Encana selling LNG subsidiary

Encana is unloading its U.S. liquefied natural gas business as part of a continuing restructuring that includes shedding some gas assets.

Texas-based Stabilis Energy said in a news release that it is acquiring “substantially all” of the U.S.-based assets of Denver-based Encana Natural Gas Inc., a subsidiary of Encana Corp. ENGI distributes LNG fuel to domestic, high-horsepower engine operators in the oilfield, mining, rail, marine, transportation and industrial sectors, the release said.

The sale is scheduled to close April 30.

Encana spokesman Doug Hock said the sale will mean some Denver employees will move to Stabilis. No Encana employees at the company’s Parachute office will be impacted, he said.

Neither the privately held Stabilis nor Encana, a publicly traded company based in Canada, disclosed the purchase price.

“This is not a material transaction for Encana, so we’re not disclosing the value,” Hock said.

Besides adding ENGI’s staff, Stabilis is buying storage and regasification trailers, mobile fueling units and related equipment.

In March, Encana announced the $1.8 billion sale of its Jonah Field natural gas holdings in the Pinedale area of Wyoming to TPG Capital. The sale includes more than 1,500 active wells.

Encana last year announced layoffs of 20 percent of its employees in response to lagging gas prices, and a decision to focus on drilling on areas rich in oil and other liquids in order to better balance its gas and oil portfolio. It also suspended its natural gas drilling in western Colorado’s Piceance Basin. However, the company has shown no signs of planning to sell its Piceance assets, saying they are large in size, provide a good base cash flow and offer a lot of potential when gas prices rebound.

Asked about the reason for the sale to Stabilis, Hock said, “We’re focusing on our core business of exploration and production and on the execution of our strategy.”

Encana has worked over the years to not just produce gas but promote markets for it through the use of LNG and compressed natural gas. It uses gas as a power supply for drilling rigs and fleet vehicles.
Last year, ENGI opened a public CNG fueling facility at the Shell gas station in Parachute — its eighth such station in North America. Hock said those stations aren’t part of the Stabilis deal and will stay with Encana, at least for the time being.

The focus of Stabilis appears to be on the LNG market. It plans to open its first LNG production facility in Texas next January to serve oilfield customers drilling in the Eagle Ford shale formation.
That’s part of a joint venture with Flint Hills Resources LLC, a subsidiary of Koch Industries, to build up to five LNG production facilities targeting oilfield customers.

Hock said Encana believes natural gas provides a tremendous opportunity as a domestic fuel source for high-horsepower engines.

“Great savings were realized by utilizing natural gas in our operations and we’re confident it will remain a part of our fuel mix,” he said.


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