Encana Corp. is poised to return to growth by the middle of this year, management said Tuesday, emphasizing that the company is positioned to increase production from its core assets by 20% between 4Q2016 and 4Q2017.
In a conference call to roll out first quarter financial results, the Calgary-based super-independent also highlighted the use of advanced completions across its portfolio, which is focused in Texas and Western Canada.
This year's growth targets include a fourth quarter ramp-up in the Montney Shale as new infrastructure comes online in the play.
Having previously outlined its 2017 plan for managing price risk for its Montney production through hedging and firm transportation commitments, management for the exploration and production (E&P) company said optionality is still the focal point of its strategy moving forward as it looks to access the right markets at the right prices.
"We believe in optionality. I honestly think some of the mindset about creating long-term firm commitments or building your own equipment and all this stuff is very outdated thinking," CEO Doug Suttles said. "The world changes way too dynamically for that. I think you have to actually create optionality as a way to manage risk because things can change. Therefore, we use a combination of structures and plans."
Looking ahead to 2018, the company will continue to evaluate the right balance between contracting and "taking market risk. Because don't forget, one of the things we like about our business today is we're in multiple basins, and the fact that if we find tightness in one place, we can rotate activity to another place and still deliver the promises we make to the market because of the character of our portfolio."
Suttles added, "I know that it makes it harder for people to directly predict each thing we're going to do, but this will create value over time because it allows us to deal with the uncertainty that's inherent in the future."
In the more immediate future, Encana is working to manage costs through improved efficiency as it tries to offset service cost inflation.
Costs have increased along with the activity in the industry, especially in the Montney and the Permian Basin in West Texas, COO Michael McAllister said.
"We've fully offset inflation with efficiency improvements and effective supply chain management," he said. "We're on track to deliver a flat well cost versus 2016. In fact, in the first quarter, we pumped 17% more proppant per foot than our 2016 average while holding well costs essentially flat. This is a direct result of the seamless linkage between our supply chain and our operations team."
Encouraging results from tighter cluster spacing targeting the Austin Chalk saw Encana translate those designs to the Pipestone and Cutbank Ridge areas of the Montney in short order, McAllister said. Using 10-foot cluster space, Encana brought three Austin Chalk wells online in the first quarter with average 30-day initial production (IP) rates of 1,285 boe/d, including 1,000 b/d of oil. Five Austin Chalk wells brought online in mid-April have demonstrated early IP rates averaging 2,150 boe/d, McAllister said.
"Our advanced completions results in the Eagle Ford are compelling," he said. "We have now made this our standard design in both the Eagle Ford and Austin Chalk zones. We transferred this technology into the Montney. The initial results in both Tower and Pipestone are generating strong incremental returns."
In the Permian, Encana highlighted results from its 12-well Abbie Laine pad, a recent example of its "cube" approach to full-scale development. Encana said the Abbie Laine pad targeted five different stacked-pay zones, with the 12 wells delivering average 30-day IP rates north of 1,000 boe/d, including 800 b/d of oil. Peak daily production from Abbie Laine totaled roughly 14,000 boe/d, including 11,000 b/d of oil, the E&P said.
Total production for the quarter averaged 317,900 boe/d, including 1.24 Bcf/d of natural gas and 110,900 b/d of liquids. That's down from 383,400 boe/d in the year-ago quarter, including 1.52 Bcf/d of gas and 130,800 b/d of liquids.
For the quarter Encana realized average prices of $2.50/Mcf for gas (up from $2.18/Mcf in 1Q2016) and an average $43.45/bbl for liquids (up from $33.09/bbl in 1Q2016).
Revenues for 1Q2017 totaled $1.3 billion, compared with revenues of $753 billion in 1Q2016.
Encana reported a net income for the quarter of $431 million (44 cents/share), compared with a net loss of $379 million (minus 45 cents/share) in the year-ago quarter.