Encana Expects Gas Production to Decline This Year
Encana Corporation concluded 2013 by meeting or exceeding guidance on all of its key operating and financial metrics during a year in which it announced a new president & CEO and launched a bold change in its strategy.
Solid results have already been achieved on primary themes of the strategy announced by the company in the fourth quarter, including significant year-over-year increases in liquids production and ending the year with strong cash flow and a strong balance sheet.
“The fourth quarter of 2013 was a transformational time for Encana. In a six-week window, we launched our new strategy, completed an organizational restructuring and announced our 2014 budget. These are significant accomplishments and I’m proud of the way our team performed during that time,” says Doug Suttles, Encana’s president & CEO. “We finished 2013 strong and we’re well positioned to deliver on our priorities and objectives in 2014 with our new strategy very much underway.”
Liquids output in the fourth quarter of 2013 averaged 66,000 barrels per day (bbls/d), an 82 percent increase when compared to the fourth quarter of 2012. Encana averaged 53,900 bbls/d of full-year liquids production, a 74 percent increase compared to 2012. Looking ahead to 2014, Encana forecasts a 30 percent year-over-year increase in total liquids production, offsetting a small decrease in forecasted natural gas production. With its focus being on the development of liquids such as light oil and condensate combined with lowering its cost structures, Encana said they believe the result will be higher margins and improved netbacks, in line with the company’s stated objective to value profitability over production volumes.
Average natural gas production volumes for 2013 were 2,777 million cubic feet per day (MMcf/d), meeting the company’s 2013 guidance. Natural gas production is expected to decline slightly in 2014 although forecasted liquids growth will keep production unchanged from 2013 levels on a total equivalency basis.
Encana reached its 2013 production and cash flow targets with total 2013 capital investment coming in at $2.7 billion, representing an approximately $400-million reduction relative to the original capital spending guidance set at the start of the year. The company finished the year reporting annual cash flow of approximately $2.6 billion or $3.50 per share, net earnings of $236 million or $0.32 per share and operating earnings of $802 million or $1.09 per share. For the fourth quarter of 2013, Encana recorded $677 million in cash flow or $0.91 per share and $226 million in operating earnings or $0.31 per share.
The fourth-quarter net loss of $251 million was impacted by the result of the change in Encana’s unrealized hedging position, a foreign exchange loss as well as higher administrative expense associated with the company’s organizational restructuring.
Encana ended the year with approximately $2.6 billion in cash and cash equivalents on its balance sheet.
“Hitting our 2013 targets while at the same time reducing our overall capital investment is a reflection of our focus on efficiency and profitability,” says Suttles. “There’s a sense of renewed energy across our business as we work collectively to become the leading North American resource play company.”
Press Release, February 13, 2014