Encana sells Colorado drilling assets for $900M; Broe Group involved in purchase

Canada-based Encana Corp. (NYSE: ECA), one of the largest oil and gas producers in Northern Colorado, is selling its assets in the state to a joint venture formed by Denver-based The Broe Group and the Canada Pension Plan Investment Board for $900 million.

The Broe Group, whose Great Western Oil & Gas Co. is itself a significant player in Northern Colorado, will own 5 percent of the new entity, while CPPIB will own 95 percent. The deal with Encana, announced Thursday morning, is slated to close by the end of the year. The name of the new venture is still being finalized.

Encana’s holdings in the Denver-Julesburg Basin include 51,000 net acres and more than 1,600 wells that produced an average of 52 million cubic feet of natural gas and 14,800 barrels of crude oil and natural gas liquids per day during the first half of the year. Estimated proved reserves at the end of 2014 were 96.8 million barrels of oil equivalent.

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The new venture will operate as a standalone business governed by its own board of directors. The Broe Group is working to assemble a management team for the firm. The acquisition adds to a Broe portfolio that includes Great Western Oil & Gas, the Great Western Industrial Park in Windsor, a railroad and transportation affiliate OmniTRAX Inc., and Three Leaf Ventures, an investment affiliate focused on health-care technology startups.

“At nearly $1 billion in total value, this is a milestone transaction for The Broe Group and represents the kind of investment we are actively seeking,” The Broe Group chief financial and operating officer Claude Pumilia said in a prepared statement. “We are pleased to be partners with CPPIB to acquire an asset with significant proved reserves, strong production, and attractive well performance and returns. The combination of the management expertise of The Broe Group with the financial strength of CPPIB will drive the success of the new venture.”

For Encana, the deal marks yet another divestiture as oil companies suffer from the effects of the plummet crude prices have taken since the middle of last year. The company, which said it would use proceeds from the Colorado sale to “further strengthen its balance sheet and create greater flexibility in this market environment,” has pulled in net proceeds of about $2.7 billion in 2015 from divestitures. The company says it will have reduced its net debt in 2015 by approximately $3 billion by the end of the year.

Encana’s share price was up more than 3.5 percent in morning trading Thursday.

“As we advance our strategy we continue to focus our portfolio and capital on our four most strategic assets, the Permian, Eagle Ford, Duvernay and Montney,” Encana CEO Doug Suttles said in a prepared statement. “The new entity is acquiring a quality asset along with a highly talented team.”