Encana Corp. will buy acreage in the Eagle Ford shale in Texas for about $3.1billion from Freeport- McMoRan Copper & Gold Inc., doubling crude oil production at Canada’s largest natural-gas producer.
The deal gives Encana 45,500 acres in the Karnes, Wilson and Atascosa counties of South Texas, an area that produced 53,000 barrels of oil equivalent a day in the first quarter, Encana said today in a statement.
Encana chief executive Doug Suttles is adding crude oil production to cut the producer’s reliance on natural gas, where the boom in shale-gas production in North America is keeping prices below their historical averages. Today’s deal will produce cash flow immediately, meaning it won’t need to change existing investment plans, the company said.
“We’re replacing natural-gas production with high-margin oil and liquids production,” Suttles said in the statement.
“This acquisition fully aligns with out strategy announced last November.”
Encana shares have gained 28% this year, valuing the company at C$18 billion ($16.5 billion.)