Direct Energy to Acquire Carrot Creek Natural Gas Assets

Direct Energy, North America’s largest competitive energy and energy-related services company, has reached an agreement with Encana Corporation to acquire producing natural gas weighted assets in the Carrot Creek region of west central Alberta, Canada for C$58 million in cash plus additional resource and infrastructure assets.

The transaction will provide Direct Energy with an additional 6.2 million cubic feet equivalent per day (MMcfe/d) production, incremental 25.6 billion cubic feet equivalent (Bcfe) of proven plus probable reserves, split 42% gas and 58% liquids, and a 40 MMcf/d capacity gas plant with related infrastructure. In exchange, Encana will receive a property that produces gas and related infrastructure operated by Direct Energy in southeast Alberta and the cash payment.

Carrot Creek is located 160 km west of Edmonton, Alberta and lies immediately northwest of the successful Cardium oil development in which Direct Energy is already involved. The acquisition provides Direct Energy with increased access to the multi-zone, liquids-rich Deep Basin gas and Cardium oil fairway in west central Alberta.

“The development potential of the Carrot Creek assets represents a promising addition to our North American upstream gas business as we seek further opportunities to increase production and reserves,” said Chris Weston, President and CEO of Direct Energy. “We continue to pursue our growth strategy for North America through strong organic and acquisitive growth in both our upstream and downstream energy businesses.”

The addition of the Carrot Creek assets is the latest step in Direct Energy’s plan to build a diversified, vertically integrated energy business in North America. With approximately C$1 billion in acquisitions completed in the last 19 months, the company has seen the addition of nearly 500,000 residential and commercial customers. In 2010 it also became the largest home energy services company in North America with the acquisition of Clockwork Home Services, Inc.

“Carrot Creek will provide us with the opportunity to leverage our upstream operational experience in the region to yield substantial well development and productivity,” said Badar Khan, President of Direct Energy Upstream. “Today’s acquisition strengthens our growing position in Alberta and the western Canadian energy market.”

Direct Energy has been active in the Western Canadian Sedimentary Basin since 2000, and increased its natural gas reserves by approximately 60 per cent with the 2010 acquisition of Suncor Energy’s assets in the Wildcat Hills region of Alberta and related interests from Shell Canada Energy in 2011. It owns more than 4,600 producing wells in the region with current daily production of 163 MMcfe/d. Following the transaction the company will be able to meet approximately 30% of the daily gas requirements of its growing competitive customer base across North America.

The transaction is subject to regulatory review and is expected to close in January 2012.