North American exploration behemoth Encana Corp. claimed a big reduction in costs during the third quarter as it continued an aggressive campaign to boost total production by 60% and increase cash flow.

Operating costs fell 20% from the year-go period, while transportation/processing costs were down more than 36%. And production rates climbed across the operator's "core four" regions -- two in Texas, the Permian Basin and Eagle Ford Shale -- and two in Canada -- the Montney and Duvernay formations.

CEO Doug Suttles and his management team discussed the Calgary independent's progress during a conference call Thursday morning. "We continue to build on our track record of operational execution during the third quarter," Suttles told investors. "We demonstrated improved well productivity with precision targeting of our horizontal well bores and by optimizing our completion designs...

"We also matched or beat our second quarter pacesetter well cost in each of the four core assets," he said, giving a nod to a 7,500-foot Permian well completed for $4.2 million -- almost 40% lower than Encana's 2015 average.

Meanwhile, the core four delivered 242,800 boe/d between July and September, representing more than 70% of the company's total 338,000 boe/d. The four assets contributed 104,500 b/d, or 89%, of liquids production and 830 MMcf/d, or 63%, of natural gas production. Total production fell from year ago, with natural gas output falling 14% to 1,326 MMcf/d, and liquids output down 17% to 117,000 b/d.

Net earnings beat Wall Street expectations at $317 million (37 cents/share) in 3Q2016, compared with a loss in 3Q2015 of $1.24 billion (minus $1.47). Cash flow climbed 38% to $252 million. Revenue declined to $979 million from $1.31 billion.

Encana had highlighted its technical expertise at length during an analyst day conference in early October (see Shale Daily, Oct. 5). COO Mike McAllister elaborated a bit more on Thursday, explaining that the focus keys on three technical drivers: targeting, fracture geometry and completion design. For instance, innovative techniques that include testing cheaper brown sand in proppant operations versus premium white sand are paying dividends.

"We've tested across all our plays, and we're not seeing really any degradation at all with respect to well performance as a result of sand," McAllister said. "The real upside is the cost savings. As an example, in the Duvernay on a per-well basis we're saving over $130,000/well as a results of using that sand."

The results from pumping more proppant into more fractures also are stark.

"Back in 2015, we ran multiple wells at up to 4,000 pounds per foot,” McAllister said. "This year we've been using 1,200-1,800 pounds per foot," and initial production (IP) rates are rising.

In the Permian, wells in Glasscock County, TX, were completed with 1,500 pounds/foot in 50-foot cluster spacing. Two new wells have been flowing for about three months, with IP rates "about 30% above type curve," McAllister said. Likewise in the Eagle Ford, Encana is using a new completion design with thin fluid and cluster spacing tighter than 25 feet to create a complex fracture system.

In three Eagle Ford wells that came on during the quarter using the design, Encana pumped about 2,400 pounds/foot of proppant "and saw no stress shadowing overwhelming any of the individual fractures," he said. "This means all fractures are equally contributing to the well. These are early results, but through the first 30 days, we're seeing 125% increase in productivity."

The first two Austin Chalk wells in Karnes County, TX, within the Eagle Ford also improved, with IP rates testing at 2,000 boe/d and 3,100 boe/d. "At an 80% oil cut, these two wells combined have produced over 100,000 bbl of oil in 30 days from a total of just 7,000 feet of lateral," he said.

"We're in the process of updating our inventory and expect to add at least 100 locations to our Eagle Ford inventory...We previously had zero Austin Chalk locations included. We also expect to spud at least three new Austin Chalk wells before year-end. We are maximizing capital productivity by utilizing our existing Eagle Ford facilities for this program."

Results also are topping expectations in the Montney, where Encana has seen a step-change in well productivity, achieving up to 55% more output from new wells at Pipestone. In early October Encana highlighted two Pipestone wells that had average IPs over 30 days (IP30) of 900 b/d of condensate and a total of 1,400 boe/d.

"Since then, our two most recent Pipestone wells have passed 30 days of production," McAllister said. "These two wells are even stronger with IP30s of 1,200 b/d and 2,400 boe/d..."

Innovation also is lowering costs. Since 2014, more than 70% of well cost reductions have been "structural, therefore, sustainable," McAllister said. "The remaining 30% savings are a benchmark against 2014 service costs. While activity is picking up, we're still a long way from 2014, when oil was $100/bbl.