Encana Corp., the Canadian energy producer seeking to boost investor returns by shifting to higher-priced crude, doubled its oil production following a $3.1 billion deal with Freeport-McMoRan Copper & Gold.
The agreement to purchase 45,500 net acres in Texas’s oil-rich Eagle Ford basin from Freeport’s oil and natural gas subsidiary “underscores our investment focus on high-margin assets,” Encana Chief Executive Officer Doug Suttles said today in a statement.
Suttles is boosting crude oil production to cut its reliance on gas, since the shale boom in North America is keeping prices below their historical averages. Freeport said the proceeds would be used to cut debt and further invest in the deepwater Gulf of Mexico.
The assets, which are located in the Karnes, Wilson and Atascosa counties of South Texas, produced about 53,000 barrels of oil equivalent a day in the first quarter, Encana said.
Suttles, who became CEO in June, promised last year to prune assets and jobs, focusing on five areas that yield oil and natural gas liquids. Encana also plans to sell shares in a royalty unit as early as this month.
“This acquisition fully aligns with out strategy announced last November,” Suttles said in the statement.
Encana this year has agreed to sell $2.3 billion of gas properties and is marketing its 480,000-acre Bighorn field in Alberta, according to people familiar with the process.
Today’s deal will produce cash flow immediately, meaning it won’t need to change existing investment plans, Calgary-based Encana said. It’s expected to close by the end of the second quarter.
Encana shares have gained 28 percent this year, valuing the company at C$18 billion ($16.5 billion.)
Scotia Waterous, a unit of Bank of Nova Scotia, advised Encana on the transaction, while Freeport was advised by Barclays Plc.
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