Encana Corporation , a Canadian upstream company, recently inked a deal with a midstream player, Keyera Corporation regarding its Pipestone infrastructure project near Grande Prairie, Alberta in a bid to bolster its growth plans in the Montney region.
Deal Highlights
Per the deal, Keyera Partnership — a subsidiary of Keyera — will pay C$39 million to acquire and fund the development of Pipestone Liquids Hub and Pipestone Processing Facility in western Alberta.
The Pipestone liquids hub is currently under construction and is expected to become functional from the fourth quarter of 2018. The startup of the Liquids Hub is likely to enhance Encana’s net raw condensate processing capacity by 14,000 barrels per day (bbls/d). This will aid in Encana’s ambitions to double its liquids production in the Montney region from the fourth quarter of 2017 to the fourth quarter of 2018. Keyera is expected to fund the remaining cost of the hub which is estimated at $105 million.
Additionally, Keyera will also own and fund the planned Pipestone Processing Facility located adjacent to the Liquids Hub. The Processing Facility is expected to become operational by 2021, providing Encana with additional 19,000 bbls/d of net raw condensate processing capacity plus 170 million cubic feet per day (MMcf/d) of net inlet natural gas processing capacity.
Under the terms of the midstream agreement, Encana will handle the construction and the initial operatorship of the project. Keyera will become the owner of the project and undertake the responsibility for its commercial development. The company will provide processing services to Encana under a long-term fee-for-service arrangement.
Keyera also has the option to assume operatorship five years from the startup of a natural gas processing and liquids stabilization plant.
Deal Motive
The deal is in sync with Keyera’s strategy to strengthen its presence in the Montney region which is a hot area for the producers owing to its attractive economics. With this Pipestone project along with Keyera’s Wapti and Simonette plants, around 50% of the company’s processing margins are focused on Montney and Duvernay regions.
Overall the deal supports Encana’s condensate-focused growth plans in Montney leading to additional 33,000 bbls/d of raw condensate processing capacity and 170 MMcf/d of net inlet natural gas processing facility in the region. Along with boosting the production growth, the deal also reduces Encana’s financial obligations emphasizing its commitment to capital efficiency.
Over the years, Encana has increased its focus to streamlining its portfolio by divestiture of its non-core assets including Gordondale, Wheatland properties and DJ Basin holdings. Concurrently, it has successfully repositioned its asset base and shifted focus to four key growth areas namely Montney, Duvernay, Eagle Ford and Permian. The deal is also expected to give a boost to Encana’s five-year targets for strong cash flow generation along with high production growth. The company is targeting a production growth of 60% from its core assets through 2021, while being within its cash flows. Management also expects its cash flow to skyrocket about 300% with its margins doubling over the next five years.
Zacks Rank and Key Picks
Encana currently carries a Zacks Rank #3 (Hold).
Some better-ranked players in the energy space include Concho Resources Inc. , Pioneer Natural Resources Company and Continental Resources, Inc , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Concho topped earnings estimates in each of the preceding four quarters, with an average beat of 48.89%.
Pioneer Natural surpassed earnings estimates in each of the last four quarters, with an average beat of 66.92%.
Continental Resources delivered an average positive earnings surprise of 64.93% in the trailing four quarters.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>
Image: Bigstock
Encana (ECA) Inks Pipestone Midstream Agreement with Keyera
Encana Corporation , a Canadian upstream company, recently inked a deal with a midstream player, Keyera Corporation regarding its Pipestone infrastructure project near Grande Prairie, Alberta in a bid to bolster its growth plans in the Montney region.
Deal Highlights
Per the deal, Keyera Partnership — a subsidiary of Keyera — will pay C$39 million to acquire and fund the development of Pipestone Liquids Hub and Pipestone Processing Facility in western Alberta.
The Pipestone liquids hub is currently under construction and is expected to become functional from the fourth quarter of 2018. The startup of the Liquids Hub is likely to enhance Encana’s net raw condensate processing capacity by 14,000 barrels per day (bbls/d). This will aid in Encana’s ambitions to double its liquids production in the Montney region from the fourth quarter of 2017 to the fourth quarter of 2018. Keyera is expected to fund the remaining cost of the hub which is estimated at $105 million.
Additionally, Keyera will also own and fund the planned Pipestone Processing Facility located adjacent to the Liquids Hub. The Processing Facility is expected to become operational by 2021, providing Encana with additional 19,000 bbls/d of net raw condensate processing capacity plus 170 million cubic feet per day (MMcf/d) of net inlet natural gas processing capacity.
Under the terms of the midstream agreement, Encana will handle the construction and the initial operatorship of the project. Keyera will become the owner of the project and undertake the responsibility for its commercial development. The company will provide processing services to Encana under a long-term fee-for-service arrangement.
Keyera also has the option to assume operatorship five years from the startup of a natural gas processing and liquids stabilization plant.
Deal Motive
The deal is in sync with Keyera’s strategy to strengthen its presence in the Montney region which is a hot area for the producers owing to its attractive economics. With this Pipestone project along with Keyera’s Wapti and Simonette plants, around 50% of the company’s processing margins are focused on Montney and Duvernay regions.
Overall the deal supports Encana’s condensate-focused growth plans in Montney leading to additional 33,000 bbls/d of raw condensate processing capacity and 170 MMcf/d of net inlet natural gas processing facility in the region. Along with boosting the production growth, the deal also reduces Encana’s financial obligations emphasizing its commitment to capital efficiency.
Over the years, Encana has increased its focus to streamlining its portfolio by divestiture of its non-core assets including Gordondale, Wheatland properties and DJ Basin holdings. Concurrently, it has successfully repositioned its asset base and shifted focus to four key growth areas namely Montney, Duvernay, Eagle Ford and Permian. The deal is also expected to give a boost to Encana’s five-year targets for strong cash flow generation along with high production growth. The company is targeting a production growth of 60% from its core assets through 2021, while being within its cash flows. Management also expects its cash flow to skyrocket about 300% with its margins doubling over the next five years.
Zacks Rank and Key Picks
Encana currently carries a Zacks Rank #3 (Hold).
Encana Corporation Price
Encana Corporation Price | Encana Corporation Quote
Some better-ranked players in the energy space include Concho Resources Inc. , Pioneer Natural Resources Company and Continental Resources, Inc , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Concho topped earnings estimates in each of the preceding four quarters, with an average beat of 48.89%.
Pioneer Natural surpassed earnings estimates in each of the last four quarters, with an average beat of 66.92%.
Continental Resources delivered an average positive earnings surprise of 64.93% in the trailing four quarters.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>