In the first quarter of 2013 Encana achieved significant milestones in a number of its oil and liquids-rich natural gas plays including strong well results from the Duvernay and Peace River Arch plays and confirmation of the commerciality of its San Juan play. Solid operational performance resulted in a 48 percent increase in oil and natural gas liquids (NGL) volumes with average production rising to 43,500 barrels per day (bbls/d) in the first quarter of 2013 compared to 29,300 bbls/d in the first quarter of last year. Encana’s average natural gas production volumes for the first quarter were 2,877 million cubic feet per day (MMcf/d).
“We are pleased with the progress made to date in a number of our emerging plays and the growth in our overall liquids production,” says Clayton Woitas, Interim President & CEO. “Proving the commercial success of emerging plays is one of our main goals this year and we intend to do so while preserving the financial strength and flexibility of the company.”
Encana generated $579 million in cash flow, or $0.79 per share, in the first quarter of 2013 and operating earnings were $179 million or $0.24 per share. The company reported a first quarter net loss of $431 million largely due to mark-to-market accounting of the company’s unrealized risk management position and a non-operating foreign exchange loss. Encana finished the quarter with approximately $2.9 billion in cash and cash equivalents and expects to finish the year with approximately $1.5 billion to $2.0 billion of cash and cash equivalents.
“Our focus remains on reducing costs and increasing our profitability,” says Woitas. “Through the first quarter we identified several areas where we can become more efficient in our business. We expect the cost reduction efforts we’ve made at the beginning of this year to have an impact on our financial results during the second half of the year.”
Search for Next President & CEO Progressing
The selection committee in search of Encana’s next President & CEO, made up of Board Chairman David O’Brien, Clayton Woitas and Suzanne Nimocks, Chair of the Human Resources and Compensation Committee, has created a short list of external and internal candidates and interviews for the position have commenced. The committee plans to complete its search by the end of June. The Board has endorsed a plan for Mr. O’Brien to continue in his current role and step down as Chairman after a new President & CEO is firmly in place. At that time, Clayton Woitas will move into the Chairman’s role.
Striving to be the Most Efficient Developer of Natural Gas
“During my time as Interim President & CEO, I have had the opportunity to see firsthand the ingenuity of the people at Encana and their commitment to making this company the most efficient producer of natural gas in North America,” adds Woitas. “I have a stronger appreciation for the suite of world-class assets Encana holds and I’m optimistic about the future of this company.”
“While we are adding diversity to our commodity and cash flow mix, Encana’s primary business is natural gas and we will succeed over the long term by striving to improve capital efficiency and lower costs across our portfolio of assets, ” says Woitas.
Update on Operations
During the quarter Encana continued to focus development on its oil and liquids-rich natural gas plays. The company expects that total liquids production will increase from an exit rate of about 37,000 bbls/d at the end of 2012 to between 70,000 bbls/d and 75,000 bbls/d by the end of 2013 with the growth driven from well-established commercial plays such as the Peace River Arch, Jonah, Piceance, DJ Basin and Bighorn. The projected growth only includes minimal volumes from the portfolio of emerging plays.
“Until our emerging plays are proven to be commercial, we are taking a conservative approach to forecasting volume growth,” says Woitas. “That being said, we have taken some positive strides in the development of our emerging plays this quarter.”
Operational highlights in the quarter:
[mappress] LNG World News Staff, April 23, 2013; Image: Encana