Encana Corp.’s second quarter performance was highlighted by its continued liquids growth in the North American onshore, with output from the Permian Basin climbing 43% and Montney production jumping 128%.

The Calgary-based independent expects to grow annual production by 30%-plus and generate free cash flow this year -- one year earlier than targeted. Cash from operating activities increased by almost 120% from 2Q2017 to $475 million.

“We delivered strong financial performance through the second quarter and continue to demonstrate our ability to execute efficiently at scale in a busier market,” said CEO Doug Suttles. With its “market diversification strategy,” Encana is “successfully converting rising commodity prices into margin growth and quality returns.

“Our performance positions us for a strong second half of the year and has us on track to generate free cash flow in 2018, one year earlier than originally targeted in our five-year plan. Our multi-basin portfolio continues to provide a competitive advantage, helping us effectively manage risk, provide optionality to direct capital to our highest margin opportunities and transfer learnings across the business.”

Encana’s focus today is clearly in the Permian and Montney, with a secondary focus in the Eagle Ford Shale and Duvernay.

Second quarter production totaled 337,900 boe/d, up 7% from a year ago, with the core assets contributing 96% of volumes. Liquids production grew by 24% to 155,300 b/d, including a 48% increase in condensate. Oil and condensate contributed 76% of quarterly liquids production. Natural gas production was 1.095 Bcf/d, down 4% from a year ago.

In the mighty Permian, Encana’s output reached 88,300 boe/d in the quarter, up 43% from a year ago, with oil rising 42% to 55,300 b/d. Three cube developments in West Texas were brought online in Midland and Martin counties; four wells in the Jo Mill bench of Martin County were exceeding type curves with average 30-day initial production (IP) rates of 1,100 b/d. Current production is more than 90,000 boe/d.

During the second quarter, Encana’s Permian realized oil price, including basis hedges, was $70.15/bbl, or 103% of West Texas Intermediate (WTI).

Addressing the potential pipeline shortfall in the basin, management noted that it has a “combination of pipeline transportation and term financial basis hedging,” that ensure “virtually no exposure to Midland oil pricing through 2018 and limited exposure through 2019. Including basis hedges.”

At the end of June, Encana had hedged through the rest of 2018 about 128,300 b/d of expected Permian oil and condensate production and 1.084 Bcf/d of expected gas output.

Meanwhile, in its other major go-to basin, Encana said Canada’s Montney formation is on track to double liquids volumes for the second consecutive year, with second quarter output at 176,200 boe/d. Liquids output jumped 18% sequentially to 36,000 b/d.

The Tower North-Central Liquids Hub in the Montney came online ahead of schedule in the quarter, supporting the condensate growth plan.Montney liquids output currently is 45,000 b/d-plus, and fourth quarter volumes are forecast to hit 55,000-65,000 b/d.

Combined output from the Eagle Ford and Duvernay was 58,500 boe/d in the second quarter, with the Eagle Ford “delivering the highest margin production in the portfolio,’ said management. Eleven wells were brought online between April and June in the Texas play, with strong results from the Graben and Austin Chalk “highlighting potential future premium inventory.

In the Duvernay, Encana highlighted two test wells that delivered average 30-day IPs of around 1,050 b/d of condensate.

“Encana is firmly on track to grow total production by more than 30% from 2017, after adjusting for 2017 dispositions,” management said. The core four assets are expected to deliver fourth quarter production of between 400,000 boe and 425,000 boe, with the capital program, weighted to the first six months, on track with guidance.

More than half of Encana’s activity was weighted to the first half of 2018, COO Mike McAllister said, giving the company confidence in its ability to hit fourth quarter targets.

“We expect our drilling activity in all four of our plays to be lower in the second half of the year,” he said. “In the Permian, we're currently running four rigs, down from five in the first quarter. In the Montney, we currently have seven rigs running, down from 12. In the Eagle Ford, we started the year with three rigs and now have two operating today.

“We expect our 2018 cube drilling program to be wrapped up...in the next couple of weeks and completions activity to be ongoing in the third quarter.”

Share repurchases also continue, and Encana expects to have repurchased repurchased the full $400 million authorized under the program by year-end.

Net losses in 2Q2018 totaled $151 million (minus 16 cents/share), compared with year-ago profits of $331 million (34 cents). Revenue declined to $983 million from $1.08 billion, while operating losses totaled $116 million versus year-ago income of $321 million.