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Encana Corporation Message Board

  • margin321 margin321 Mar 1, 2010 7:09 PM Flag

    Horn River and Montney

    <<Korea Gas Corp. has signed a three-year deal with Calgary-based gas giant EnCana Corp. for a 50 percent interest in land blocks in the Montney and Horn River Basin shale formations.

    EnCana spokesman Alan Boras said Monday the deal gives EnCana the opportunity to accelerate development faster than it would have otherwise.>>

    They don't say exactly what blocks but the details are starting to come out.

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    • Last year they borrowed $ 6.5 billion and lost their single “A” credit rating in the process. They now must sell a billion worth of assets every year to make their bankers happy.


      Here is the wording of the original Yonhap News Agency report of the Korea Gas investment:

      http://english.yonhapnews.co.kr/news/2010/02/28/0200000000AEN20100228001700320.HTML

      “Korea Gas to invest US$1.1 billion in Canadian natural gas fields

      SEOUL, Feb. 28 (Yonhap) -- The state-run gas agency Korea Gas Corp. will invest US$1.1 billion to jointly develop natural gas fields in Canada with local firm Encana Corp., a deal that will secure gas shipments to South Korea, the local firm said Sunday.

      Under the deal with the biggest natural gas company in North America, Korea Gas acquired a combined 50 percent stake in three oil fields in northeast British Columbia and will start extracting 1.1 million tons of natural gas every year for 40 years beginning in 2017, the company said.”


      You keep ignoring the key words “beginning in 2017” – when does ECA actually get the money? - everything is hype and wishful thinking until Encana comes clean and produces the facts for investors.


      The reason ENCANA declined to issue a news release or make a formal announcement is because it’s probably not such a good deal for ECA.

      As you know the Koreans are though negotiators who get what they need.

    • That is a disingenuous statement by Mr. Boras, something Encana usually does not do. Of course a deal to jointly develop a BC gas field and convert the output to LNG and export it to Korea for 40 years is a HUGE deal. It gives Canada the promise of an entire new market and more importantly access to international nat gas prices via entering the LNG export game.

      PS - they do not have any creditors they need to keep at bay. On the contrary, their debt levels are actually below their target zone at this point.

    • What is the hype all about? 2017 maybe?

      ENCANA declined to issue a news release or make a formal announcement.

      ENCANA, Alan Boras
      “Oil companies routinely farm out unused land to avoid relinquishing mineral rights and allowing them to invest capital elsewhere. Normally the deals aren’t publicized, Boras said, and the company declined to issue a news release or make a formal announcement.

      If this is such a great deal why don't they give details or is it another smoke screen to keep their creditors at bay.

    • Where to start.

      1. They are jointly developing 20% of their Horn River and Montney acres. They will benefit from a partner sharing the capex costs for infrastructure. They will still own half the gas the JV produces.

      2. This gas is being sold into the export market, where the worldwide price for LNG will determine the price. In fact there might actually be a premium as part of the deal. Kinemat port is being built as a gas export facility to convert BC gas to LNG and load it for international destinations. The JV helps create another market for Canadian gas and will support better local gas prices, not undercut them.

      3. It is a nice deal. I like the JV with Apache at Horn River. I like the JV with Shell at Haynesville. I like this JV with KoreasGas. ECA has huge scale and is accelerating growth with money from other companies. Otherwise they might temporarily go cash flow negative while building expensive new infrastructure at Horn River, really a frontier area. The deal with KoreaGas is different and even better. Not only does it give ECA upfront capital to develop the project, it also gives them a customer for the gas for next 40 years and likely higher pricing than they could get selling the gas in Canada or to US market. If Kinemat is wildly successful, you might see more export terminals.

    • So the Koreans are buying a 50% interest but it's only for 3 years.

      I don't get the 3 year part.

      Is EnCana selling a half interest in their acreage in these two plays or what?

      is that all they're worth?

      • 2 Replies to foundareststop
      • They are buying half of about 20% of ECA's interest in Horn River and Montney (ie they are jointly developing 20% of the acres).

        ECA has 260,000 Horn River acres (net) and 760,000 Montney acres.

        KG is jointly developing about 200k acras (50:50 so the net is 100,000 acres). Of that at least 2/3 is Montney - the total acres they are developing together at Horn River is much smaller.

        So the price makes a lot more sense since is is for half interest on 20% of those properties.

      • More details are coming out. By one report Korea gas bought half interest in 10,000 acres in Horn River and 52,000 acres in Montney. Or maybe their net was that much - it wasn't totally clear.

        Now remember ECA has 260,000 acres of Horn River (net) and 761,000 acres of Montney.

        So I was WAY off when I was thinking they might be buying half of ECA's half of Horn River JV with Apache. That would be 130,00 acres, and Korea Gas is buying interest in less than a tenth of ECA's piece. (Together the JV with Apache has 520,000 prime Horn River acres).

        And they are buying very small stake in Montney. (interest in 52k/total of 761k acres)

        Original Gas in place is 150 BCF/section at Horn River and 300 BCF per section in very best parts of Montney. Korea Gas buying into 20 sections at Horn River (300 BCF OGIP) and 80 sections of Montney (2.4 TCF OGIP).

        BY the way, does anyone know off hand the conversion of 1.1 million tons a year into MMCF/day of gas production? I haven't had a chance yet to look that up.

 
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