Encana to cut spending, grow oil and natural gas liquids production in 2014
Doug Suttles, the new CEO of Encana Corp., speaks to reporters in Calgary on June 11, 2013. (Jeff McIntosh/THE CANADIAN PRESS
Published Wednesday, December 11, 2013 7:40AM EST
Last Updated Wednesday, December 11, 2013 11:24AM EST
CALGARY -- Encana Corp.'s capital spending is expected to come in 10 per cent lower next year, while production of valuable oil and natural gas liquids is targeted to rise by 30 per cent, the company announced Wednesday.
The Calgary-based energy giant said three quarters of its planned $2.4 billion to $2.5 billion capital budget next year will be concentrated on five liquids-rich areas: the Montney and Duvernay in Western Canada; the DJ Basin in Colorado; the Tuscaloosa Marine Shale in the southeastern United States and the San Juan Basin in New Mexico.
Encana (TSX:ECA) has said its goal is to derive three-quarters of its cash flow from oil and natural gas liquids in 2017 by focusing on areas that can offer higher returns.
Encana does not expect its total forecasted production levels to change from last year, despite the spending cut. A 30 per cent boost in oil and natural gas liquids will be offset by a decline in less profitable dry natural gas, it said.
"We've heard many comments from investors that 2014 is a transition year and that the excitement doesn't show up beyond this year. I would actually disagree with that comment," said CEO Doug Suttles, who took the reins in June.
For example, Suttles said Encana's five core assets are expected to churn out 45 per cent of its 2014 operating cash flow, even though they only comprise 25 per cent of projected production.
"Over time, we're very confident that this focus on core value instead of production will deliver sustainable value to our shareholders," said Suttles.
Encana isn't anticipating a big change in commodity prices next year, forecasting natural gas prices to hit US$3.75 per 1,000 cubic feet and US$95 for West Texas Intermediate oil.
In unveiling a leaner, more focused strategy last month, Suttles announced that Encana would be cutting 20 per cent of its workforce of 4,900 full-time employees and contractors.
Suttles said Wednesday that those cuts are now complete. Encana expects to take a $65 million after-tax charge during the fourth quarter related to the restructuring.
Encana shares were off about 3.4 per cent at $19.68 in late-morning trading on the Toronto Stock Exchange.