Toyota Tsusho invests C$ 600 million in Encana’s CBM development in Canada

Encana Corp. has reached an agreement with Toyota Tsusho Wheatland Inc., a subsidiary of Toyota Tsusho Corp., that will see the Japanese company invest approximately C$ 602 million to acquire a 32.5% royalty interest in natural gas production from a portion of Encana’s coalbed methane (CBM) resource play. The agreement includes production from a total of about 5500 existing wells and potential future drilling locations in southern Alberta, Canada.

“This investment from a global partner recognises the significant value identified in Encana’s CBM lands which rank among the company’s lowest-cost, lowest-risk assets, and signifies another step as Encana pursues a range of opportunities to manage its portfolio and enhance the long-term value creation of its vast inventory. Encana’s CBM resources cover a great expanse that includes approximately 2.1 million acres in the Horseshoe Canyon fairway. The vast majority of this acreage is fee lands, where Encana holds the mineral rights in perpetuity, and are estimated to contain significant amounts of recoverable natural gas. This relationship with Toyota Tsusho, a world-class leader, offers strong synergies that have the potential to foster expanded business opportunities. Further, this agreement serves as a model for other investment opportunities and supplies capital investment to preserve the value and efficient development of Encana’s shallow gas lands in Alberta that have contributed long-life production for more than five decades,” said Randy Eresman, president and CEO of Encana.

Encana’s CBM assets integrate CBM and the company’s widespread shallow gas developments, including tapping into coal seams and sands using a combination of existing, new and recompleted wells. Under the agreement, Toyota Tsusho paid C$ 100 million with the closing of the transaction yesterday and will invest approximately C$ 502 million over seven years to acquire a 32.5% royalty interest, before deductions, in production from approximately 4000 existing wells and approximately 1500 potential future drilling locations. These wells are located in an area covering about 480,000 acres along the eastern edge of the Horseshoe Canyon fairway — an area that represents about 24% of Encana’s total CBM net acreage. The existing wells on these lands are currently producing a total of about 120 million ft³ equivalent per day of natural gas. The area contains approximately 480 billion ft³ equivalent of proved plus probable reserves and 140 billion ft³ equivalent of best estimate economic contingent resources as of 31 December 2011. Under the agreement, Encana will be operator and Encana and Toyota Tsusho have established a management committee that will provide overall supervision and direction of development operations.

Responsible resource development of abundant natural gas

Encana is committed to demonstrating reliability and trustworthiness as it engages in safe, energy-efficient, sustainable development and to advancing this development with consideration and respect for the people, communities and environment where it operates.

“Our integrated CBM wells produce low-pressure, sweet natural gas that is essentially pure methane, and as a result is a cleaner energy source, producing the fewest emissions of any hydrocarbon — a natural gas resource capable of delivering long-term, affordable energy supplies to domestic and export markets,” Eresman said.

Read the article online at: https://www.worldcoal.com/cbm/26042012/toyota_tsusho_invests_in_encana_canada_cbm_development/