Natural gas-focused Encana Corporation (ECA) announced plans to join the Kitimat liquefied natural gas (LNG) project in British Columbia and the associated Pacific Trail Pipelines (PTP).
In this regard, Encana will buy a 30% stake in the project from its present owners Apache Corporation (APA) and EOG Resources (EOG). The financial terms of the deal were not disclosed.
Per the agreement, Encana will acquire an 11% interest of the venture from Apache, leaving the latter with 40% ownership and operatorship rights. The other partner, EOG Resources, will sell its 19% equity in Kitimat LNG and PTP to Encana, holding on to the remaining 30% stake.
The deal, pending regulatory approval, is slated to be closed in the second quarter of 2011.
The proposed Kitimat LNG export terminal is based in Bish Cove, approximately 400 miles to the north of Vancouver. The first two phases of the facility will provide an initial production capacity of about 700 million cubic feet per day of natural gas, or about 5 million metric tons of LNG per annum. With project construction likely to begin in 2012, the first LNG export will start in 2015.
The Kitimat project is targeted to tap enormous natural gas resources in the Canadian fields, in turn increasing export to the overseas regions. Encana management stated that the company’s investment will enable it to capture high demand in the Asia-Pacific markets over the coming years. Apart from strengthening international trade ties and creating job opportunities, this endeavor will open doors for more future deals.
We are maintaining a long-term ‘Neutral’ rating on the stock. Encana currently retains a Zacks #3 Rank (short-term ‘Hold’ recommendation).
APACHE CORP (APA): Free Stock Analysis Report
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