By OGJ editors
HOUSTON, Jan. 6 -- EnCana Corp. and Inter Pipeline Fund have closed the sale of EnCana's indirect 70% interest in the Cold Lake pipeline system to Inter Pipeline for $425 million, subject to closing and post-closing adjustments, EnCana reported. As a result of the transaction, Inter Pipeline increased its ownership interest in the Cold Lake system to 85% from 15% and will replace EnCana as operator of the Cold Lake system.
"This transaction furthers our corporate strategy of increasing our exposure to Alberta's long-life oil sands reserves, said David W. Fesyk, president and CEO of Inter Pipeline Fund. "We have diversified our pipeline operations geographically and enhanced the long-term cash flow profile of our business," he added.
EnCana said the sale is part of its strategic realignment to focus on core company assets that have the highest growth and return, and it plans to use the sale proceeds for general corporate purposes.
The Cold Lake system is Canada's largest heavy-oil gathering complex, consisting of 400,000 bbl of oil storage and more than 900 km of heavy blend and condensate pipelines that currently transport 220,000 b/d from the Cold Lake oil sands production region to crude oil market hubs at Edmonton and Hardisty, Alta.
EnCana's Sherwood Park control center also is included in the transaction. Inter Pipeline said that during 2003 it would transfer to the Sherwood Park facility the remote monitoring and operational control functions for its four existing pipeline systems in Alberta and Saskatchewan. Most EnCana employees associated with the Cold Lake system have accepted employment offers from Inter Pipeline.
The Cold Lake system will maintain its long-term shipping agreements with the major producers in the Cold Lake region, including Imperial Oil Ltd., Canadian Natural Resources Ltd., and EnCana, which will continue oil transportation capacity on the system through an existing long-term contract.
Inter Pipeline financed the acquisition through a syndicated senior debt facility and a $138 million issue of 10% convertible extendible subordinated debentures. With the completion of the Cold Lake acquisition, the maturity date of the convertible debentures has been automatically extended to Dec. 31, 2007 from Feb. 15, 2003, Inter Pipeline said.
EnCana also said it expects to close by mid-January the previously announced sale of its 1,717 mile Express pipeline system. The system is being sold for $1.175 billion, including the assumption of $582 million in debt, to a consortium of BC Gas Inc., Borealis Infrastructure Management Inc. and Ontario Teachers' Pension Plan (OGJ Online, Nov. 22, 2002).
The Express system consists of the 24-in. and 20-in. Express and Platte pipelines that transport Canadian crude oil from Hardisty, Alta., via Casper, Wyo., to Wood River, Ill.