Louisiana residents may be interested to know that the Encana Corporation has recently sold off all of its Louisiana natural gas assets. According to media reports, the transaction, which reportedly yielded Encana Corp. around $850 million, will be used to pay down some of its debt, which as of the beginning of the third quarter were reported to total roughly just over six billion dollars.
The assets were sold to two companies, GeoSouthern Haynesville LP and GSO Capital Partners LP, that have decided to co-own them in a joint venture. Part of the deal also includes having Encana transport natural gas over the next five years for GeoSouthern for a predetermined fee.
Joint ventures have become increasingly popular in the current business environment because of the current market volatility and perceived instability. This is due to the fact that a joint venture is essentially a short-term partnership between two or more companies who undertake a transaction coequally for profit. This spreads the expenses across multiple partners, which allows companies without a lot of capital to be able to undergo business ventures that would be normally financially out of their reach. It also lowers the risk by spreading it between each partner.
Joint ventures are also widely popular as a tool that can be used by companies to gain entry into foreign markets. Typically a foreign company will find a willing local partner that operates in the market it wishes access to and strike up a joint venture with that company thus enabling it easy access in to said market.
During any business transactions and deal, it is important to get legal insight to ensure that an appropriate deal is being made, and that all the laws surrounding the deals are being followed. Seeking out the advice of a business law attorney can be helpful.
Source: Financial Post, “With eye on debt, Encana Corp sells Louisiana natural gas assets to reap US $1.3B in cash and saving,” Geoffrey Morgan, Aug. 25, 2015