Encana Sticks to $1.7 Billion in Capital Spending for 2017 as U.S., Canadian Shales Show Promise

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Researched by Industrial Info Resources (Sugar Land, Texas)--Oil prices may have been recovering in the past few months, but Encana Corporation (NYSE:ECA) (Calgary, Alberta) is not taking the improved market for granted. The company has opted not to spend more than planned on production, citing cost inflation and the possibility of unrest in Saudi Arabia and other hotspots, despite strong third-quarter results in its shale plays. Industrial Info is tracking more than $1.4 billion in active projects involving Encana, more than half of which are nearing or under construction.

Capital expenditures for Encana stood at $1.3 billion for the first nine months of the year; the company has a budget of $1.7 billion for the full year. Encana has been paring its operations to focus on four core assets: the Eagle Ford Shale and Permian Basin in the U.S., and the Montney and Duvernay shales in Western Canada. Encana's net profits were reported to be $294 million, a 7.25% decrease from third-quarter 2016. Total production fell 16% to 284,000 barrels of oil equivalent per day, led by a 29% drop in natural gas production; liquids production, which includes high-value oil and condensate, rose 9%.

Like ConocoPhillips (NYSE:COP) (Houston, Texas), Encana is playing it safe and only will ramp up activity if higher oil prices are thought to be sustainable in the long term. For more information on ConocoPhillips' plans, see November 9, 2017, article - ConocoPhillips to Invest $5.5 Billion Per Year through 2020 as it Stresses Profits Over Production.

In the Montney Shale, Cutbank Ridge Partnership, a joint venture between Encana and Mitsubishi Corporation (Tokyo, Japan), started up production at three facilities--the Tower, Sunrise and Saturn plants. Encana constructed and is operating the three plants on behalf of Veresen Midstream (Calgary), a joint venture between Veresen Incorporated (TSX:VSN) (Calgary) and affiliates of Kohlberg Kravis Roberts & Company LP, on a contracted basis.

Encana and Veresen are putting the finishing touches on a $700 million expansion of a mechanical-refrigeration processing plant for sweet natural gas at the Saturn complex in Dawson Creek, British Columbia. The project consists of two low-temperature separation propane refrigeration trains, each with a capacity 200 million standard cubic feet per day from the Saturn field, bringing the site's total plant capacity to 800 million standard cubic feet per day. For more information, see Industrial Info's project report and September 28, 2017, article - Encana, Veresen Ramp Up Natural Gas Plant in British Columbia.

Encana executives said the company is delivering some of the most productive wells of any operator in the Eagle Ford Shale. "The returns and the performance in the Eagle Ford today is better than it's ever been, even though prices are lower, much lower than they were three or four years ago," said Douglas Suttles, the chief executive officer of Encana, in a quarterly earnings-related conference call. He added, "The Eagle Ford may attract a bit more capital than maybe what we had thought of a year or so ago just because the performance has been so strong."

Industrial Info is tracking Encana's drilling programs in the Eagle Ford Shale near Karnes City, Texas, including the:

• $54 million Wessendorff A Oil Lease, which includes 18 wells; see project report
• $39 million Nichols A Oil Lease, which includes 13 wells; see project report
• $18 million Long-Fischer Oil Lease, which includes six wells; see project report
• $18 million Kotara-Ridley Oil Lease, which includes six wells; see project report
• $16 million Love Oil Lease, which includes five wells; see project report
• $12 million Patsy-Clark Oil Lease, which includes four wells; see project report

Strong well performance in the Permian also is delivering substantial oil production growth. "The [Permian] wells we brought on-stream in the third quarter and early in the fourth quarter are some of our best yet," said Michael McAllister, the chief operating officer of Encana, in the conference call. "This has driven a big increase in production in October. We've now placed over 100 wells on production in our 2017 program; 16 of those have come on in just the past few weeks."

McAllister added that the company's 2018 activity in the Permian is expected to resemble this year's, but with lower operating costs. He said that Encana has contracted fracturing services for 2018 "at competitive rates," allowing it to retain high-performing hydraulic-fracturing crews throughout the year.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.