Encana's C$2.9B Cutbank Ridge deal dominates

Echoing last month's large deals, the largest deal of the 30-day period from mid-January to mid-February involves an Asian company and a North American unconventional play. This month saw Encana Corp. agree to sell a 40% interest in its Cutbank Ridge Partnership to Japanese global integrated business enterprise Mitsubishi Corp. for roughly C$2.9 billion. The Partnership holds about 409,000 net acres of Encana's undeveloped Montney-formation natural gas lands in the company's Cutbank Ridge resource play in northeast British Columbia.

The deal fills the void left last year after a $5.4 billion deal by PetroChina to acquire a 50% interest in Encana's Montney shale play asset fell through following a breakdown on terms. This new deal is different in that Mitsubishi will be acquiring a 40% interest in just a portion of the undeveloped acreage, containing 409,000 acres and no production, for C$2.9 billion.

According to Evaluate Energy's new Shale database, the deal will make Mitsubishi the top Asian acreage holder in the play with 163,600 net acres, ahead of KOGAS with 129,000 net acres and Petronas with approximately 75,000 net acres.

"The deal is a coup for Encana who have replaced one deal that included producing assets, pipelines and storage facilities for $7,700 per acre (unadjusted), with one that only includes undeveloped acreage for C$17,700 per acre," said Evaluate Energy's Eoin Coyne in a report to OGFJ.

In another large deal, Apache Corp. agreed to acquire Cordillera Energy Partners III LLC, a privately held company with substantial operations that include approximately 254,000 net acres in the Granite Wash, Tonkawa, Cleveland and Marmaton plays in western Oklahoma and the Texas Panhandle, for $2.85 billion.

The sellers, including EnCap Investments, other institutional investors and Cordillera management will receive approximately $600 million in Apache common stock subject to customary lock-up provisions. The balance of the consideration, $2.25 billion, will be funded with debt.

Apache Corp. has expanded on its reputation as a company who can acquire mature assets and extract previously unforeseen value to also include the acquisition of early stage shale resources, noted Coyne. Apache's deal with Cordillera is a "healthy blend of these two strategies. Cordillera owns 254,000 acres in the liquids fairway of the Anadarko basin, an area in which Apache has operated in for over 50 years. The Granite Wash amongst other plays being acquired has several different target zones at differing depths. The conventional zones have a long history of production, but other tight zones which although not technically shale resources, have been opened up by the advances made in horizontal drilling and fracing technologies," he continued.

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