Encana Grows as it Narrows Focus to Key Fields in Canada, Texas

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Researched by Industrial Info Resources (Sugar Land, Texas)--Encana Corporation (NYSE:ECA) (Calgary, Alberta) showed its financial acumen in second-quarter 2017 as it offset an overall decline in natural gas and natural gas liquids (NGL) production by slashing costs and seizing opportunities from stronger prices. The second-largest gas producer in North America has shifted the bulk of its efforts to its most profitable production areas in the U.S. and Canada, where it has more efficiently responded to growing demand. Industrial Info is tracking more than $1 billion in active projects involving Encana.

Encana's natural gas production declined roughly 19% from second-quarter 2016 to about 1.15 billion cubic feet per day, while liquids production fell 5% to 124,900 barrels per day. But natural gas prices jumped 37.6% to $2.56 per thousand cubic feet, while, NGL prices rose 9% to $41.97 per barrel. And fewer impairment charges meant operating expenses dropped more than 40%. All this more than boosted the bottom line: Encana's net earnings of $331 million far outpaced second-quarter 2016's loss of $601 million.

Capital expenditures totaled $415 million in the second quarter, up from $215 million in second-quarter 2016. Encana has scaled back its operations to focus on its most profitable areas: the Montney and Duvernay shales in Canada, and the Eagle Ford Shale and Permian Basin in the U.S. Southwest. The Montney is host to the largest active Encana project by investment value: the $860 million construction of Sunrise Cryogenic Natural Gas Processing Plant near Dawson Creek, British Columbia. The project, which is owned by Veresen Incorporated (TSX:VSN) (Calgary) and has Encana onboard as a partner and project manager, involves building a two-train facility with a capacity of 400 million standard cubic feet per day, to produce 40,000 BBL/d of NGL and condensate. For more information, see Industrial Info's project report.

The Sunrise plant is expected to be the largest gas processing plant built in 30 years, according to Financial Post, and is among the tens of billions of dollars of projects in the blossoming Montney area. But Encana also has $156 million in 2017 drilling programs active in the Eagle Ford Shale, surrounding Karnes City, Texas.

These include the Wessendorff A Oil Lease, which has 18 wells; the Nichols A Lease, which has 13 wells; the Long Fischer Lease, which has six wells; the Kotara-Ridley Lease, which has six wells; the Love Lease, which has five wells; and the Patsy-Clark Lease, which has four wells. All these programs are expected to end toward the middle of December. For more information, see Industrial Info's project reports on the Wessendorff A, Nichols A, Long Fischer, Kotara-Ridley, Love and Patsy-Clark leases.

Encana said it was on track to meet its 2017 capital expenditure forecast of between $1.6 billion and $1.8 billion, and its production forecast of between 320,000 and 330,000 barrels of oil equivalent per day.

Outside its largest production areas, Encana's U.S. subsidiary is playing a key role Xcel Energy Incorporated's (NYSE:XEL) (Minneapolis, Minnesota) proposed $6 million transmission line in Colorado, a power line that would run nine miles from Encana's Middle Fork Substation near Parachute, Colorado, to Xcel's Wolf Ranch Substation in Rifle, Colorado. The project is half of Xcel's Wheeler Line, which remains in its early analysis phase. For more information, see Industrial Info's project report.

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