News
-- Average annual liquids production of 86,800 barrels per day (bbls/d) up
61 percent from 2013
-- Fourth quarter liquids production averaged 106,400 bbls/d, up 61 percent
year-over-year
-- Two-thirds of fourth quarter 2014 upstream operating cash flow,
including hedging, derived from liquids production
-- Successful base production optimization reduced base decline from 34
percent to 29 percent
-- Seamless operational transition into the Eagle Ford and Permian Basin
with immediate capital efficiencies
-- $150 million in operating and administrative cost savings
-- The best safety record in company history based on total recordable
injury frequency rate
"The transformation of
For the fourth quarter of 2014,
To maintain a solid balance sheet and help strengthen liquidity through a low price environment,
"We're responding decisively and prudently to the current low commodity price environment," said Suttles. "We will continue to execute our strategy at a pace that makes sense and continue our relentless efforts to realize enduring efficiencies in all aspects of our business. Our priority is to maintain our solid balance sheet and financial flexibility while preserving the long-term value of our portfolio by investing in our most strategic assets."
Operating highlights
More than 80 percent of
Eagle Ford:
Dividend declared On
For the dividend payable on
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Financial Summary
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(for the period ended December 31) Q4 Q4
($ millions, except per share amounts) 2014 2013 2014 2013
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Cash flow1 377 677 2,934 2,581
Per share diluted 0.51 0.91 3.96 3.50
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Operating earnings1 35 226 1,002 802
Per share diluted 0.05 0.31 1.35 1.09
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Earnings Reconciliation Summary
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Net earnings (loss) attributable to 3,392 236
common shareholders 198 251
After tax (addition) deduction:
Unrealized hedging gain (loss) 306
341 (209) (232)
Impairments - - - (16)
Non-operating foreign exchange gain (407
(loss) (151 ) (124) ) (282)
Income tax adjustments (12 ) (80) (8 ) 28
Restructuring charges (4 ) (64) (24 ) (64)
Gain (loss) on divestitures (11 ) - 2,523 -
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Operating earnings (1) 35 226 1,002 802
Per share diluted 0.05 0.31 1.35 1.09
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(1) Cash flow and operating earnings are non-GAAP measures as defined in Note 1.
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Production Summary
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(for the period ended December 31) Q4 Q4
% %
∆ ∆
(After royalties) 2014 2013 ; 2014 2013 ;
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Natural gas (MMcf/d) 1,861 2,744 -32 2,350 2,777 -15
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Oil and NGLs (Mbbls/d) 106.4 66.0 61 86.8 53.9 61
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Natural Gas and Oil & NGLs Prices
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Q4 2014 Q4 2013 2014 2013
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Natural gas
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NYMEX ($/MMBtu) 4.00 3.60 4.41 3.65
Encana realized natural gas
price(1)($/Mcf) 4.16 4.34 4.59 4.09
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Oil and NGLs($/bbl)
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WTI 73.15 97.46 93.00 97.97
Encana realized liquids price(1) 66.40 67.01 69.70 67.75
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(1) Realized prices include the impact of financial hedging.
Reserves Quantities
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2014 Proved Reserves Estimates - United States SEC Protocols (After
Royalties)(1)
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Using constant prices and costs; Natural Gas Oil & NGLs Total
simplified table. (Bcf) (MMbbls) (MMBOE)
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December 31, 2013 7,852 220.8 1,529.5
Revisions and improved recovery (261) 0.5 (43.0)
Extensions and discoveries 879 57.2 203.7
Purchase of reserves in place 240 201.1 241.1
Sale of reserves in place (2,358) (86.2) (479.2)
Production (858) (31.7) (174.7 )
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December 31, 2014 5,494 361.7 1,277.4
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(1) Numbers may not add due to rounding.
Using
---------------------------------------------------------------------------- 2014 Proved Reserves Estimates - Canadian Protocols (After Royalties)(1) ---------------------------------------------------------------------------- Using forecast prices and costs; Natural Gas Oil & NGLs Total simplified table. (Bcf) (MMbbls) (MMBOE) ---------------------------------------------------------------------------- December 31, 2013 8,576 234.9 1,664.2 Extensions & discoveries 847 49.7 190.8 Revisions (852) (4.6) (146.6) Acquisitions 237 198.1 237.5 Divestitures (2,427) (89.9) (494.3) Production (858) (31.7) (174.6 ) ---------------------------------------------------------------------------- December 31, 2014 5,522 356.5 1,276.9 ----------------------------------------------------------------------------
(1) Numbers may not add due to rounding.
Using forecast price assumptions,
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Reserves and Resources (MMBOE, After Royalties)
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Estimated Economic Contingent
Estimated Reserves Resources
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2P 3P Proved
Using forecast 1P Proved + + Probable 1C Low 2C Best 3C High
prices and costs Proved Probable + Possible Estimate Estimate Estimate
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Total
As at Dec. 31
2014 1,277 2,349 2,763 5,094 7,672 10,356
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Total
As at Dec. 31
2013 1,664 2,458 2,935 4,940 8,549 12,338
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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.
The unaudited interim Condensed Consolidated Financial Statements for the period ended
Important Information Encana reports in U.S. dollars unless otherwise noted. Production, sales and reserves estimates are reported on an after-royalties basis, unless otherwise noted. Per share amounts for cash flow and earnings are on a diluted basis. The term liquids is used to represent oil, NGLs and condensate. The term liquids-rich is used to represent natural gas streams with associated liquids volumes. Unless otherwise specified or the context otherwise requires, reference to
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.
Upstream operating cash flow is defined as revenues, net of royalties,
including 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.
-- 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
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.
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
-- achieving the company's focus of developing its strong portfolio of
resource plays producing natural gas, oil and NGLs
-- the company's plan to continue to execute on its long-term strategy
through 2016 and beyond, realize efficiencies and maximize profitability
through focused capital allocation and operational excellence
-- anticipated positioning to be more competitive and resilient
-- anticipated cost reductions including capital and operating cost targets
for 2015 and beyond, and the ability to preserve balance sheet strength
-- maintaining a balanced portfolio
-- the company's plan to focus capital investment in its four most
strategic assets (including in the Permian, Eagle Ford, Montney and
Duvernay areas) and the expected growth from these areas in 2015
-- anticipated 2015 capital investment
-- anticipated 2015 cash flow
-- anticipated flexibility to make capital adjustments
-- expected proceeds from divestitures
-- anticipated drilling and production and number of wells and the success
thereof (including in the Permian, Eagle Ford, Montney and Duvernay
areas)
-- expected third-party investment
-- expected hedging activities
-- anticipated oil, natural gas and NGLs prices
-- anticipated oil, natural gas and NGLs production in 2015 and beyond
-- anticipated dividends
-- potential future discounts to market price in connection with the
company's DRIP
-- estimated reserves and economic contingent resources, including
estimates of PUDs and the expected period within which to convert PUDs
to proved developed reserves
-- the expectation of meeting the targets in the company's 2015 corporate
guidance
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
-- the company's ability to realize capital and operating efficiencies as
anticipated
-- 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
-- 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 Encana may refer to from
time to time as "partnerships" or "joint ventures" and the funds
received in respect thereof which Encana may refer to from time to time
as "proceeds", "deferred purchase price" and/or "carry capital",
regardless of the legal form) as a result of various conditions not
being met
-- product supply and demand; market competition
-- risks inherent in the company's and its subsidiaries' marketing
operations, including credit risks
-- imprecision of reserves estimates and estimates of recoverable
quantities of natural gas and liquids from resource plays and other
sources not currently classified as proved, probable or possible
reserves or economic contingent resources, including future net revenue
estimates
-- marketing margins; potential disruption or unexpected technical
difficulties in developing new facilities
-- unexpected cost increases or technical difficulties in constructing or
modifying processing facilities
-- 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 Encana
--
Although
Assumptions with respect to forward-looking information regarding expanding
Forward-looking information respecting anticipated 2015 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,
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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