Mitsubishi and Encana Corp to invest in Canadian gas development project

Japan’s Mitsubishi Corporation has signed a deal with Encana Corporation to invest approximately C$2.9bn ($2.92bn) in a natural gas development project in British Columbia, Canada.

The company will acquire a 40% stake in the Cutbank Ridge Partnership (CRP), which was formed by Encana to develop a natural gas asset in north-eastern British Columbia.

Encana will hold the remaining 60% state in CRP.

CRP holds approximately 409,000 net acres of undeveloped Montney shale formation gas land in the Cutbank Ridge resource play, as well as undeveloped similar size land targeting other opportunities, including Cadomin and Doig geological formations.

Mitsubishi will pay Encana C$1.45bn for the 40% stake in CRP and another C$1.45bn over the next five years to develop CRP’s asset in accordance with an agreed-upon development plan.

The Japanese company has established a wholly owned subsidiary, Cutbank Dawson Gas Resources, which will become the partner to CRP.

CRP intends to spend more than C$6bn over the next five years for drilling of about 600 horizontal production wells to develop its asset.

The CRP lands have proved undeveloped reserves of about 900 billion cubic feet of natural gas equivalent.

The transaction will close by the end of this month and will not include any of Encana’s current Cutbank Ridge production of approximately 600 million cubic feet of gas per day, processing facilities, gathering systems or its Alberta landholdings.

Encana president and CEO Randy Eresman said Cutbank Ridge is one of the most prolific and lowest-cost resource plays in North America.

"Mitsubishi’s financial commitment recognises the significant value contained in a portion of our enormous resource opportunity," Eresman added.