Current ECA Stock Info

Deal struck between Encana and Keyera Partnership adds 33,000 barrels of raw condensate processing capacity and 170 MMcf/day of net inlet gas processing; Keyera will own the facilities at Pipestone

Encana Corporation (ticker: ECA) and Keyera Partnership have reached an agreement where Keyera will acquire and fund the remaining development of Encana’s Pipestone liquids hub and Encana’s planned Pipestone processing facility.

Overall, the agreement provides Encana with an additional 33,000 bbls/d of net raw condensate processing capacity and 170 MMcf/d of net inlet natural gas processing capacity.

“We are pleased to expand our relationship with Keyera and to have completed another highly innovative midstream agreement that significantly reduces our financial obligations compared to a traditional take-or-pay structure,” said Renee Zemljak, Encana’s EVP of midstream, marketing and fundamentals.

“This agreement strongly supports our condensate-focused growth plan in the Montney, advances our five-year plan and demonstrates our commitment to capital discipline and efficiency.”

Encana, Keyera Deal will Add 33,000 Barrels of Montney Condensate Processing Capacity at Pipestone

Source: Keyera

Under the agreement, Keyera will acquire and fund the remaining development of Encana’s Pipestone Liquids Hub, currently estimated at a total of approximately C$105 million – as a result, Keyera now expects to invest growth capital of between $900 million and $1 billion in 2018.

The Pipestone Liquids Hub is expected to start up in the fourth quarter of 2018, providing Encana with an additional 14,000 bbls/d of net raw condensate processing capacity. Encana said this agreement will support the company’s goal of doubling Montney liquids production from Q4 2017 to Q4 2018.

Keyera will own and fund Encana’s planned Pipestone Processing Facility under the agreement, which will include associated acid gas disposal and water handling infrastructure, with the facility located alongside the Pipestone Liquids Hub. According to Keyera, the preliminary capital estimate for the facility is between $500 million and $600 million, with a significant amount of the investment expected to occur in 2019 and 2020.

The initial Pipestone facility will provide Encana with 19,000 bbls/d of net raw condensate processing capacity, plus 170 MMcf/d of net inlet natural gas processing capacity. The Pipestone Processing Facility is expected to start up in 2021.

Encana and Keyera will jointly develop the facilities, with Encana managing the design, construction and initial operation. Keyera said it will oversee all commercial and ownership activities for both facilities. The sales proceeds received by Encana under the transaction were approximately C$39 million. The effective date of the agreement was March 1, 2018. Additionally, Keyera will provide Encana with condensate and natural gas processing services under a fee-for-service arrangement.

“This project aligns with Keyera’s strategy of building a stronger presence in the liquids-rich Montney development of northwestern Alberta, where strong geology and attractive economic returns are driving producer activity,” said David Smith, Keyera’s president and CEO. “With Pipestone and the continued build out of our Wapiti and Simonette gas plants, approximately half of Keyera’s gathering and processing margin is expected to be focused on liquids-rich Montney and Duvernay developments.”


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