Encana to Lay Off 20 Pct of Workers
Encana Corporation announced its clear vision and strategy today, earlier than initially expected, and has already started making the “significant and bold changes needed to put Encana on track to be a leading North American resource play company.”
“We are doing what it takes to get Encana back to winning and we have already begun executing on our strategy with some of that impact being seen in our strong third quarter results,” says Doug Suttles, Encana President & CEO. “We have a focused long term plan in place, the resource base to support that plan and a talented team of people with the energy and drive to succeed.”
“Encana is focused on developing high quality resource plays in North America and continuously striving to operate in those plays more efficiently than our competitors,” says Suttles. “Our tremendous asset base offers us the opportunity to build a focused portfolio with exposure to different geographic regions and product diversity, providing quality investment options and the ability to prosper through variable commodity price cycles.”
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.
“The Board is confident in this strategy because of the deep level of research and intense analysis undertaken by Doug and his team,” says Clayton Woitas, Encana’s Board Chairman. “We believe this is the right path forward for Encana.”
The key points of Encana’s strategy are:
- Focus its capital investment on five oil and liquids-rich resource plays in North America.
- Continue to lower cost structures by leveraging its proven operational expertise and focusing operations to improve efficiency.
- Grow liquids production to build greater commodity diversity in its portfolio while retaining significant high quality natural gas resource options.
- Align the organizational structure with its strategy.
- Reset the Company’s dividend to align this return of cash to shareholders with current cash flow generation, while maintaining financial discipline and a strong balance sheet.
- Unlock additional value from the portfolio through asset divestitures and an initial public offering (IPO) of its Clearwater mineral fee title lands and associated royalty interests.
Unlocking value from its portfolio
The Company will invest approximately 75 percent of its 2014 capital into five high return oil and liquids-rich plays: the Montney, Duvernay, DJ Basin, San Juan Basin and Tuscaloosa Marine Shale.
“One of Encana’s competitive advantages is our team’s ability to develop large, complex resource plays where we can implement our full resource play hub process that is proven to drive down costs and create higher returns,” says Suttles. “The five high quality liquids-rich plays we’ve chosen to focus on offer the scale and running room we need to realize that advantage.”
Encana also plans to transfer its significant mineral fee title land position and associated royalty interests across southern Alberta – approximately five million net acres where the Company holds the oil and gas rights and can collect royalties on production – into a separate company through an IPO by mid-2014. Encana intends to retain a significant stake in the new company which will manage leasing activities in the area currently known as Encana’s Clearwater play. This gives the Company the opportunity to unlock value from what it believes is an undervalued royalty business in its portfolio while offering the potential for longer term cash flow generation to Encana.
In addition to its investment in its top five plays and the Clearwater royalty business IPO, Encana will continue to seek opportunities to improve its portfolio and realize the full value of its massive asset base. The Company identified a number of assets that have considerable upside potential through a divestiture process scheduled to begin immediately.
20% workforce reduction
The Company is in the process of aligning the organization with its focused strategy and the new structure is expected to result in an approximate 20 percent workforce reduction. Encana will consolidate its office locations to Calgary, Alberta and Denver, Colorado resulting in the closing of its Plano, Texas office.
“In order to align our organization with our strategy, we have had to make a number of exceptionally difficult decisions,” adds Suttles. “The restructuring that is underway reflects our shift from funding about 30 different plays to focusing our resources on five key areas. We will work as hard as we can to make these staffing decisions quickly and thoughtfully and we will treat everyone affected with respect as we work through this very difficult part of our transition.”
The Company expects its capital program to be approximately $2.5 billion for 2014 and intends to issue more detailed guidance for that program in mid-December 2013.
“I’m excited about Encana’s future and encouraged by how our people have rallied as one team to get Encana back to winning,” says Suttles. “While we have a lot of challenging work ahead of us, I am more confident than ever that we will be successful.”
On November 4, 2013, the Board declared a dividend of $0.07 per share payable on December 31, 2013, to common shareholders of record as of December 13, 2013.
“The dividend is an important component of total shareholder return. The current level is consistent with maintaining a strong balance sheet in a volatile commodity price environment and recognizes the attractive investment options within our portfolio,” adds Suttles.
Press Release, November 06, 2013