Encana Provides Update on Strategy Development Process
Encana President & CEO Doug Suttles will provide an update on the company’s strategy development process today at the Barclays CEO Energy-Power Conference in New York City.
Encana engaged internal and external advisory teams to conduct a rigorous assessment of the company’s assets and identify the company’s strengths and challenges to inform the strategy development process.
“Initial insights from the independent research combined with our internal analysis showed that Encana’s strengths include our vast amount of resources, our robust knowledge of market fundamentals and a proven ability to develop and operate plays very cost-effectively relative to our industry peers,” says Suttles.
In particular, the assessments found that Encana is excellent in the development of very large scale and complex resource reservoirs.
The assessments also identified several areas where significant changes are required to be successful. Encana has more inventory in its portfolio of plays, particularly dry natural gas, than can be optimally developed. The company must focus its portfolio and concentrate capital in the assets that leverage its strengths and generate the strongest returns. Further, the organizational structure must be fully aligned with the strategy going forward.
“The resounding message I have received from our shareholders and staff through surveys, focus groups, meetings and interviews across the organization is that they are ready for change and maintaining the status quo is not an option,” says Suttles. “I have every intention of making significant change in the areas where improvement is required.”
The company’s strategy, supported by a strong balance sheet, will be built on four core competencies:
1. Resource Identification – It is critical to have world class skills in this area and focus efforts on the highest quality plays and leverage Encana’s operating skills.
2. Market Fundamentals – Encana expects that future oil and natural gas prices will remain volatile. Understanding hydrocarbon type differentiation and regional factors will become increasingly important. This knowledge must be strongly linked to portfolio decisions and capital allocation.
3. Capital Allocation – Capital decision making must be centralized, focused, completely aligned with strategy and driven by returns.
4. Operational Excellence – The company’s internal and external assessments demonstrated that the difference in capital and operating efficiency between the top performers and the industry average in core plays with scale can be twenty percent or greater and that Encana has consistently perfomed amongst the best competitors in these areas. Leveraging the company’s development expertise will be crucial to achieving higher returns.
In addition, maintaining a strong balance sheet will be critical to consistent delivery of strong financial performance and to support the company’s ability to capture new opportunities.
“Over the coming weeks, we will be finalizing our strategy and building our implementation plans. Many of the building blocks for success are in place, but in several areas significant change is required,” says Suttles. “I am confident that the organization is ready for what lies ahead and I’m fully committed to driving the necessary change that will get Encana back to winning.”
LNG World News Staff, September 12, 2013; Image: Encana