March 8, 2016 / 8:50 PM / 4 years ago

Exclusive: Encana exploring sale of $1 billion in non-core assets - sources

TORONTO (Reuters) - Canadian oil and natural gas producer Encana Corp (ECA.TO), looking to further trim its debt load, is exploring the sale of more non-core assets in the United States and Canada that could be worth about $1 billion, two sources familiar with the matter said.

President and CEO of Encana Doug Suttles addresses shareholders at the company's annual meeting in Calgary, Alberta, May 13, 2014. REUTERS/Todd Korol

The move would help Calgary-based Encana, which recently cut its 2016 capital spending forecast to less than half of its 2015 expenditure, to further pare the roughly $5.4 billion it has in fixed and revolving debt, said the sources, who asked not to be named as the discussions are not public.

A spokesman for the company declined to comment.

On Feb. 18, Moody’s downgraded its rating on Encana debt to junk grade Ba2 from an investment grade Baa2, noting it expects a “material decline in Encana’s cash flow” in 2016 and 2017, potentially affecting its leverage metrics.

Last year, in a bid to strengthen its balance sheet, Encana sold shares worth C$1.44 billion ($1.08 billion). It has also reached agreements to sell about $2.8 billion worth of assets.

“Despite this, there’s still a perception in the market that Encana are over levered,” said a third source, adding that an equity sale is not really an option as it would be highly dilutive for the company at this stage.

Like others in the energy sector, Encana’s stock has been battered by the slump in global energy prices. Despite a rally over the last couple of weeks, the company’s shares are still down about 65 percent in the last two years.

The first source said that although the company itself has no long-term debt maturities until 2019, it wants to proactively address the leverage issue and focus investments on core assets.

Encana has previously identified the Montney and Duvernay assets in Western Canada, along with the Permian Basin and Eagle Ford assets in Southern United States, as its core projects.

The sources said Encana is open to offers on all of its non-core assets including the Deep Panuke offshore gas field in Nova Scotia; its Horn River and Wheatland assets in western Canada; natural gas assets in the Piceance basin in northwest Colorado; its San Juan assets in New Mexico; and its Tuscaloosa Marine Shale assets in Mississippi and Louisiana.

It was not immediately clear whether Encana has retained a bank to run the sale process.

Additional reporting by Nia Williams; Editing by Alan Crosby

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