Encana Corporation finished the year ahead of 2012 guidance as the company reported annual cash flow of $3.5 billion, or $4.80 per share, and $997 million in operating earnings, or $1.35 per share. In the fourth quarter of 2012 the company generated cash flow of $809 million, or $1.10 per share, and operating earnings of $296 million, or $0.40 per share.
In addition, Encana ended the year with $3.2 billion in cash and cash equivalents, far exceeding the $2.5 billion Encana had targeted in 2012, due in part to the company’s success with signing major agreements with subsidiaries of PetroChina Company, Mitsubishi Corporation and Toyota Tsusho Corporation.
In the fourth quarter of 2012 Encana averaged 36,200 barrels per day (bbls/d) of liquids production and 2.9 billion cubic feet per day (Bcf/d) of natural gas production. Average natural gas production volumes for the full year were 3.0 Bcf/d, and average liquids production volumes were 31,000 bbls/d, meeting the company’s 2012 guidance.
“I would like to commend Encana’s staff and the senior management team for meeting or exceeding the goals the company set for itself in 2012,” says Clayton Woitas, Encana’s Interim President & CEO. “Operational momentum built through 2012 combined with our major transaction agreements puts Encana in a strong position starting 2013.”
“Encana has an outstanding asset portfolio in natural gas and liquids rich plays and a proven ability to develop these assets at a low cost,” says Woitas. “We have an extensive portfolio of emerging oil plays that are under evaluation and a range of established plays that can be profitable at current commodity prices, and those are the areas where we plan to spend our time and money in 2013.”
Guidance and Capital Investment Plan for 2013
“Our first priority for 2013 is profitability and running a business that continues to be sustainable in the current low natural gas price environment. Second, we intend to maintain financial strength and flexibility and third, we are setting a target to be among the lowest cost producers of natural gas in North America,” says Woitas.
Encana expects its oil and natural gas liquids (NGLs) production in 2013 to be between 50,000 to 60,000 bbls/d, and annualized natural gas production is expected to remain near current levels ranging between 2.8 to 3.0 Bcf/d. Capital investment is estimated to be about $3.0 billion to $3.2 billion, cash flow to be approximately $2.3 billion to $2.5 billion (based on current hedging position, NYMEX price of $3.75 per thousand cubic feet (Mcf) and $95.00 per bbl) and the company is targeting net divestitures to be in the $500 million to $1.0 billion range.
Encana has budgeted approximately 80 percent of its 2013 operating capital to light oil and liquids rich natural gas plays, with the majority of that to be invested in commercial plays such as Cutbank Ridge, Bighorn, Peace River Arch, Piceance Basin, DJ Niobrara, and Jonah. The remainder of that 80 percent will be invested in emerging plays such as the Duvernay, San Juan Basin and the Tuscaloosa Marine Shale.
“We’re encouraged by the results in a number of our emerging plays and we are proceeding with development in these areas at a measured pace,” says Woitas. “Through the year, we will assess our investments and make future funding decisions based on successful results.”
The company is targeting to spend the balance of its operating capital, approximately 20 percent, in dry natural gas assets with plans to invest in plays with a low supply cost or those supported by third party capital, making the plays profitable in the current natural gas price environment.
In addition to Encana’s 2013 planned capital investment, the company’s joint venture partners have agreed to spend approximately $750 million in the form of carry capital, effectively making Encana’s total gross capital investment between $3.7 billion to $3.9 billion. Carry capital is cash that the company’s joint venture partners have agreed to pay in excess of their ownership interests as part of their commitments under the agreements. Over the next five years Encana’s total carry capital is approximately $3.8 billion.
“We had tremendous success last year with joint venture and other third party agreements and we expect that joint ventures and strategic divestitures will remain a key aspect of our strategy,” adds Woitas.
LNG World News Staff, February 14, 2013; Image: Encana