Encana Corp.'s Tower processing plant in Canada's Montney Shale has started up ahead of schedule and under budget, the Calgary-based independent announced Wednesday.
Tower, which began service last week, is the first of three planned processing plants designed to serve Encana's condensate-focused production out of the Montney.
The other two plants, Sunrise and Saturn, are also ahead of schedule and under budget, with Sunrise slated for a mid-October start-up and Saturn expected to come online by the end of the year, Encana said.
"The Tower plant start-up...is an important milestone in our strategy and five-year plan," CEO Doug Suttles said. "Liquids growth in the Montney is a key driver in expanding our corporate margin and delivering quality returns."
The three facilities are expected to more than double Encana's Montney liquids production from 4Q2016 to 4Q2017, the exploration and production (E&P) company said, with volumes projected to continue growing throughout 2018 as the plants ramp up to full capacity.
Tower, Sunrise and Saturn are being developed through the Cutbank Ridge Partnership between Encana and Veresen Midstream, with the E&P constructing and operating the plants for Veresen on a contracted basis. Encana is using the plants through a fee-for-service agreement, while Veresen would fund and own the facilities.
Meanwhile, Encana, focused on developing its"core four"including the Montney, the Permian Basin, the Eagle Ford Shale and Canada’s Duvernay Shale, said it remains on track to meet production guidance for the year. The E&P said it limited Hurricane Harvey-related curtailments from the Permian and Eagle Ford to 3,500 boe/d in 3Q2017 "through well-executed recovery plans and strong coordination between Encana's operations, midstream and marketing teams."
Natural gas constraints in Western Canada also impacted 3Q2017 production, with TCPL system maintenance and extended third-party gas plant turnaround cutting about 55 MMcf/d, Encana said. The company said it responded by focusing on liquids-rich production to minimize cash flow impacts.
Despite the negative impacts, Encana expects to achieve year/year production growth for 4Q2017 at the high end of its guidance of 25-30%.
"We are committed to being an operator that can be counted on," Suttles said. "We continue to grow margins, lower costs and drive efficiency. Our focus on creating a business that can deliver quality returns through the commodity cycle is paying off. We are firmly on track with our 2017 guidance and well-positioned for 2018, when we expect to deliver significant value growth within cash flow."
Earlier this year, Encana discussed its five-year plan for the Montney, including a strategy for limiting its exposure to unfavorable pricing at the AECO hub through pipeline commitments and hedges. Encana said in April that it had committed to 316 MMcf/d of west-to-east capacity on TransCanada Corp.'s Mainline through an open season offering discounted tolls designed to entice Western Canada producers.
Last week, Canada's National Energy Board ratified a 46% toll discount for 1.4 Bcf/d of western Canada production headed to Ontario, Quebec and northeastern U.S. markets.
Based on recent AECO prices, Western Canada producers may take all the help they can get. Hampered by construction-related constraints, NOVA/AECO C traded at an average C8 cents/gigajoule (GJ) Tuesday, according to NGI, with some transactions veering into the negatives for the first time in at least 15 years, including a low of negative C29 cents/GJ.
Those constraints, caused by TransCanada Corp.’s installation of new jumbo pipelines, are expected to end soon, however, as the first phase of the new lines open Nov. 1 with 443 MMcf/d of added capacity.
Meanwhile, a new government assessment of the Duvernay formation issued this week showed the Alberta natural gas formation also harbors 9.6 billion bbl of liquid products and premium light oil.