Strong Operational Performance in Second Quarter Positions Encana for Accelerated Growth
CALGARY, AB--(Marketwired - July 24, 2015) - Strong second quarter operational performance helped Encana (
"Following our successful portfolio transformation in 2014, we continue to lower costs, improve well performance and increase well inventory in our four most strategic assets," said Doug Suttles, Encana President & CEO. "We exited the second quarter with significant operational momentum and we expect to accelerate liquids growth through the second half of the year."
Second quarter liquids production increased more than five percent over the previous quarter, largely attributable to continued organic growth in the company's Eagle Ford and Permian positions. Second quarter natural gas production of approximately 1.6 billion cubic feet per day (Bcf/d) reflects a 16 percent decrease compared to the previous quarter, mainly due to divestitures, the company's seasonal production strategy for its Deep Panuke platform and takeaway restrictions in the Montney.
Total company production averaged 389,000 (BOE/d) with Encana's four strategic assets contributing approximately 223,000 BOE/d or 57 percent. The company expects its Permian, Eagle Ford, Duvernay and Montney assets will contribute an average of approximately 270,000 BOE/d or 65 percent of total production during the fourth quarter of 2015.
"Through our culture of innovation, we continue to identify and seize opportunities to enhance our performance and make our four most strategic assets bigger, better and more efficient," said Suttles. "Our core assets are located in the heart of four of the highest netback basins in North America and are delivering strong returns through the current commodity price cycle."
Consistent with its strategy to grow high-margin production, the company expects to focus its remaining 2015 capital budget on its four most strategic assets. Based on assumptions of $50 per barrel (bbl) WTI oil prices and NYMEX natural gas prices of $3 per million British thermal units (MMBtu), Encana expects to realize average operating margins of over $25 per BOE in the Permian, Eagle Ford and Duvernay, and $1.15 per thousand cubic feet equivalent (Mcfe) in the Montney.
Encana remains on track to deliver its 2015 cash flow guidance of between $1.4 billion and $1.6 billion. The company generated second quarter cash flow of $181 million or $0.22 per share; an operating loss of $167 million or $0.20 per share; and a net loss of $1.6 billion or $1.91 per share primarily due to a $1.3 billion non-cash, after-tax ceiling test impairment. Year-to-date, Encana has generated $676 million in cash flow or $0.85 per share; an operating loss of $148 million or $0.19 per share; and net loss of approximately $3.3 billion or $4.15 per share, largely attributable to non-cash, after-tax ceiling test impairments of $2.6 billion.
Encana is on track to fully fund its 2015 capital program and dividend with anticipated cash flow and the proceeds from previously announced and completed divestitures. In addition, the company continued streamlining its organization during the second quarter to align its structure with its transformed portfolio and disciplined capital program.
Operational highlights: Lowering costs, improving well performance and increasing well inventory
Permian: Building a long-term growth engine
Eagle Ford: Growing inventory after successful first year
Duvernay: Improving well performance, driving down costs
Montney: Unlocking significant condensate potential
Additional information on Encana's four most strategic assets will be available in the company's updated corporate presentation later today. Encana's updated 2015 guidance can be downloaded from the company's website at http://www.encana.com/investors/financial/corporate-guidance.html.
Encana's risk management program - additional oil hedges secured during the second quarter
At June 30, 2015, Encana has hedged approximately 1,000 MMcf/d of expected July to December 2015 natural gas production using NYMEX fixed price contracts at an average price of $4.29 per Mcf. In addition, Encana has hedged approximately 59.4 thousand barrels per day (Mbbls/d) of expected July to December 2015 oil production using WTI fixed price contracts at an average price of $61.96 per bbl and approximately 38 Mbbls/d of expected 2016 oil production at an average price of $62.83 per bbl.
Dividend declared
On July 23, 2015, Encana's Board of Directors declared a dividend of $0.07 per share payable on September 30, 2015, to common shareholders of record as of September 15, 2015.
Second Quarter Highlights
Financial Summary | |||||
(for the period ended June 30) ($ millions, except per share amounts) |
Q2 2015 |
Q2 2014 |
|||
Cash flow1 | 181 | 656 | |||
Per share diluted | 0.22 | 0.89 | |||
Operating earnings (loss) 1 | (167) | 171 | |||
Per share diluted | (0.20) | 0.23 | |||
Earnings Reconciliation Summary | |||||
Net earnings (loss) attributable to common shareholders | (1,610) |
271 |
|||
After-tax (addition) deduction: | |||||
Unrealized hedging gain (loss) | (187) | 8 | |||
Impairments | (1,328) | - | |||
Restructuring charges | (10) | (5) | |||
Non-operating foreign exchange gain (loss) | 114 | 156 | |||
Gain (loss) on divestitures | 1 | 135 | |||
Income tax adjustments | (33) | (194) | |||
Operating earnings (loss)1 | (167) | 171 | |||
Per share diluted | (0.20) | 0.23 | |||
1 Cash flow and operating earnings (loss) are non-GAAP measures as defined in Note 1 on page 4. | |||||
Production Summary | ||||||
(for the period ended June 30) (After royalties) |
Q2 2015 |
Q2 2014 |
% Δ |
|||
Natural gas (MMcf/d) | 1,568 | 2,541 | (38) | |||
Liquids (Mbbls/d) | 127.3 | 68.2 | 87 | |||
Natural Gas and Liquids Prices | ||||
Q2 2015 | Q2 2014 | |||
Natural Gas | ||||
NYMEX ($/MMBtu) | 2.64 | 4.67 | ||
Encana realized gas price1 ($/Mcf) | 3.52 | 4.08 | ||
Oil and Natural Gas Liquids ($/bbl) | ||||
WTI | 57.94 | 102.99 | ||
Encana realized liquids price1 | 43.78 | 69.53 | ||
1 Realized prices include the impact of financial hedging. | ||||
A conference call and webcast to discuss the second quarter 2015 results will be held for the investment community today at 7 a.m. MT (9 a.m. ET). To participate, please dial (877) 291-4570 (toll-free in North America) or (647) 788-4919 approximately 10 minutes prior to the conference call. An archived recording of the call will be available from approximately 10 p.m. MT on July 24 until 9:59 p.m. MT on July 31, 2015 by dialing (800) 585-8367 or (416) 621-4642 and entering passcode 56243229. A live audio webcast of the conference call, including slides and additional asset information will also be available on Encana's website, www.encana.com, under Invest In Us/Presentations & Events. The webcasts will be archived for approximately 90 days.
NOTE 1: Non-GAAP measures
This news release contains references to non-GAAP measures as follows:
These measures have been described and presented in this news release in order to provide shareholders and potential investors with additional information regarding Encana's liquidity and its ability to generate funds to finance its operations.
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 Encana or to the company includes reference to subsidiaries of and partnership interests held by Encana Corporation and its subsidiaries.
ADVISORY REGARDING OIL AND GAS INFORMATION
Encana uses the term resource play. Resource play is a term used by Encana to describe an accumulation of hydrocarbons known to exist over a large areal expanse and/or thick vertical section, which when compared to a conventional play, typically has a lower geological and/or commercial development risk and lower average decline rate.
30-day initial production and other short-term rates are not necessarily indicative of long-term performance or of ultimate recovery. In this news release, certain natural gas volumes have been converted to barrels of oil equivalent (BOE) on the basis of six thousand cubic feet (Mcf) to one barrel (bbl). BOE may be misleading, particularly if used in isolation. A conversion ratio of six Mcf to one bbl 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 natural gas as compared to oil 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.
The disclosure regarding drilling locations is based on internal estimates. The drilling locations which Encana will actually drill will ultimately depend upon the availability of capital, regulatory and partner approvals, seasonal restrictions, oil and natural gas prices, costs, actual drilling results, additional reservoir information that is obtained and other factors.
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS
This news release contains certain forward-looking statements or information (collectively, "forward-looking statements") within the meaning of applicable securities legislation. Forward-looking statements include, but are not limited to:
Readers are cautioned upon unduly relying 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, these statements involve numerous assumptions, known and unknown risks and uncertainties and other factors, which can contribute to the possibility that such statements will not occur or which may cause the actual performance and financial results of the Company to differ materially from those expressed or implied by such statements. These assumptions include, but are not limited to:
Risks and uncertainties that may affect the operations and development of our business include, but are not limited to: the ability to generate sufficient cash flow to meet the Company's obligations; commodity price volatility; ability to secure adequate product transportation and potential pipeline curtailments; variability of dividends to be paid; the timing and costs of well, facilities and pipeline construction; business interruption and casualty losses or unexpected technical difficulties; counterparty and credit risk; risk and effect of a downgrade in credit rating, including access to capital markets; fluctuations in currency and interest rates; assumptions based upon the Company's 2015 corporate guidance; failure to achieve anticipated results from cost and efficiency initiatives; risks inherent in marketing operations; risks associated with technology; the Company's ability to acquire or find additional reserves; 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; risks associated with past and future 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; and other risks and uncertainties impacting Encana's business as described from time to time in Encana's most recent MD&A, financial statements, Annual Information Form and Form 40-F, as filed on SEDAR and EDGAR.
Although Encana believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned that the assumptions, risks and uncertainties referenced above are not exhaustive. The forward-looking statements contained in this document are made as of the date of this document and, except as required by law, Encana undertakes no obligation to update publicly or revise any forward-looking statements. The forward-looking statements contained in this document are expressly qualified by these cautionary statements.
Encana Corporation
Encana is a leading North American energy producer that is focused on developing its strong portfolio of resource plays, held directly and indirectly through its subsidiaries, producing natural gas, oil and natural gas liquids (NGLs). By partnering with employees, community organizations and other businesses, Encana contributes to the strength and sustainability of the communities where it operates. Encana common shares trade on the Toronto and New York stock exchanges under the symbol ECA.
SOURCE: Encana Corporation
Further information on Encana Corporation is available on the company's website, www.encana.com, or by contacting:
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(403) 645-2978
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(403) 645-2285
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(403) 645-2252
Media contact:
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