By the OGJ editors
HOUSTON, Nov. 22 -- Two buyers have signed separate agreements to purchase EnCana Corp.'s interests in the Express and Cold Lake pipeline systems for $1.6 billion (Can.).
EnCana's board on Tuesday approved the two transactions, part of EnCana's bid to refocus its operations on oil and gas exploration and production and selected midstream opportunities. That bid entails disposition of noncore assets that EnCana reckons will raise more than $2.1 billion this year.
EnCana was formed in April from the $27 billion merger of Calgary firms Alberta Energy Co. Ltd. and PanCanadian Energy Corp. The merger was announced in January (OGJ Online, Jan. 28, 2002).
Express deal
A consortium of BC Gas Inc., Vancouver; Borealis Infrastructure Management Inc.; and Ontario Teachers' Pension Plan agreed to buy EnCana's 100% stake in the Express pipeline system for $1.175 billion, including the assumption of $582 milion in debt. Each buyer holds a one-third interest in the consortium.
The 1,717 mile Express system, consisting of the Express and Platte pipelines, transports Canadian crude oil from Hardisty, Alta., via Casper, Wyo., to Wood River, Ill. The 24-in., 785-mile Hardisty-Casper line delivers as much as 172,000 b/d of oil to Montana, Wyoming, and Utah. The 20-in., 932 mile Platte system can transport 150,000 b/d of oil from Casper to Wood River, serving refineries in Colorado, Kansas, and Illinois.
The Hardisty-Casper line is expandable to 280,000 b/d capacity with a "comparatively modest" investment in pump stations, BC Gas said.
BC Gas is British Columbia's main gas utility and also holds interests in gas storage and oil pipeline facilities. Borealis Infrastructure manages infrastructure investments on behalf of the Ontario Municipal Employees Retirement System. The Ontario Teachers' Pension Plan, with assets of $68 billion, invests on behalf of Ontario's 300,000 teachers.
Cold Lake deal
Calgary-based Inter Pipeline Fund, formerly Koch Pipelines Canada LP, agreed to acquire EnCana's 70% interest in the cold Lake system for $425 million. Koch Pipelines Canada is a subsidiary of the Canadian unit of Koch Industries Inc., Wichita.
The Koch Canadian pipeline unit owns and operates four Canadian pipeline systems: the Bow River, Koch Alberta, and Koch Valley pipelines in Alberta and the Mid-Saskatchewan system in Saskatchewan.
Two pipelines comprise EnCana's Cold Lake system: the 145 mile, 235,000 b/d west leg from Cold Lake to Edmonton, Alta., and the 260 mile, 200,000 b/d leg from Cold Lake to Hardisty. The Cold Lake area is a major source of synthetic crude oil production derived from Canada's massive oil sands resource.
To ensure market access, EnCana has retained oil transportation capacity through its existing long-term contracts.on the pipelines it's selling
EnCana said the purchasers expect to retain "the vast majority" of the 150 employees of the two systems.
Both transaction are subject to regulatory approvals and are expected to be finalized in January 2003.
Strategy
EnCana said that the oil pipeline sales constituted another step in the strategic realignment of the company to focus on its "highest-growth, highest-return core assets, which the company believes are capable of achieving a minimum 10% forecast compound annual per share sales growth for several years to come."
The pipeline interests are held through its AEC subsidiary.
At the time of the merger, the combined companies had projected an asset disposition target for 2002 of only $1 billion, less than half of what it now expects to realize.
Most recently, Calgary-based AltaGas Services Inc. agreed to acquire EnCana's interests in two natural gas pipelines in Suffield, Alta., and nine natural gas gathering and processing systems comprising the Wabasca system in northeastern Alberta for $115 million (OGJ Online, Nov. 5, 2002).
