Calgary-based Encana Corp. reaffirmed its vision for the future of its Montney Shale on Wednesday, hinting at plans to compete with Marcellus/Utica shale gas flowing into the Dawn Hub in Ontario.
The super independent said it expects its Montney portfolio to produce more than 70,000 b/d of liquids and 1.2 Bcf/d of natural gas by 2019. Encana said it has limited its exposure to unfavorable pricing at the AECO Hub through a combination of pipeline commitments and hedging, with less than a third of Western Canadian production subject to AECO pricing from 2018-2020.
Notably, Encana said it has committed to move 316 MMcf/d to Dawn as part of TransCanada Corp.'s recent open season to entice Western Canadian producers to transport gas eastward on the TransCanada Mainline at a discount.
The company's transportation portfolio also includes 100 MMcf/d to Malin and Sumas in the Pacific Northwest and 80 MMcf/d to Chicago.
"Our world-class, condensate-rich Montney asset keeps getting better, and we believe there is opportunity for significant upside to our five-year plan," CEO Doug Suttles said. "We are making our Montney asset more valuable by operating efficiently at scale and continuously delivering leading well performance and cost efficiencies. We have secured access to infrastructure to support our growth plan and are actively managing price risk to maximize value from the Montney."
The commitment to move Montney gas to Dawn would put it in direct competition with Appalachian Basin gas expected to flood into the hub once the Rover Pipeline goes into full service, scheduled later this year. The Nexus Gas Transmission pipeline has also been proposed to transport Marcellus and Utica gas to the Dawn market, though that project is still waiting on a blessing by the Federal Energy Regulatory Commission.
Encana said the 316 MMcf/d it has committed on the TransCanada Mainline "will arrive at Dawn, Ontario, at significantly less cost than competing U.S. natural gas."
Encana has hedged around 475 MMcf/d at AECO from 2018-2020 at the New York Mercantile Exchange (Nymex) price minus 87 cents/Mcf, "a level strongly supportive of the company's development plans in Western Canada."
The company said it continues to focus on the condensate-rich areas of the Montney, with its most recent completions yielding initial production rates of 500-1,200 b/d of condensate. The company has four wells in the Pipestone area that have each produced more than 100,000 bbl in under 100 days.
Encana also said it expects infrastructure projects to come online beginning late this year and stretching into 2018 to open up new cash flow growth. The Tower and Sunrise facilities at Cutbank Ridge, backed by Veresen Midstream LP and aimed at serving Encana's growth plans in the play, are ahead of schedule and on track for a fourth quarter start-up.
"A third facility, Saturn, is expected to be operation in early 2018," it said. "Encana has secured firm downstream transportation capacity for its expected gas and liquids growth, including service on the Nova Gas Transmission system."
To add further upside to its five-year plan, Encana said it "is working to unlock additional growth opportunities in the Cutbank Ridge area beyond 2018 and evaluate further oil and condensate growth in Pipestone, as well as the stacked pay potential of the Montney zone within the Duvernay."