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Encana Sells balance of its Prairie View Royalties

Posted by bernell on September 10, 2014

Encana, under the leadership of Doug Suttles, has used 2014 to liquidate various assets and to focus its effort on "Core" assets, of which the TMS is included. 

This week another announcement of a sale for $2.7 billion added to the coffers and provided further liquidity for EnCana.
A presentation on this sell and the company in general was led by Sherri Brillion, Executive VP and Chief Financial Officer for EnCana and is linked at the bottom of this post.

Relative to the TMS, here is what I gleaned from the presentation.

Multi-well drilling from one pad saves a bunch of money.  (Encana is, apparently, good at this and we’re likely to see more of the 4 well pads by Encana going into 2014.)  They talked about 8 and 10 wells drilling in other plays.  Costs can be and are significantly lower under these circumstances.

Encana can be relatively debt free at roughly $500 million dollars at the end of 2014 compared to roughly $6 billion at the beginning of the year, while acquiring a $3 billion 6
“core” asset in the Eagle Ford back in June.

I’d say 2014 has been good to Encana.

So, the real question from our perspective is what does this mean for the TMS? 

That question wasn’t asked, specifically, but the question was asked as to what Encana’s plans might be going forward in light of its stronger financial statement.

A portion of the answer by Sherri Brillion was that the current financial position of Encana provides “an opportunity to be opportunistic whether it be in acquiring and building on our existing positions or new positions.”

So, Encana could accelerate development in the TMS, by far its largest developing play.

Encana could even add to its holdings here. 

Alternatively, if the right deal came along, Encana could acquire an 8th “core” asset.

One analyst suggested that Encana could make an acquisition in the Permian Basin in Texas, but if this happened, he predicted, the TMS would go on the auction block.  He said an 8th play would simply be too distracting.

Opinions vary. 

Personally, all I know for sure is that Encana is the only company in the TMS at present that can pretty much make this play without any outside help. 

So, I’m hoping the decision is to focus here in 2015.

Here is a link to the Encana presentation.  Fair warning…get a strong caffeine injection before starting!

What do you think about it?