Encana to Increase Natural Gas Liquids Production

With its sight set on sustainably growing shareholder value, Encana Corporation announced a disciplined capital program focused on generating profitable growth through investment in five core liquids-rich resource plays.

“In November, we announced a clear vision and strategy to lay the foundation for Encana’s future,” says Doug Suttles, Encana President & CEO. “Going forward through to 2017 we will measure success by our performance on three key indicators; our transition to a balanced commodity portfolio, operational excellence and the integrity of our balance sheet.”

In order to transition to a more balanced commodity portfolio and achieve a goal of deriving approximately 75 percent of its cash flow from oil and natural gas liquids by 2017, Encana will focus three quarters of its planned $2.4 billion to $2.5 billion capital investment in 2014 on five oil and liquids-rich assets: the Montney, Duvernay, DJ Basin, San Juan Basin and the Tuscaloosa Marine Shale. These five assets are expected to make up about 25 percent of total production in 2014 while generating approximately 45 percent of total upstream operating cash flow before the impact of commodity price hedging.

Operationally, the company’s forecasted production, on a total equivalency basis, is expected to remain unchanged from last year despite a more than 10 percent reduction in planned capital investment from 2013 levels. Total liquids production is expected to grow by 30 percent year-over-year which will offset a small decline in expected gas production for 2014. With growth in higher margin liquids, the Company is estimating it will achieve an approximate 10 percent increase in netbacks in 2014.

Maintaining a strong balance sheet and investment grade credit rating continues to be a priority for Encana. In 2014, the company will maintain its balance sheet integrity by aligning its capital expenditures with cash flow and unlocking value from its asset base through an initial public offering of its Clearwater Royalty business. The company also plans to repay from cash a US$1 billion, 5.8 percent note maturity due May 1, 2014.

“The goal of all our deliverables for 2014 is targeted at creating sustainable shareholder value for next year and beyond,” adds Suttles. “The work we completed in 2013 has positioned us very well for a strong start in 2014, a start well aligned with our new strategy.”

With its focus firmly set on successful execution of its strategy, Encana’s key deliverables for 2014 include:

• growing high-quality total liquids production
• completing appraisal of two high-potential emerging liquids plays, the TMS and the Willesden Green area in the southern portion of the Duvernay
• continuing to reduce costs and improve capital efficiency
• optimizing the performance of base production areas by reducing production decline to a rate between 25 and 27 percent
• unlocking value from its portfolio through an IPO of its Clearwater royalty business

As a result of the company’s focused strategy and capital investment plan, Encana projects its full-year 2014 upstream operating cash flow, including hedging, to be between $3.0 billion and $3.2 billion. Total cash flow is expected to range between $2.4 and $2.5 billion. Natural gas production is expected to average between 2.6 billion cubic feet per day (Bcf/d) and 2.8 Bcf/d and total liquids production between 70 thousand barrels per day (Mbbls/d) and 75 Mbbls/d.

Through its disciplined and focused growth strategy, the company believes it can average a more than 10 percent compound annual growth rate in cash flow per share through 2017.

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LNG World News Staff, December 12, 2013; Image: Encana