- Third quarter net earnings of
$294 million, cash from operating activities of $357 millionand non-GAAP cash flow of $270 million.
- Year-to-date non-GAAP corporate margin of
$10.77per BOE; on track for full-year corporate margin of around $11per BOE, up over 65 percent from year-end 2016.
- Third quarter total production of 284,000 barrels of oil equivalent per day (BOE/d); October total production was more than 325,000 BOE/d, an increase of 14 percent from the third quarter.
- Third quarter core asset production of 248,000 BOE/d; in October, this increased by 22 percent to over 302,000 BOE/d.
Encanaexpects its core assets will deliver around 30 percent production growth from the fourth quarter of 2016 to the fourth quarter of 2017.
- Third quarter liquids production of 127,500 barrels per day (bbls/d), including oil and condensate of 103,100 bbls/d; in October, liquids production increased by 18 percent to over 150,000 bbls/d and oil and condensate production increased by 16 percent to 120,000 bbls/d.
- Permian production in October averaged 80,000 BOE/d, up 25 percent from the third quarter and ahead of its fourth quarter 2017 target of 75,000 BOE/d.
Montneyproduction in October totaled 147,000 BOE/d, up 32 percent from the third quarter, with liquids production of more than 25,000 bbls/d, up 42 percent from the third quarter.
- During Investor Day,
Encanaupdated its five-year plan and expects its non-GAAP return on capital employed to climb to between 10 and 15 percent, a 25 percent compound annual growth rate in non-GAAP cash flow and approximately $1.5 billionof cumulative non-GAAP free cash flow.
"Driven by innovation and strong execution, each of our core assets is firmly on track to meet or beat its 2017 targets," said
"Our financial and operational performance demonstrates our strategy is working and that we can deliver quality corporate returns through the commodity cycle," added Suttles. "We are generating significant momentum for 2018 and are strongly positioned to deliver leading returns, cash flow growth and free cash flow through our five-year plan."
Third quarter results: Firmly on track to meet or beat 2017 deliverables
Encana's third quarter production totaled 284,000 BOE/d. This included total liquids production of 127,500 bbls/d, of which more than 80 percent was high-value oil and condensate. Third quarter liquids volumes contributed 45 percent of total production, up from 35 percent of total production in the third quarter of 2016.
The company's core assets contributed 248,000 BOE/d, representing 87 percent of total third quarter production, despite impacts from Hurricane Harvey and third-party western Canadian natural gas curtailments. Third quarter natural gas production averaged 939 million cubic feet per day (MMcf/d). The reduction from the second quarter was largely the result of the sale of Piceance, which closed on
Innovation and execution performance: Delivering high-margin production growth
Through the continual refinement of its cube development and advanced completion designs,
In the Permian, cube development and the latest high-intensity completion designs are delivering leading well performance. In October, production averaged 80,000 BOE/d, up 25 percent from the third quarter and well ahead of its fourth quarter 2017 target of 75,000 BOE/d. The Permian is on track to deliver 50 percent production growth between the fourth quarter of 2016 and the fourth quarter of 2017.
Balance sheet strength, lower costs and quality corporate returns
Strong execution performance and continued efficiencies have lowered Encana's costs and strengthened its resilience. The company is on track to deliver a 10 percent capital productivity improvement by year-end. Year to date,
Encana's strong balance sheet and liquidity position it to manage commodity price volatility and deliver quality corporate returns throughout the commodity cycle. By year-end, the company expects net debt to adjusted EBITDA ratio will be about two times and to have total liquidity of over
Managing risk, preserving optionality and creating value
For 2018, the company has hedged approximately 88,000 bbls/d of expected oil and condensate production at an average price of
|Third Quarter Highlights|
|Non-GAAP Cash Flow Reconciliation|
|(for the period ended
|Q3 2017||Q3 2016|
|Cash from (used in) operating activities||357||186|
|Deduct (add back):|
|Net change in other assets and liabilities||(11)||(6)|
|Net change in non-cash working capital||98||(60)|
|Current tax on sale of assets||-||-|
|Non-GAAP cash flow1||270||252|
|Non-GAAP Operating Earnings Reconciliation|
|Net earnings (loss)
|Before-tax (addition) deduction:|
|Unrealized gain (loss) on risk management||(76)||41|
|Non-operating foreign exchange gain (loss)||203||(44)|
|Gain (loss) on divestitures||406||395|
|After-tax (addition) deduction||270||285|
|Non-GAAP operating earnings 1||24||32|
1 Non-GAAP cash flow and non-GAAP operating earnings (loss) are non-GAAP measures as defined in Note 1.
|(for the period ended
|Q3 2017||Q3 2016||% ∆|
|Natural gas (MMcf/d)||939||1,326||(29)|
|Total production (MBOE/d)||284.0||338.0||(16)|
|Liquids and Natural Gas Prices
|Q3 2017||Q3 2016|
|Oil and NGLs
1 Prices include the impact of realized gain (loss) on risk management.
Third Quarter Conference Call
A conference call and webcast to discuss the 2017 third quarter results will be held for the investment community today at
NOTE 1: Non-GAAP measures
Certain measures in this news release do not have any standardized meaning as prescribed by
- Non-GAAP Cash Flow is a non-GAAP measure defined as cash from (used in) operating activities excluding net change in other assets and liabilities, net change in non-cash working capital and current tax on sale of assets. Non-GAAP Free Cash Flow is a non-GAAP measure defined as Non-GAAP Cash Flow in excess of capital investment, excluding net acquisitions and divestitures. Non-GAAP Corporate Margin is a non-GAAP measure defined as Non-GAAP Cash Flow per BOE of production.
- Return on Capital Employed (ROCE) is a non-GAAP measure defined as Adjusted Operating Earnings divided by Capital Employed. Adjusted Operating Earnings is defined as non-GAAP Operating Earnings (Loss) plus after-tax interest expense. Capital Employed is defined as average net debt plus average shareholders' equity. Non-GAAP Operating Earnings (Loss) is a non-GAAP measure defined as net earnings (loss) excluding non-recurring or non-cash items that management believes reduces the comparability of the company's financial performance between periods. These items may include, but are not limited to, unrealized gains/losses on risk management, impairments, restructuring charges, non-operating foreign exchange gains/losses, gains/losses on divestitures and gains on debt retirement. Income taxes may include valuation allowances and the provision related to the pre-tax items listed, as well as income taxes related to divestitures and adjustments to normalize the effect of income taxes calculated using the estimated annual effective income tax rate.
- Net Debt to Adjusted EBITDA is a non-GAAP measure calculated as Net Debt divided by Adjusted EBITDA. Net Debt is defined as long-term debt, including the current portion, less cash and cash equivalents. Adjusted EBITDA is defined as trailing 12-month net earnings (loss) before income taxes, DD&A, impairments, accretion of asset retirement obligation, interest, unrealized gains/losses on risk management, foreign exchange gains/losses, gains/losses on divestitures and other gains/losses.
ADVISORY REGARDING OIL AND GAS INFORMATION - The conversion of natural gas volumes to barrels of oil equivalent (BOE) is on the basis of six thousand cubic feet to one barrel. BOE is based on a generic energy equivalency conversion method primarily applicable at the burner tip and does not represent economic value equivalency at the wellhead. Readers are cautioned that BOE may be misleading, particularly if used in isolation.
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS - This news release contains certain forward-looking statements or information (collectively, "FLS") within the meaning of applicable securities legislation, including the United States Private Securities Litigation Reform Act of 1995. FLS include: expectation of meeting or exceeding targets in corporate guidance; execution of the strategy and five-year plan, including improvements in well performance, reduction of costs, shift to higher value production mix, funding of capital program and other metrics contained therein; growth of non-GAAP corporate margin, expected returns and recovery, profitability and margins of a play, return on capital employed, cash flow and free cash flow, including impact of commodity prices; anticipated production, product types and growth between periods, including growth from core assets; momentum into 2018; expectation total capital and cash flow to be in balance in 2018; success of and benefits innovation, including from cube development approach, precision well targeting and advanced completion designs; anticipated costs, strengthening of balance sheet, including expected net debt and debt ratios, and delivering value to shareholders; ability to access sources of liquidity; performance relative to peers; anticipated hedging and outcomes of risk management program; and anticipated dividends.
Readers are cautioned against unduly relying on FLS which, by their nature, involve numerous assumptions, risks and uncertainties that may cause such statements not to occur, or results to differ materially from those expressed or implied. These assumptions include: future commodity prices and differentials; foreign exchange rates; ability to access credit facilities and shelf prospectuses; assumptions contained in Encana's corporate guidance, five-year plan and in this news release, including margin increase in
Risks and uncertainties that may affect these business outcomes include: ability to generate sufficient cash flow to meet obligations; commodity price volatility; ability to secure adequate transportation and potential pipeline curtailments; variability and discretion of
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