EnCana may spin off oil sands
DAVE EBNER
theglobeandmail.com
Globe and Mail Update
POSTED AT 3:20 PM EDT ON 26/04/06
Calgary — "EnCana Corp. is considering spinning off its oil sands unit once it strikes a deal with potential partners to process its planned 500,000 barrels a day of bitumen output.
On a conference call Wednesday, chief executive officer Randy Eresman said it is “pretty obvious to us” that it makes sense to create a pure oil sands company because such entities receive “tremendous valuations.”
“There's a compelling argument,” Mr. Eresman said in response to a question.
He added that a decision won't be made until the company finalizes a larger oil sands partnership.
EnCana wants a deal with one to three major players by the end of September to upgrade and refine its planned bitumen output. The deal or deals would likely involve EnCana taking an equity stake on the so-called downstream processing end of things while giving up equity for as much as half its goal of 500,000 barrels a day by 2015.
Thereafter, EnCana could hold an initial public offering of its remaining oil sands holdings while keeping a stake itself. This would mean investors could more precisely value the assets.
The comments were made on a quarterly conference call ahead of the company's annual meeting this morning in Calgary.
EnCana is best known as a North American producer of natural gas but also has extensive oil sands holdings, though analysts and investors say that the company gets little credit in the stock market for its the oil.
In an update Wednesday of what EnCana calls its unbooked resource potential — reserves it hopes to book as proved in the next decade or so — it said its oil sands holdings include 3.3 billion barrels of recoverable bitumen. That is more than its unbooked potential for natural gas, when comparing barrels of oil to volume of gas.
The previous update in 2005 showed only 900 million barrels of oil sands. The number has increased because EnCana has more exact development plans under way.
Mr. Eresman said the company has narrowed down a list of more than 20 potential partners to less than 10.
Marathon Oil Corp., a Houston-based oil producer and refiner, is among that group, sources have said. Marathon has publicly said it would like to get involved in oil sands production as well as secure supply for its refineries." |
