Canadian natural gas firm EnCana Corporation (ECA) has signed a capacity expansion deal with Pembina Pipeline Corporation.
Per the agreement, Pembina will put in approximately C$230 million, or $225.2 million, to expand the processing and liquids extraction capacity of the Resthaven natural gas processing plant in west central Alberta.
The expansion program will be executed in two phases and is slated to commence in late 2013. In the first phase, the extraction capacity of natural gas liquids (NGLs) at Resthaven will be increased to 8,000 barrels per day (bpd) from the current level of 1,000 bpd.
Phase two of the program will aim at supplying EnCana with another 4,000 barrels per day of extracted NGLs from its emerging liquids natural gas production in the region.
EnCana expects to generate significant natural gas in the Deep basin in west-central Alberta. The company expects to triple its daily NGL extraction from the region to 30,000 barrels from 10,000 barrels.
EnCana is looking forward to strong daily contributions from three imminent third-party midstream companies –– Resthaven bringing in about 12,000 barrels, Musreau about 5,000 barrels and Gordondale more than 3,000 barrels, netting an additional growth of about 20,000 bpd of NGLs.
EnCana’s gas liquids expansion is set to start in December with the expected addition of about 5,000 barrels per day of NGL production from expanded facilities that Pembina has installed at its Musreau natural gas processing plant, about 18.64 miles northwest of the Resthaven plant.
Headquartered in Calgary, Alberta, EnCana is the second largest gas producer in North America, and holds a highly competitive land and resource position in a number of the region's most promising shale and tight gas resource plays. This provides the company with a low risk, long-life, and sustainable growth profile.
In an attempt to trim expenditure and cope with weak natural gas prices, EnCana has embarked upon a $1–$2 billion divestiture program slated for completion by the end of this year. In this regard, the company has entered into an agreement with Enbridge Inc. (ENB) for the sale of its majority stake at the Cabin Gas Plant in Horn River Basin for approximately C$220 million.
EnCana will sell some of its midstream assets in Colorado to privately held Summit Midstream Partners LLC for $590 million. The company expects proceeds from these sales to strengthen its balance sheet and render greater financial flexibility in 2012.
We are maintaining our long-term Neutral recommendation on the stock. EnCana shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating.
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