EnCana sells Petrovera Resources to Canadian Natural Resources

Energy giant EnCana has sold its Alberta-based heavy oil joint venture Petrovera Resources for more than $ 700 mm to Canadian Natural Resources. Under a two-stage deal, EnCana bought out its Petrovera partner, ConocoPhillips Canada, then sold the entire company to Canadian Natural for $ 535 mm, or C$ 701 mm.
In a separate transaction, Canadian Natural divested about a third of the assets in the Petrovera partnership to an unnamed independent producer for about $ 234 mm, resulting in a net cost of $ 467 mm for the properties it kept.

Petrovera is an Alberta-based partnership formed in 1999 that produces heavy oil in east central Alberta and Saskatchewan. EnCana's share of Petrovera's 2003 production represents about 20,000 barrels of oil equivalent output a day after royalties. ConocoPhillips Canada's stake is about 18,000 bpd. EnCana owned 53.3 % of the company and ConocoPhillips 46.7 %.
"This is another step forward in the sharpening of our focus on resource plays -- large, low unit cost unconventional natural gas and oil reservoirs that deliver sustainable, long-life reserves and production growth," Randy Eresman, EnCana's COO, said. "Our core North American asset base contains large, high working interest land positions where we are able to apply our core competencies, built up over many years, to achieve low unit costs and superior return on investment. Our Petrovera interest was non-operated and among our higher operating cost properties."

EnCana's heavy oil strategy is focused on enhanced recovery projects at Suffield and Pelican Lake, plus being a low cost oilsands producer using steam-assisted gravity drainage technology at the company's fully owned Foster Creek and Christina Lake oilsands projects.
"Our 2004 plans call for the divestment of approximately 25,000 bpd of oil equivalent, after royalties, of primarily conventional heavy oil production in Western Canada," said Eresman. "The Petrovera sale represents a substantial portion of that objective."

EnCana said it plans to use money raised from the sale to pay down its debt. In a separate release, ConocoPhillips Canada revealed that it had sold its minority stake in Petrovera to EnCana for C$ 327 mm.
The Petrovera partnership was formed five years ago between Gulf Canada, now ConocoPhillips Canada, and PanCanadian Petroleum, EnCana's predecessor company. It produces primarily conventional heavy oil in Alberta and Saskatchewan. Calgary-based ConocoPhillips Canada said despite the sale "it continues to focus on conventional oil and gas business in Canada with major projects in the oil sands and Northern gas development."
"Canada remains an integral part of the company's long-term plans," the US-owned company said.

At Canadian Natural Resources, the company said the acquisition fits the company's strategy of "dominating its core areas and related infrastructure" because all the properties acquired by the company are located in its heavy oil core area.
The Calgary company said it expects to cut operating costs by seeking efficiencies with its own existing operations and pipelines. In addition, Canadian Natural has identified 300 new well locations and more than 400 well recompletion opportunities.