Encana Corporation agreed Tuesday to sell its Haynesville natural gas assets, located in northern Louisiana, to GEP Haynesville, LLC (GeoSouthern) for $850 million in cash.
The sale was made by Encana’s wholly owned subsidiary Encana Oil & Gas.
GeoSouthern is a joint venture formed by GeoSouthern Haynesville, LP and funds managed by GSO Capital Partners LP.
Encana will reduce its gathering and midstream commitments by 480 million on an undiscounted basis through the transfer of current and future obligations.
The commitments will be “substantially complete” through 2020, Encana said.
Alberta-based Encana will also transport and market GeoSouthern’s Haynesville production on a fee for service basis for the next five years.
During the first half of 2015, Encana’s Haynesville assets produced an average 217 million cubic feet per day of gas, contributed 9 percent to companywide production and accounted for less than 2.5 percent to Encana’s first half operating cash flow, excluding hedges.
Encana’s Haynesville natural gas assets include about 112,000 net acres of leasehold, plus additional fee mineral lands.
Encana operates 300 wells in the area.
Estimated year-end 2014 proved reserves were 720 billion cubic feet equivalent of natural gas.
The assets represent Encana’s total position in northern Louisiana.
The sale is expected to close in the fourth quarter of 2015 with an effective date of January 1, 2015.
Encana said it will use the total cash consideration to reduce its net debt, further strengthening its balance sheet.
“This transaction delivers significant proceeds that we’ll use to strengthen our balance sheet. In addition, it eliminates our midstream commitments in the Haynesville and captures ongoing revenue upside through a gas marketing arrangement,” Encana president and CEO Doug Suttles said.