Encana, PetroChina take $2.2 billion stab at joint venture

Thu Dec 13, 2012 6:29pm EST
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - PetroChina (601857.SS: Quote) will pay Encana Corp (ECA.TO: Quote) C$2.2 billion ($2.2 billion) for a 49.9 percent stake in a rich Alberta shale gas prospect owned by the Canadian company, the first big deal since Ottawa issued new guidelines for major energy investments by foreign state-owned enterprises.

Encana said the venture, with a non-controlling interest for PetroChina, allows the partners to bypass stringent reviews under the government's new restrictions.

The government had no immediate comment. But there was no indication of delays like the one faced by CNOOC Ltd (0883.HK: Quote) in its eventually successful bid for oil producer Nexen Inc NXY.TO.

Encana announced the deal less than a week after Canada issued its new framework for approving takeovers of resource assets, particularly oil sands, by foreign state-owned companies. The government also approved the Nexen takeover and a bid for Progress Energy Resources PRQ.TO by Malaysia's Petronas PETR.UL.

"The timing of this deal is really quite unbelievable," said lawyer Richard Steinberg, head of Fasken Martineau's mergers & acquisitions practice group.

"This is a step removed from the oil sands and so to the extent that this is not Canadian oil sands, it does seem to be in a less sensitive area and not directly in the bulls-eye," said Steinberg, noting that the deal appears to tick all the boxes in the government's new rule book.

Under the deal, which follows a failed joint-venture attempt by the pair in 2011, a unit of PetroChina known as Phoenix Duvernay Gas will take the nearly-half interest in Encana's Duvernay play in west-central Alberta, estimated to contain 9 billion barrels of oil equivalent

It has already paid C$1.18 billion and the other C$1 billion is payable over the next four years to help Encana pay for development, said Encana, Canada's largest natural gas producer. During the period, the partners will spend C$4 billion on drilling and processing facilities.   Continued...