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The deal is roughly in line with expectations, as the Wall Street Journal reported earlier this month that the company was in “advanced talks” to sell the field for $2 billion. However, the expected buyers listed by the paper aren’t the ones Encana reported this morning.
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Encana (NYSE: ECA) (TSX: ECA) is headquartered in Calgary, Alberta, with U.S. operations based in Denver. The Denver-Julesburg Basin, which includes territory in Northern Colorado, is one of Encana’s top sites for drilling.
In late 2013, the natural-gas giant had already trimmed its Wyoming workforce by nine people, a 6.25 percent drop compared with 18.5 percent continent-wide layoffs for the company drastically shifting gears in the face of low dry-gas prices. The Jonah sale will cut Encana’s workforce in Wyoming by about 100 people as those employees likely shift over to the management of TPG Capital’s subsidiary. That will leave Encana with a drastically slimmer workforce of about 60 employees in the Cowboy State.
“TPG has indicated they need a strong workforce going forward,´ said Encana spokesman Doug Hock in an email to the Wyoming Business Report, a sister publication of BizWest. “Recognizing the accomplishments of the Jonah workforce and the need for continuity, they expect to retain the employees working in connection with the Jonah Field.”
Encana chief executive Doug Suttles said in a release that the sale is consistent with the company’s current strategy, which is to shift into liquids production and focus on other growth areas for the company.
Hock recently told the Wyoming Business Report that the company was “testing the market” in key areas, but didn’t indicate what those areas might be, saying that comes when sales are formally announced. Now with the Jonah sale expected to close in the second quarter, Hock said there could be more sales in the pipeline.
“Our overall strategy isn’t predicated on either acquisitions or divestitures,” Hock said. “That being said, we continue to look for opportunities that fit our strategy across North America.”
TPG seems pleased with the acquisition.
“The Jonah field is a world-class, low-risk resource with long reserve life and future drilling opportunities that will be a strong platform to continue to grow a portfolio of cash flow-producing assets,´ said Tom Hart, CEO of the new oil and gas platform formed by TPG to pursue the investment.
The company will maintain Encana’s former Jonah office in Pinedale, Wyo., and open a Denver office as a result of the purchase.
Encana has been posting massive losses recently, including a $251 million loss in the fourth quarter of 2013. Such losses have prompted major restructuring of the company to “get back to winning.”
This sale of Encana’s Jonah assets is subject to satisfaction of normal closing conditions as well as regulatory approvals, and is expected to close in the second quarter of 2014.
Evercore and Davis Graham & Stubbs LLP advised Encana on this transaction. Vinson & Elkins LLP advised TPG.