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"Our third quarter results highlight the tremendous momentum we have built executing our strategy and we are now a full two years ahead of the targets we originally set for 2017," says
During the third quarter,
"The accelerated execution of our strategy has placed us in a position of strength," says Suttles. "We're building sustainable success from the inside-out with a culture built on teamwork, agility and the drive to succeed. Our team continues to take the concrete steps needed to deliver on our growth targets and drive efficiencies into everything we do."
Year-to-date the company has unlocked approximately
"We've achieved significant capital and operational cost improvements in each of our growth areas, resulting in improved capital efficiency and margin growth," says Suttles. "We hit the ground running with a seamless transition into the Eagle Ford, demonstrating the agility of our teams in entering new basins as well as our ability to rapidly apply our operational expertise and integrate with existing asset teams. We are very confident that we will replicate our Eagle Ford success in the Permian once we complete the transaction and are able to combine our expertise with that of the Athlon team."
Year-to-date, the company has reported cash flow of approximately
Third quarter operational highlights
-- Eagle Ford: One full quarter since acquiring the asset,Encana has lowered drilling and completion costs by 25 and 13 percent, respectively. Current production is about 45,000 barrels of oil equivalent per day (boe/d) with liquids comprising 85 percent. Production from the play, on an annualized basis, is expected to average about 23,000 boe/d and contribute between$200 million and$250 million of free cash flow in 2014. The company added a third rig in July and a fourth rig in early November. A fifth rig is planned for mid-December.Encana expects to invest between$260 million and$280 million in 2014 to drill 34 net wells. --Montney :Encana had continued success with high-intensity completions in theCutbank Ridge portion of the play. Eight wells brought online during the third quarter had average initial production rates between 12 million and 14 million cubic feet per day (MMcf/d) and higher than expected liquids yields. In September,Encana commissioned its Water Resource Hub, a facility which is expected to both reduce overall development costs and significantly reduce the company's use of surface water in theCutbank Ridge area. By drawing on otherwise unusable saline water, the centralized facility is projected to meet up to 75 percent ofEncana's operational water requirements in the area over the next five years and result in the conservation of about 16 million barrels of surface water. In Gordondale,Encana brought 17 oil wells online during the quarter, increasing oil production by 60 percent to more than 6,000 bbls/d.Encana has drilled 65 net wells in theMontney as ofSeptember 30 , and currently has four rigs running in the play. --Duvernay :Encana reduced drilling costs by 17 percent from the second quarter of 2014 through application of its resource play hub. At$3.6 million the recently rig released 1-3 well representsEncana's lowest cost to date in theDuvernay , reflecting a 49 percent reduction compared to 2013 average costs. The 30-day initial production forEncana's Simonette wells have been very strong with the majority of wells meeting or exceeding type curve. The 8-11 well had a 30-day initial production of 2,200 boe/d and is currently flowing at 150 percent of type curve. The company continues to work on developing long-term takeaway capacity in the play, including the commissioning of the 15-31 plant during the third quarter. This is expected to increase processing capacity to 55 MMcf/d of natural gas and 10,000 bbls/d of condensate. Year-to-dateEncana has drilled nineteen net wells and has five rigs currently running in the play. --San Juan :Encana continues to advance commercial development and 2014 production is expected to reach 9,500 boe/d, an increase of 150 percent from the beginning of the year. Drilling and completion costs have been reduced by 11 percent and 15 percent, respectively, compared to 2013. Well performance continues to meet or exceed expectations with initial production rates between 400 to 500 barrels of oil per day. Three rigs are currently running in the play and the company has drilled 24 net wells this year. --DJ Basin : Drilling cycle times continue to be reduced and are averaging approximately three days below target. Section length laterals are averaging under 10 days spud-to-rig release and one and one-half section laterals are averaging 13 days spud-to-rig release.Encana also successfully drilled eight 10,000-feet lateral wells during the quarter, and drilled a pace-setting 10,000-foot well in 17 days. In continuing to optimize efficiencies in the play,Encana's year-to-date well costs are averaging between$4.5 million to$5 million . The company currently has six rigs running in the play and has drilled 49 net wells year-to-date. --Tuscaloosa Marine Shale (TMS):Encana's TMS team has been able to consistently achieve lateral length of over 7,000 feet and meet the target cost of$2.2 million per 1,000 feet in the most recent wells. The three most recent wells have reached 30-day initial production of over 1,100 barrels of oil per day.Encana has drilled ten net wells year-to- date and plans to run two rigs in the play through the remainder of 2014. -- Base assets: Various cost efficiencies coupled with production optimization projects have increasedEncana's base production by 7,000 boe/d and generated approximately$65 million of operating cash flow year-to-date. Results achieved fromEncana's base business so far this year have the company well positioned to exceed its targeted 10 percent reduction in the expected 2014 base decline rate.
Recent activities
-- Completed the previously announced disposition of Bighorn assets in
Alberta for approximately $1.7 billion after closing adjustments
-- Announced $7.1 billion acquisition of Athlon Energy Inc., which will
give Encana a premier oil position in the Permian Basin ; closing is
expected to occur on November 13, 2014
-- Completed the secondary offering of 70.2 million common shares of
PrairieSky Royalty Ltd. at an offering price of C$36.50 per common share
for gross proceeds of approximately C$2.6 billion and a gain on
divestiture of approximately $2.1 billion before tax; as of September
26, 2014 , Encana no longer holds an interest in PrairieSky
-- Announced an agreement to sell the majority of Encana's Clearwater
assets in Alberta for approximately C$605 million ; the sale is expected
to close in the first quarter of 2015
-- Extended a planned maintenance outage of Deep Panuke this fall, in part
to assess increased water production and commission a feed gas
compressor; production is expected back on stream by early December at
an average of about 140 to 180 MMcf/d
At
Dividend declared
On
Third Quarter Highlights
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Financial Summary
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(for the period ended September 30) Q3 Q3
($ millions, except per share amounts) 2014 2013
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Cash flow(1) 807 660
Per share diluted 1.09 0.89
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Operating earnings(1) 281 150
Per share diluted 0.38 0.20
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Earnings Reconciliation Summary
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Net earnings attributable to common shareholders 2,807 188
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After-tax (addition) deduction:
Unrealized hedging gain (loss) 160 (89)
Impairments - (16)
Restructuring charges (5) -
Non-operating foreign exchange gain (loss) (218) 105
Gain (loss) on divestitures 2,399 -
Income tax adjustments 190 38
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Operating earnings (1) 281 150
Per share diluted 0.38 0.20
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(1) Cash flow and operating earnings are non-GAAP measures as defined in Note 1 on page 4.
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Production Summary
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(for the period ended September 30) Q3 Q3 % Change
(After royalties) 2014 2013
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Natural gas (MMcf/d) 2,199 2,723 (19)
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Liquids (Mbbls/d) 104.0 58.2 79
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Natural Gas and Liquids Prices
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Q3 2014 Q3 2013
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Natural Gas
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NYMEX ($/MMBtu) 4.06 3.58
Encana realized gas price(1)($/Mcf) 4.03 4.00
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Oil and Natural Gas Liquids ($/bbl)
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WTI 97.17 105.81
Encana realized oil price(1) 90.22 90.42
Encana realized NGLs price 48.76 46.35
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(1) Realized prices include the impact of financial hedging.
A conference call and webcast to discuss the third quarter 2014 results will be held for the investment community today at
Follow
Important Information
NOTE 1: Non-GAAP and other measures
This news release contains references to non-GAAP measures as follows:
-- Cash flow is a non-GAAP measure defined as cash from operating
activities excluding net change in other assets and liabilities, net
change in non-cash working capital and cash tax on sale of assets.
-- Upstream operating cash flow is defined as revenues, net of royalties,
excluding realized hedging gains/losses less production and mineral
taxes, transportation and processing and operating expenses for each of
the respective Canadian and USA operations. Operating cash flow for a
specific asset is defined as revenues, net of royalties, less production
and mineral taxes, transportation and processing and operating expenses.
-- Free cash flow is a non-GAAP measure defined as operating cash flow in
excess of capital investment, excluding net acquisitions and
divestitures, and is used to determine the funds available for other
investing and/or financing activities.
-- Operating earnings is a non-GAAP measure defined as net earnings
attributable to common shareholders excluding non-recurring or non-cash
items that management believes reduces the comparability of the
company's financial performance between periods. These after-tax items
may include, but are not limited to, unrealized hedging gains/losses,
impairments, restructuring charges, non-operating foreign exchange
gains/losses, gains/losses on divestitures, income taxes related to
divestitures and adjustments to normalize the effect of income taxes
calculated using the estimated annual effective income tax rate.
These measures have been described and presented in this news release in order to provide shareholders and potential investors with additional information regarding
ADVISORY REGARDING OIL AND GAS INFORMATION --
Initial production and short-term rates are not necessarily indicative of long-term performance or of ultimate recovery.
In this news release, certain oil and NGLs volumes have been converted to cubic feet equivalent (cfe) on the basis of one barrel (bbl) to six thousand cubic feet (Mcf). Cfe may be misleading, particularly if used in isolation. A conversion ratio of one bbl to six Mcf is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent value equivalency at the well head. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS -- In the interests of providing
Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause the company's actual performance and financial results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These assumptions, risks and uncertainties include, among other things: volatility of, and assumptions regarding natural gas and liquids prices, including substantial or extended decline of the same and their adverse effect on the company's operations and financial condition and the value and amount of its reserves; risks and uncertainties associated with announced but not completed transactions including the risk that the transactions may not be completed on a timely basis or at all; assumptions based upon the company's current guidance; fluctuations in currency and interest rates; risk that the company may not conclude divestitures of certain assets or other transactions or receive amounts contemplated under the transaction agreements (such transactions may include third-party capital investments, farm-outs or partnerships, which
Assumptions with respect to forward-looking information regarding expanding
Forward-looking information respecting anticipated 2014 cash flow for
Forward-looking information respecting anticipated 2015 operating cash flow is based upon the current forward strip prices for oil, natural gas and NGLs.
Furthermore, the forward-looking statements contained in this news release are made as of the date hereof and, except as required by law,
SOURCE:
FOR FURTHER INFORMATION PLEASE CONTACT:
Further information on
Investor contact:Brian Dutton Director, Investor Relations (403) 645-2285Patti Posadowski Sr. Advisor, Investor Relations (403) 645-2252 Media contact:Jay Averill Director, Media Relations (403) 645-4747Doug McIntyre Advisor, Media Relations (403) 645-6553 Source:Encana Corporation
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