gas and oilsands in North America. The company will record a $ 1 bn after-tax gain on the sale, which is expected to be completed by Dec. 1, it said.

Nexen said it will spend $ 650 mm to finish developing the Buzzard field in the North Sea, operating it and owning 43 %. The Buzzard discovery, 100 km (62 miles) off the Scottish coast, is expected to start producing oil in 2006.
"This acquisition will establish us as a significant player in the region," Nexen CEO Charlie Fischer said. "Nexen will gain a proven UK management and technical team with an excellent track record."

Under the proposal, subject to UK government approval, Nexen will gain 41 % of the UK Scott field and 54 % of the Telford field, which together produce about 19,000 bpd of oil equivalent, the statement said. Buzzard may reach a peak production of 80,000 bpd of oil equivalent in 2007, it said.
Nexen expects to get $ 1.5 bn Canadian ($ 1.2 bn) from selling "mature assets," its statement said.

Calgary-based EnCana, Canada's largest natural- gas producer, said third-quarter profit rose 36 % to $ 393 mm as output increased and costs fell. CEO Gwyn Morgan, 58, is spending billions of dollars this year drilling about 4,500 gas wells in North America to capitalize on rising fuel prices.
The sale of Buzzard "presents an opportunity to capture substantial immediate value for our shareholders at a time of high oil prices," Morgan said.

EnCana will use the proceeds from the sale to reduce debt and buy back its shares. It plans to sell more interests, in Ecuador and Gulf of Mexico, next year.
Deutsche Bank advised Nexen.

Source: Bloomberg
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