Monday, April 20, 2015

Encana Putting Haynesville Shale Properties on Market - Bloomberg

Bloomberg reported today that Encana Corp. has hired Citicorp to shop its Haynesville Shale properties.  This should come as little shock to Encana observers.  We noted a few months ago that the Haynesville play no longer merited a label on its map in investor presentations, instead giving it a vague reference of "natural gas optionality," which was a not so subtle hint that the company no longer valued its position.

According to the article, Encana plans to shed its gas positions and double down on NG liquids and oil.  Long-time observers of Encana likely view this as a good buying opportunity for natural gas since ECA hasn't yet gotten the timing right in the gas-liquids hokey pokey, especially now that gas is trading near $2.50/MMBtu.

It will be interesting to see who ponies up $1 billion or so to buy in.  Will it be a private equity player?  Blackstone, through Vine Oil and Gas, owns the other half of the original Encana-Shell joint venture, and they like most other PE guys have money to burn.  KKR?  They are still trying to keep Samson from sinking, so they may have too much "exposure to the space."

What about an operator?  Chesapeake has renewed interest in the Haynesville, but management is on a short leash to run a tight ship.  What about Aubrey McClendon's new American Energy Partners?  He has expressed interest in the Haynesville since leaving CHK, but CHK under his control didn't have that much overlap with Encana's properties, so he may not love that part of the play.  Also, he got his wings clipped when one of his subsidiaries settled a secrecy lawsuit with CHK and it was revealed that McClendon was frozen out of the negotiations, which became a juicy story for a little while.  He likely will have bigger fish to fry with CHK - but will that make him hungry to poke the dog with a stick or will his sensible side kick in and cause him to lay low for a while?

Whatever happens, it will be a sad day when Encana closes shop in the Haynesville since they were the ones who drilled the first wells (no matter how much Chesapeake claims to have discovered the play).  But since Encana stopped drilling the Haynesville in December 2013, I'm sure the landowners with leases will be happy to see new blood making an investment that likely will lead to more drilling.

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