EnCana agrees to sell interest in offshore Brazil oil discovery to Norsk Hydro for US$350 million

abarrelfullabarrelfull wrote on 19 Sep 2014 11:20
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November 21, 2005

EnCana Corporation (TSX, NYSE: ECA) has reached an agreement to sell its 50 percent interest in the Chinook heavy oil discovery offshore Brazil to Norsk Hydro ASA for approximately US$350 million. Under the agreement, Norsk Hydro will purchase all of the shares of an EnCana subsidiary holding a 50 percent interest in Block BM-C-7, located in the Campos Basin. EnCana expects to record an after-tax gain of more than US$200 million on the sale, which is subject to normal closing conditions and regulatory approvals, and is expected to close in the first quarter of 2006. EnCana is continuing a very active exploration program on several other concessions offshore Brazil.

Creating option value through exploration
"The sale of our interests in the Chinook heavy oil discovery is a prime example of how our Frontier and International New Ventures division is able to generate pre-development cash value by applying its exploration and evaluation skills in select international locations," said Randy Eresman, EnCana's Chief Operating Officer. "EnCana will continue to hold extensive interests in eight deep water exploration blocks offshore Brazil and is committed to evaluating those blocks with our partners. Additionally, our company and partners were recently successful in Brazil's ANP Round 7 and we are in the process of being awarded two additional blocks in the Potiguar Basin. We look forward to continuing with our high-impact option value exploration program in Brazil."

The Chinook discovery

EnCana and its partner in the Chinook find - Kerr McGee Corporation - have drilled four appraisal wells into the discovery, which is located about 75 kilometres offshore Brazil and in water depths of about 100 metres. During a three-day production test in September, the 3-ENC-3-RJS well flowed at rates up to 1,800 barrels per day of crude oil (14 API), a rate that was limited by the capacity of the test equipment. The well encountered about 34 meters of net pay. A fourth well, which completed drilling in October, confirmed Chinook's potential. EnCana has not booked any reserves associated with this discovery. The Chinook partners are preparing a development plan for submission to the Brazilian regulator.

EnCana plans two exploration wells
EnCana in conjunction with partners is planning to drill two exploration wells in 2006 on separate blocks in the Espirito Santo and Campos Basins. In total, EnCana is expected to have non-operated interests in 10 blocks offshore Brazil, once the results of Brazil Round 7 are confirmed. Nine of these blocks are operated by Petrobras. The company is also working with Petrobras on the development of heavy oil technology that may be used to develop Brazil's significant heavy oil reserves.


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