TORONTO (Reuters) - Encana Corp (ECA.TO), Canada’s largest natural gas company, said on Wednesday it is buying producing assets in the Eagle Ford shale field in Texas from Freeport-McMoRan Copper & Gold (FCX.N) for $3.1 billion, nearly doubling its oil output and boosting its shares by as much as 6.2 percent.
The purchase adds another core region to the five shale fields Encana is concentrating spending on as it restructures its operations away from low-value natural gas to concentrate on valuable crude and natural gas liquids.
“Gaining a position in a world class, oil-rich resource play like the Eagle Ford accelerates the transition of our portfolio and underscores our investment focus on high margin assets” Encana Chief Executive Doug Suttles, said in a statement.
Encana shares were up C$1.14 to C$25.70 by early afternoon on the Toronto Stock Exchange after earlier touching C$26.08.
The acquisition is Suttles’ first major purchase since the former BP Plc (BP.L) executive arrived at the Calgary-based Encana last June with a mandate to reshape a company that had endured a series of strategic missteps that had it relying on natural gas from wide flung operations throughout North America.
Suttles has begun selling off surplus properties, shedding its stake in Wyoming’s Jonah gas field in March for $1.8 billion and late last month selling east Texas gas lands for $530 million.
Encana said the Eagle Ford assets offer a large contiguous land position in the core of the play, fitting well with Encana’s technical expertise in developing resource plays.
Canaccord Genuity analyst Phil Skolnick said he views the transaction as positive for Encana, as the deal will boost cash flows for the company.
The deal will give Encana 45,500 net acres in Karnes, Wilson and Atascosa counties in south Texas. The properties produced the equivalent of about 53,000 barrels of oil per day in the first quarter, the company said.
The acquisition is expected to close by the end of the second quarter.
Freeport said it expects net proceeds of about $2.5 billion, roughly half of which would be used to repay debt and the rest for investment in the deepwater Gulf of Mexico. The proceeds would get the copper and gold miner more than halfway to its stated goal of monetizing about $4 billion of its energy assets.
Freeport’s debt levels spiked last year when it bought energy companies Plains Exploration & Production Co and McMoRan Exploration Co for $9 billion. At March 31, 2014, its consolidated debt was $20.9 billion.
“This transaction represents an important step in our ongoing debt reduction plan while providing additional capital to enhance our portfolio of assets with superior margins and growth characteristics,” said Freeport’s CEO James Moffett in a statement.
Freeport shares were up 19 cents to $34.03 on the New York Stock Exchange.
With additional reporting by Scott Haggett in Calgary and Sayantani Ghosh and Swetha Gopinath in Bangalore; Editing by Sriraj Kalluvila, Alden Bentley and Andrew Hay