EnCana dividing into 2 companies: one oil, one gas

The Associated Press

EnCana Corp. will create a publicly traded integrated oil company with oilsands as the growth driver, the company's board of directors said in a news release.

This new company, which has a working name of IntegratedOilCo, will focus on the development of EnCana's Canadian oilsands assets and refinery interests in the United States, with an established natural gas and oil production base in Alberta and Saskatchewan.

The second company, with a working name of GasCo, will be aimed at growing the Canadian and U.S. unconventional gas resources in which EnCana already has a huge stake. GasCo will represent about two-thirds of the company's current production and proved reserves. The company is expected to become the second-biggest natural gas producer in North America, with a focus on unconventional resources that will deliver long-term, low-risk growth.

"We have assembled an outstanding portfolio of unconventional natural gas, oil and in-situ oilsands assets. Our strong operational and financial performance has shown that our resource play model is working extremely well and we are ideally positioned for the future," EnCana Chief Executive Randy Eresman said in a statement.

Eresman will run GasCo and the company's current chief financial officer, Brian Ferguson, will run IOCo.

The transaction is expected to be completed in early 2009.

EnCana will continue to exploit its existing natural gas resources in Alberta's foothills, the Western United States and in West Texas' Barnett shale. It will also develop emerging plays in Northeastern British Columbia's Horn River Basin as well as in Louisiana.

EnCana has a major foothold in oilsands, with 6.5 billion barrels of recoverable oil at its Christina Lake and Foster Creek operations.

Early last year, EnCana reached a $15 billion deal with ConocoPhillips to tie in its oilsands production with the U.S. energy heavyweight's American refinery operations.

IOCo will aim to increase gross production from Foster Creek and Christina Lake to about 400,000 barrels of oil per day, and refining capacity to 510,000 barrels of oil per day.