News
"The fourth quarter of 2013 was a transformational time for
Liquids output in the fourth quarter of 2013 averaged 66,000 barrels per day (bbls/d), an 82 percent increase when compared to the fourth quarter of 2012.
Average natural gas production volumes for 2013 were 2,777 million cubic feet per day (MMcf/d), meeting the company's 2013 guidance. Natural gas production is expected to decline slightly in 2014 although forecasted liquids growth will keep production unchanged from 2013 levels on a total equivalency basis.
"Hitting our 2013 targets while at the same time reducing our overall capital investment is a reflection of our focus on efficiency and profitability," says Suttles. "There's a sense of renewed energy across our business as we work collectively to become the leading North American resource play company."
Update on operations activity
--Duvernay :Encana is moving into full resource play hub mode in the Kaybob area in the northern portion of theDuvernay , with the first multi-well pad underway with two of the eight planned wells on production. Drilling of the remaining six wells will be initiated in March after construction of the pad is completed. Moving into continuous operations on multi-well pads is a key step in delivering efficient development plans.Encana currently has five rigs running in theDuvernay and continues working towards commerciality in the southern Willesden Green area. --Montney :Encana is currently running nine rigs as the company continues to focus development on theMontney's oil and liquids-rich areas.Encana's fifth multi-well oil pad in Gordondale has been completed. --DJ Basin :Encana now has six rigs running in the DJ, up from two rigs last year, and continues to improve efficiencies. On its most recent well, the company set a record of approximately eight days from spud to rig release, down from the 13-day average in 2013.Encana also captured a 34 percent reduction in hydraulic fracturing costs over 2013. --San Juan Basin :Encana has one rig running and realized strong production performance on its latest well with a 30-day initial production rate of approximately 450 bbls/d. The company continues to work with theBureau of Land Management to streamline the permitting process to help with the acceleration ofEncana's development in the play. --Tuscaloosa Marine Shale :Encana currently has two rigs running in the play to advance its appraisal program. -- Full commercial production was achieved offshoreNova Scotia at the Deep Panuke gas field with the issuance of the Production Acceptance Notice in mid-December, with the platform producing at or near its full capacity of 300 MMcf/d since that time.
Hedging position
As of
Dividend declared
For the dividend payable on
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Financial Summary
----------------------------------------------------------------------------
(for the period ended
December 31)
($ millions, except per Q4 Q4
share amounts) 2013 2012 2013 2012
----------------------------------------------------------------------------
Cash flow(1) 677 809 2,581 3,537
Per share diluted 0.91 1.10 3.50 4.80
----------------------------------------------------------------------------
Operating earnings(1) 226 296 802 997
Per share diluted 0.31 0.40 1.09 1.35
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Earnings Reconciliation Summary
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net earnings (loss) (251) (80) 236 (2,794)
After tax (addition)
deduction:
Unrealized hedging gain
(loss) (209) (72) (232) (1,002)
Impairments - (300) (16) (3,188)
Non-operating foreign
exchange gain (loss) (124) (66) (282) 92
Income tax adjustments (80) 62 28 307
Restructuring charges (64) - (64) -
----------------------------------------------------------------------------
Operating earnings(1) 226 296 802 997
Per share diluted 0.31 0.40 1.09 1.35
----------------------------------------------------------------------------
(1) Cash flow and operating earnings are non-GAAP measures as defined in
Note 1.
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Production Summary
----------------------------------------------------------------------------
(for the period
ended December
31)
(After Q4 Q4
royalties) 2013 2012 % delta 2013 2012 % delta
----------------------------------------------------------------------------
Natural gas
(MMcf/d) 2,744 2,948 -7 2,777 2,981 -7
----------------------------------------------------------------------------
Liquids
(Mbbls/d) 66.0 36.2 82 53.9 31.0 74
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Natural Gas and Liquids Prices
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Q4 2013 Q4 2012 2013 2012
----------------------------------------------------------------------------
Natural gas
----------------------------------------------------------------------------
NYMEX ($/MMBtu) 3.60 3.40 3.65 2.79
Encana realized natural gas
price(1)($/Mcf) 4.34 5.02 4.09 4.82
----------------------------------------------------------------------------
Oil and NGLs ($/bbl)
----------------------------------------------------------------------------
WTI 97.46 88.22 97.97 94.21
Encana realized liquids
price(1) 67.01 66.65 67.75 75.12
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(1) Realized prices include the impact of financial hedging.
Reserves revisions reflect new strategic focus
The majority of revisions to reserves in 2013 (shown in the following tables) are a result of aligning future capital spending with the new strategy that
The Company's focused investment on five of its core oil and natural gas liquids-rich growth plays, resulted in (under U.S. protocols prepared in accordance with the requirements of theUnited States Securities and Exchange Commission (SEC))Encana's proved natural gas reserves decreasing 11 percent to approximately 7.9 Tcf, due primarily to dry gas proved undeveloped (PUD) reserves reductions as the company transitions to a more balanced commodity portfolio. Proved liquids reserves increased 5 percent to approximately 220 MMbbls. Overall,Encana's proved reserves as atDecember 31, 2013 under U.S. protocols decreased 9 percent to approximately 9.2 Tcfe. --------------------------------------------------------------------------- --------------------------------------------------------------------------- 2013 Proved Reserves Estimates - United States SEC Protocols (After Royalties) --------------------------------------------------------------------------- --------------------------------------------------------------------------- Using constant prices and Natural Gas Liquids Total costs; simplified table. (Bcf) (MMbbls) (Tcfe) --------------------------------------------------------------------------- --------------------------------------------------------------------------- December 31, 2012 8,792 210.0 10.1 Extensions & Discoveries 981 55.8 1.3 Revisions (618) (24.3) (0.8) Acquisitions 7 0.6 - Divestitures (296) (1.6) (0.3) Production (1,014) (19.7) (1.1) --------------------------------------------------------------------------- December 31, 2013 7,852 220.8 9.2 --------------------------------------------------------------------------- ---------------------------------------------------------------------------
On a Canadian protocol basis,
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- 2013 Proved Reserves Estimates - Canadian Protocols (After Royalties) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Using forecast prices and Natural Gas Liquids Total costs; simplified table. (Bcf) (MMbbls) (Tcfe) ---------------------------------------------------------------------------- December 31, 2012 11,617 240.4 13.1 Extensions & Discoveries 772 49.7 1.1 Revisions (2,316) (33.6) (2.6) Acquisitions 8 0.7 - Divestitures (491) (2.6) (0.5) Production (1,014) (19.7) (1.1) ---------------------------------------------------------------------------- December 31, 2013 8,576 234.9 10.0 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------Encana has focused its reserves disclosure on proved reserves based on a forecast or business case basis. In 2010, the company expanded how it reports on its estimates of reserves and resources and published estimates of proved, probable and possible reserves as well as all categories of economic contingent resources. Economic contingent resources fall into three categories: low estimate (1C), best estimate (2C) and high estimate (3C). The three classifications of contingent resources have the same degree of technical certainty as the corresponding reserves categories. In determining their economic viability, the same commodity price assumptions are applied as estimating proved, probable and possible reserves. Contingent resources are not yet commercial due to contingencies such as the timing and pace of development, or the need for additional infrastructure. The low estimate is the most conservative category and carries with it the greatest degree of confidence-90 percent-that these resources will be recovered. ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Reserves and Resources (Tcfe, After Royalties) ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Estimated Economic Contingent Estimated Reserves Reserves ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Using 3P forecast 2P Proved + prices 1P Proved + Probable + 1C Low 2C Best 3C High and costs Proved Probable Possible Estimate Estimate Estimate ---------------------------------------------------------------------------- Total As at Dec. 10.0 14.7 17.6 29.6 51.3 74.0 31 2013 ---------------------------------------------------------------------------- Total As at Dec. 13.1 20.7 24.3 25.4 45.4 69.8 31 2012 ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
For information on reserves reporting protocols see Note 2.
Conference call information
Media are invited to participate in the call in a listen-only mode.
Follow
The unaudited interim Condensed Consolidated Financial Statements for the period ended
Important Information
NOTE 1: Non-GAAP 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.
-- Operating earnings is a non-GAAP measure defined as net earnings
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,
foreign exchange gains/losses, income taxes related to divestitures and
adjustments to normalize the effect of income taxes calculated using the
estimated annual effective 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
NOTE 2: Reserves reporting information
For all Canadian protocol reserves and economic contingent resources estimates highlighted in this news release,
RESERVES METRICS DEFINITIONS
Proved reserves added in 2014 included both developed and undeveloped quantities. Additions to and removals from
ADVISORY REGARDING RESERVES & OTHER RESOURCES INFORMATION - Reserves are the estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, from a given date forward, based on: analysis of drilling, geological, geophysical and engineering data, the use of established technology, and specified economic conditions, which are generally accepted as being reasonable. Proved reserves are those reserves which can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves. Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves.
The estimates of economic contingent resources contained in this news release are based on definitions contained in the Canadian Oil and Gas Evaluation Handbook. Contingent resources do not constitute, and should not be confused with, reserves. Contingent resources are defined as those quantities of petroleum estimated, on a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Economic contingent resources are those contingent resources that are currently economically recoverable. In examining economic viability, the same fiscal conditions have been applied as in the estimation of reserves. There is a range of uncertainty of estimated recoverable volumes. A low estimate is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate, which under probabilistic methodology reflects a 90 percent confidence level. A best estimate is considered to be a realistic estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate, which under probabilistic methodology reflects a 50 percent confidence level. A high estimate is considered to be an optimistic estimate. It is unlikely that the actual remaining quantities recovered will exceed the high estimate, which under probabilistic methodology reflects a 10 percent confidence level.
There is no certainty that it will be commercially viable to produce any portion of the volumes currently classified as economic contingent resources. The primary contingencies which currently prevent the classification of
The estimates of various classes of reserves (proved, probable, possible) and of contingent resources (low, best, high) in this news release represent arithmetic sums of multiple estimates of such classes for different properties, which statistical principles indicate may be misleading as to volumes that may actually be recovered. Readers should give attention to the estimates of individual classes of reserves and contingent resources and appreciate the differing probabilities of recovery associated with each class.
The practice of preparing production and reserve quantities data under Canadian disclosure requirements (National Instrument 51-101) differs from the disclosure under U.S. protocols prepared in accordance with the requirements of the
a. the Canadian standards require disclosure of proved and probable
reserves, while the U.S. standards require disclosure of only proved
reserves;
b. the Canadian standards require the use of forecast prices in the
estimation of reserves, while the U.S. standards require the use of 12-
month average historical prices which are held constant;
c. the Canadian standards require disclosure of reserves on a gross (before
royalties) and net (after royalties) basis, while the U.S standards
require disclosure on a net (after royalties) basis;
d. the Canadian standards require disclosure of production on a gross
(before royalties) basis, while the U.S. standards require disclosure on
a net (after royalties) basis;
e. the Canadian standards require that reserves and other data be reported
on a more granular product type basis than required by the U.S.
standards; and
f. the Canadian standards require that proved undeveloped reserves be
reviewed annually for retention or reclassification if development has
not proceeded as previously planned, while the U.S. standards specify a
five year limit after initial booking for the development of proved
undeveloped reserves.
30-day 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 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; 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
Risks associated with technology; the company's ability to acquire or find additional reserves; hedging activities resulting in realized and unrealized losses; business interruption and casualty losses; risk of the company not operating all of its properties and assets; counterparty risk; risk of downgrade in credit rating and its adverse effects; liability for indemnification obligations to third parties; variability of dividends to be paid; its ability to generate sufficient cash flow from operations to meet its current and future obligations; its ability to access external sources of debt and equity capital; the timing and the costs of well and pipeline construction; the company's ability to secure adequate product transportation; changes in royalty, tax, environmental, greenhouse gas, carbon, accounting and other laws or regulations or the interpretations of such laws or regulations; political and economic conditions in the countries in which the company operates; terrorist threats; risks associated with existing and potential future lawsuits and regulatory actions made against the company; risk arising from price basis differential; risk arising from inability to enter into attractive hedges to protect the company's capital program; and other risks and uncertainties described from time to time in the reports and filings made with securities regulatory authorities by
Assumptions with respect to forward-looking information regarding expanding
Forward-looking information respecting anticipated 2014 cash flow for
Furthermore, the forward-looking statements contained in this news release are made as of the date hereof and, except as required by law,
Further information on
SOURCE:
FOR FURTHER INFORMATION PLEASE CONTACT:
Investor contact:
Manager, Investor Relations
(403) 645-6977
Advisor, Investor Relations
(403) 645-2252
Advisor, Investor Relations
(403) 645-2285
Media contact:
Media Relations
(403) 645-4747
Source:
News Provided by Acquire Media