EnCana Corp., Calgary, (NYSE; Toronto: ECA) plans to acquire all of the Deep Bossier gas and land interests of privately owned Leor Energy, Houston, in East Texas for US$2.55 billion.

Assets include Leor's 50% interest on approximately 26,600 net acres in the Amoruso Field in Robertson County, approximately 9,100 net acres of offsetting land to the east at South Hilltop, and 20,600 net undeveloped acres in Robertson and Madison counties, totaling approximately 56,300 mostly undeveloped net acres.

Production is approximately 75 million cu. ft. per day net. EnCana expects production to reach more than 220 million per day by year-end and average between 315- and 355 million per day in 2008.

EnCana entered the Deep Bossier formation play in July 2005 with a 30% interest from Leor, then increased this to 50% in June 2006. EnCana has drilled and operated most of Amoruso Field's 30 producing wells. New processing capacity is expected to come onstream in December with the completion of a new gas plant and a gathering system expansion. EnCana has seven rigs working in the field now and expects to increase that to about 10 next year.

EnCana estimates about 200 net well locations expected to each recover between 8- and 13 billion cu. ft. of gas with finding, development and acquisition costs of about $3 per thousand cu. ft. Ultimate recovery is expected to total 1.3- to 1.8 trillion cu. ft. net of royalties. When combined with EnCana's existing Deep Bossier interests, the company estimates that it will have a total of about 370 potential drilling locations. Ultimate recovery is projected at 2.4- to 3.3 trillion cu. ft.

This acquisition increases EnCana's total holding over the Deep Bossier trend to about 215,000 net acres. EnCana expects all-in costs for this and its existing holding to average $2.50 per thousand cu. ft.

EnCana president and chief executive Randy Eresman says, "This acquisition follows our successful practice of entering a play early, locking up a large land position, applying the right technology and generating value that was previously unrecognized. It is similar to what we have done in plays such as Jonah in Wyoming and Cutbank Ridge in British Columbia.

"In just over 24 months, production from the Amoruso Field has grown from zero to more than 215 million gross cu. ft. per day. This is an exciting long-life asset that is at the earliest days of development. It has the potential to be the leading resource play in our North American portfolio."

EnCana plans to pay for the acquisition with cash and a US$2-billion revolving bridge financing with CIBC. Closing is expected by year-end.

Work on the buy-out began this spring. EnCana will have 100% interest in Amoruso Field upon closing. Two of the five largest U.S. wells since 2002 are in the field: Bonnie Ann 1 and South McLean B1 (more than 50 million cu. ft. per day). A newer well, Larson, is producing 65 million cu. ft. per day.

Each well costs some $10 million to drill. They are 15,000 to 20,000 feet deep and intersect shale and sandstone 2,000 to 3,000 feet thick. Leor has a private-equity stake in Navasota Resources LP, which has a joint venture with Gastar Exploration Ltd., Houston, (Amex: GST; Toronto: YGA) in East Texas.

Leor was formed in 2003 by Thomas Kaplan and Guma Aguiar and in 2005 received $45 million of private-equity backing from Goldman Sachs and, in 2007, $150 million from Merrill Lynch. Its senior lenders are JPMorgan Chase and BNP Paribas.

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