Canada’s Encana Reverses 2016 Loss
Canadian producer Encana reported February 15 it had reversed its US$944mn loss in 2016 with net earnings for 2017 of US$827mn, reflecting continued focus on the Permian basin in the US and the liquids-rich Montney gas play in western Canada.
Cash from operating activities increased to US$1.05bn from US$625mn, while cash-flow margin (a non-GAAP measurement), rose 81%, to US$11.75mn from US$6.49mn.
Permian production averaged 66,200 barrels of oil equivalent/day (boe/day), up 37% from 2016, with 2018 expected to see a further 30% increase. In the Montney, 4Q2017 liquids production more than doubled, to 29,000 boe/day, and is expected to double again in 4Q2018, to between 55,000 and 65,000 boe/day.
Montney liquids production is primarily high-value condensate, which receives premium pricing similar to West Texas Intermediate, the North American benchmark crude. Encana has also diversified the markets for its western Canadian gas production, and only 4% of projected 2018 revenue is exposed to AECO pricing, which has been in a tailspin recently.
Total gas production by the company declined in 2017, to 1.1bn ft3/day from 1.38bn ft3/day in 2016, while the company’s guidance for 2018 suggests production in 2018 in a range between 1.15bn ft3/day and 1.25bn ft3/day.
“We delivered very strong financial and operational results in 2017,” Encana CEO Doug Suttles said. “Driven by disciplined capital allocation, consistent performance and relentless pursuit of improvement, we significantly exceeded our cash flow margin target and delivered substantial oil and condensate growth. We are well positioned for 2018 and expect to fund our 2018 capital program from corporate cash flows.”
Encana’s forecast 2018 capital program is in the US$1.8bn to US$1.9bn range, with 70% targeted to the Permian and Montney, while its core assets – Permian, Montney, Eagle Ford in Texas and the Duvernay in western Canada – are expected to contribute over 95% of total 2018 production, projected to average between 360,000 boe/day and 380,000 boe/day.