Nucor announced today that it has concluded several transactions to improve its access to a long-term supply of natural gas.
Nucor has purchased 49 percent of Encana's leasehold interest covering approximately 54,000 acres in the South Piceance Basin. Further, Nucor and Encana also terminated the two Carry and Earning drilling agreements entered into in 2010 and 2012, and Nucor sold its 50 percent equity interest in Hunter Ridge Energy Services LLC to Encana. Hunter Ridge is a gas gathering and water service provider formed by Nucor and Encana in 2012 to support the joint well development in the North Piceance Basin.
Under the new structure, Nucor has acquired 49 percent of Encana's leasehold interest in certain mineral leases to all depths, compared to the limited contractual commitments to participate in drilled wells that the company had under the original drilling agreements. This ownership structure provides Nucor full discretion on its participation in all future drilling capital investment.
By canceling the drilling agreements, Nucor has eliminated all future carry capital and all contingent liabilities associated with those contracts, which should result in lower unit cost for any future drilling. Nucor retains all existing producing wells it currently owns.
To support Nucor's operating wells and potential future well developments on the 54,000 acres, Nucor has entered into long-term agreements directly with existing third party gathering and processing service providers.
"These transactions give both companies capital flexibility. In addition, they preserve Nucor's long-term access to low cost gas resources in support of Nucor's raw material strategy. We think this transaction is a win-win for both companies," said John Ferriola, Chairman, CEO and President of Nucor.