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(Updates with comment from analyst in fourth paragraph.)
June 21 (Bloomberg) -- Encana Corp. and a unit of PetroChina Co. have called off a joint venture after failing to complete a C$5.4 billion ($5.5 billion) agreement for a 50 percent stake in a Canadian natural-gas asset during almost a year of talks.
The agreement was for Encana’s Cutbank Ridge reservoir in British Columbia and Alberta, which will now be offered up in portions through a “variety of joint venture opportunities,” the Calgary-based company said in a statement today. The company, Canada’s largest gas producer, will also look at doing a deal for its pipeline and processing assets in the area.
The value of oil and gas deals in Canada plunged 35 percent to $11 billion through June 15, the biggest drop since 2003, data compiled by Bloomberg show. Energy accounts for almost 7 percent of the nation’s gross domestic product, according to the Energy Council of Canada.
“This is likely a one-off situation,” said Charles Maxwell, an analyst at Weeden & Co. in Greenwich, Connecticut. “The Asians, I think, will continue to be factors in taking over oil companies.” Maxwell rates Encana’s shares a hold, and does not own any.
Encana holds about 1 million acres of land in Cutbank Ridge and produced the equivalent of 401 million cubic feet of gas a day from the area last year, according to its website.
‘Catch the Whale’
“It’s almost, ‘Let’s fish with four smaller fishing rods’ and then bring in incrementally smaller deals that keep the cash coming in, rather than to catch the whale,” said Bob Brackett, an analyst at Sanford C. Bernstein & Co. in New York who rates Encana shares at market perform and owns none.
Encana said joint venture talks with potential investors are “well under way” for other projects, including the Horn River shale lands and the Greater Sierra field. The company expects to receive revenue from asset sales of $1 billion to $2 billion, up from a previous forecast of $500 million to $1 billion, according to the statement today.
Encana Chief Executive Officer Randy Eresman said on April 20 that the company was looking for more partners to help fund fuel extraction in British Columbia amid “unsustainably low” gas prices.
Gas prices on the New York Mercantile Exchange are averaging $4.289 per million British thermal units this year, a 52 percent decline from the $8.899 average in 2008.
Encana fell 77 cents, or 2.6 percent, to C$28.70 at 9:30 a.m. on the Toronto Stock Exchange. PetroChina rose 20 cents, or 1.8 percent, to HK$11.08. at the 5 p.m. close of Hong Kong trading.
Encana has retained both RBC Capital Markets and Jefferies & Co. as advisers.
--With assistance from Jeremy van Loon in Calgary. Editors: Jessica Resnick-Ault, Tina Davis
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