CALGARY, Alberta (Reuters) - Nucor Corp (NUE.N) said on Tuesday it has signed a deal to develop natural gas wells with Canada's Encana Corp (ECA.TO) it hopes will guarantee supply more than 20 years for its steel mills and other facilities in the United States.
Nucor said the agreement will establish a reliable gas supply for the direct reduced iron facility it is building in Convent, Louisiana, where iron ore is processed into a concentrate.
Under the terms of the deal, the companies will share costs to develop wells in the continental United States. EnCana will operate the wells, and drilling could stop if natural gas prices fell below an undisclosed threshold.
Nucor said in a release that the agreement, which builds on a smaller deal with Encana reached two years ago, could eventually provide enough natural gas to offset the fuel used at its U.S. mills and two gas-intensive direct reduced iron facilities.
Nucor shares were up 58 cents to $41.51 by midmorning on the New York Stock Exchange while Encana rose 12 Canadian cents to C$22.31 on the Toronto exchange.
Nucor and Encana could not be immediately reached for comment.
Reporting by Scott Haggett and Ernest Scheyder; editing by Andrew Hay