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Energy Summary for June 22, 2016

2016-06-22 19:25 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for August delivery lost 72 cents to $49.13 on the New York Merc, while Brent for August lost 74 cents to $49.88 (all figures in this para U.S.). Western Canadian Select traded at a discount of $13.40 to WTI ($35.73), down from a discount of $13.15. Natural gas for July lost 9.1 cents to $2.677. The TSX energy index lost 2.88 points to close at 185.18.

EnCana Corp. (ECA) lost 33 cents to $10.44 on 8.18 million shares, after agreeing to sell its Gordondale assets in the Alberta Montney to Birchcliff Energy Ltd. (BIR), down 38 cents to $6.42 on 22 million shares. Birchcliff will pay $625-million. The sale is not unexpected, although the price is lower than EnCana's investors might have hoped. Rumours of a potential Gordondale sale began six weeks ago, when Bloomberg reported that EnCana was considering a Gordondale sale for proceeds of as much as $1-billion. Although selling Gordondale would trim EnCana's overall position in the Montney, which for years had been touted as one of the company's core plays, Gordondale was not really a core part of the play. This was made all the more clear in EnCana's press release. EnCana says it will have 9,000 potential Montney drilling locations after the sale. To put that in perspective, EnCana told investors in New York on May 17 that it had 10,000 locations; Gordondale thus removes just 1,000. EnCana also said in New York that it wanted to double its liquids production from the Montney to 50,000 barrels a day by the end of 2018. EnCana repeated that target in its new press release. That means that even though selling Gordondale will remove about 8,800 barrels of liquids a day (out of total Gordondale production of 25,200 barrels of oil equivalent a day), EnCana will hardly notice the loss. The real effect of the sale for EnCana, according to research note this morning from Scotia Capital analyst Jason Bouvier, is that it "bridges [the] funding gap" for 2017. That is Mr. Bouvier's way of saying that EnCana will not have to seek external financing to cover its 2017 spending plans. Mr. Bouvier warns, however, that EnCana will need external funds in 2018.

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