Encana Oil & Gas (USA), a wholly-owned subsidiary of Encana, has signed an agreement to divest its Piceance natural gas assets to Denver-based Caerus Oil and Gas for around $735m.

Encana also noted that it will reduce its midstream commitments by around $430m and will market Caerus' production related to the assets.

Situated in northwestern Colorado, Encana's Piceance assets comprised of around 550,000 net acres of leasehold and around 3,100 operated wells.

The wells produced an average 240 million cubic ft per day (MMcf/d) of natural gas and 2,178 barrels per day (bbls/d) of liquids in the first quarter of this year.

By year-end 2016, the well has an estimated proved reserves of 814 billion cubic ft equivalent (Bcfe), according to the company.

Subject to satisfaction of normal closing conditions, regulatory approvals, closing and other adjustments, the deal is expected to complete during the third quarter of this year.

BMO Capital Markets acted as a financial advisor to Encana in the transaction. 

Encana president and CEO Doug Suttles said: "This transaction advances our strategy, makes the company more efficient and delivers significant proceeds that we will use to further strengthen our balance sheet.

"I'd like to congratulate Caerus on acquiring a high-quality natural gas asset along with a talented team."

Piceance Basin is a geologic structural basin in northwestern Colorado. The basin includes reserves of coal, natural gas, and oil shale.

Encana is a North American energy producer, which produces natural gas, oil and natural gas liquids directly and indirectly through its subsidiaries.