Encana strengthens its condensate-focused growth plan in the Montney with innovative midstream agreement
April 02 2018 - 6:00AM
(TSX:ECA) (NYSE:ECA)
Encana Corporation
(Encana) has reached an agreement with Keyera Partnership, a
subsidiary of Keyera Corp. (Keyera), under which Keyera will
acquire and fund the remaining development of Encana’s Pipestone
Liquids Hub and Encana’s planned Pipestone Processing Facility.
This agreement provides Encana with an additional 33,000 barrels
per day (bbls/d) of net raw condensate processing capacity and 170
million cubic feet per day (MMcf/d) of net inlet natural gas
processing capacity. Keyera will provide Encana with processing
services under a competitive fee-for-service arrangement.
“We are pleased to expand our relationship with
Keyera and to have completed another highly innovative midstream
agreement that significantly reduces our financial obligations
compared to a traditional take-or-pay structure,” said Renee
Zemljak, Encana’s Executive Vice-President, Midstream, Marketing
& Fundamentals. “This agreement strongly supports our
condensate-focused growth plan in the Montney, advances our
five-year plan and demonstrates our commitment to capital
discipline and efficiency.”
Under the agreement, Keyera will acquire and
fund the remaining development of Encana’s Pipestone Liquids Hub,
currently estimated at a total of approximately C$105 million. The
Pipestone Liquids Hub is expected to start up in the fourth quarter
of 2018 providing Encana with an additional 14,000 bbls/d of net
raw condensate processing capacity. This supports the company’s
plan to double its Montney liquids production from the fourth
quarter of 2017 to the fourth quarter of 2018.
Keyera will also own and fund Encana’s planned
Pipestone Processing Facility which will include associated acid
gas disposal and water handling infrastructure and be located
alongside the Pipestone Liquids Hub. Designed to accommodate future
capacity expansion, the initial facility will provide Encana with
19,000 bbls/d of net raw condensate processing capacity plus 170
MMcf/d of net inlet natural gas processing capacity. The Pipestone
Processing Facility is expected to start up in 2021.
Keyera will provide Encana with condensate and
natural gas processing services under a competitive fee-for-service
arrangement. This increases Encana’s flexibility and significantly
reduces its financial obligations compared to a traditional
take-or-pay agreement. With a land dedication structure which is
subject to existing processing facilities that Encana owns in the
area, Encana’s financial obligation is a revenue guarantee on a
fraction of its initial capacity rights.
Encana and Keyera will jointly develop the
facilities, with Encana managing the design, construction and
initial operation. Keyera will oversee all commercial and ownership
activities for both facilities. The sales proceeds received by
Encana under the transaction are approximately C$39 million,
subject to post-closing adjustments. The effective date of the
agreement is March 1, 2018.
Encana CorporationEncana
Corporation is a leading North American energy producer that is
focused on developing its strong portfolio of resource plays, held
directly and indirectly through its subsidiaries, producing oil,
natural gas liquids (NGLs) and natural gas. By partnering with
employees, community organizations and other businesses, Encana
contributes to the strength and sustainability of the communities
where it operates. Encana common shares trade on the Toronto and
New York stock exchanges under the symbol ECA.
ADVISORY REGARDING FORWARD-LOOKING
STATEMENTS – This news release contains forward-looking
statements or information (collectively, “FLS”) within the meaning
of applicable securities legislation, including the United States
Private Securities Litigation Reform Act of 1995. FLS include:
expectation that closing conditions will be satisfied and timing
thereof; expected capacity, cost and timing of the liquids hub and
processing facilities; anticipated benefits of the transaction,
including term, financial obligations and benefits compared to
other structures; growth and five-year plan in the Montney;
commitment to capital discipline and efficiency; and anticipated
proceeds.
Readers are cautioned against unduly relying on
FLS which involve assumptions, risks and uncertainties that may
cause FLS not to occur or results to differ materially. These
assumptions include: future commodity prices and differentials;
assumptions contained in corporate guidance and five-year plan;
results from innovations; access to transportation and processing
facilities; expectation that counterparties will fulfill their
obligations under the gathering, midstream and marketing
agreements; access to transportation and processing facilities
where Encana operates; and expectations and projections made in
light of Encana's historical experience and its perception of
historical trends. Risks and uncertainties include: risks inherent
to closing the transaction including timing thereof; adjustments
that may reduce anticipated proceeds; ability to generate
sufficient cash flow to meet obligations; commodity price
volatility; ability to secure adequate transportation and potential
curtailments; delays in infrastructure construction; unexpected
technical difficulties; counterparty and credit risk; failure to
achieve cost and efficiency initiatives; risks inherent in
marketing operations; risks inherent in corporate guidance and
five-year plan; and other risks and uncertainties impacting
Encana's business, as described in its Annual Report on Form 10-K
and from time to time in other periodic filings as filed on SEDAR
and EDGAR.
Although Encana believes the expectations
represented by FLS are reasonable, there can be no assurance FLS
will prove to be correct. Readers are cautioned that the above
assumptions, risks and uncertainties are not exhaustive. FLS are
made as of the date of this news release and, except as required by
law, Encana undertakes no obligation to update publicly or revise
any FLS. The FLS contained herein are expressly qualified by these
cautionary statements.
Further information on Encana Corporation is
available on the company’s website, www.encana.com, or by
contacting:
Investor
contact: |
Media
contact: |
Corey Code |
Simon Scott |
Vice-President,
Investor Relations |
Vice-President,
Communications |
(403)
645-4606 |
(403)
645-2526 |
|
|
Patti Posadowski |
Jay
Averill |
Sr. Advisor, Investor
Relations |
Director, Media Relations |
(403)
645-2252 |
(403)
645-4747 |
SOURCE: Encana Corporation