Encana Corp. recorded its second consecutive profitable period in the third quarter, and the move to oil and natural gas liquids (NGL) also trended higher, with volumes up 92% year/year, the Calgary operator said Wednesday.

Net earnings were $188 million (25 cents/share), with cash flow of $660 million (89 cents) and operating earnings of $150 million (20 cents). In 3Q2012, Encana reported a net loss of $1.24 billion, mostly because of a writedown related to its substantial natural gas holdings and its gas focus (see Shale Daily, Oct. 26). The company has since transitioned to produce more oil and liquids, and the results were obvious in the latest quarter.

Oil and NGL volumes averaged 58,200 b/d, almost double from 3Q2012. Management said the company now is on track to achieve total liquids production of 50,000-60,000 b/d for the year, compared with an average 31,000 b/d in 2012, and expects to exit 2013 with liquids output of 70,000-75,000 b/d. Year-to-date, two-thirds (64%) of Encana’s liquids production is comprised of condensate and light oil.

In the latest period, Encana’s natural gas volumes averaged 2.7 Bcf/d. Guidance for 2013 volumes has been revised to 2.7-2.8 Bcf/d, an adjustment reflecting asset divestitures and delays associated with ongoing work to ramp up the Deep Panuke offshore project to its full production capacity. Deep Panuke, offshore Nova Scotia, began ramping up in September.

Encana’s management team earlier this year had set a target to reduce costs and achieve efficiencies of $100-150 million over 18 months; by year-end, about $110 million of that goal should be achieved. Full-year cash flow should be near the high end of the current guidance range, with capital spending guidance lower to reflect expenditures of $2.7-2.9 billion, down from $3.0-3.2 billion. Encana finished the quarter with a balance of about $3.3 billion in cash. Cash flow in 3Q2013 fell 28% year/year to $660 million (20 cents/share).

“The effort our staff has made in reducing costs has contributed to improved cash flow,” said CEO Doug Suttles, who took over the beleaguered producer in June (see Shale Daily, June 12).

Suttles, a former BP plc executive, has since overhauled the management team and set the company toward a new strategic direction (see Shale Daily, Oct. 2;Sept. 13).

“Our disciplined capital focus through the year, along with our stronger cash balance, positions us well as we prepare to make changes to align the business with our future strategic direction,” Suttles said. “In addition, we are on track to hit our year-end exit rate liquids production target of 70,000-75,000 b/d.”

The company plans to announce a long-term strategic plan and fourth quarter dividend before the end of the year.

Encana’s team is “making rapid progress in the development of our strategy and reached a major milestone with the recent announcement of our new organizational structure and senior management team,” Suttles said. “We’re focusing our energy on finalizing our strategy, which will inform our capital allocation decisions for 2014 and beyond. Our goal is to make Encana a more focused, dynamic and efficient organization.”

Operations-wise, Encana is hitting on all cylinders in the Duvernay formation in west-central Alberta. The company’s 8-5 well had an initial production (IP) rate of 1,400 b/d of field condensate and 4 MMcf/d over the first 30 days and continues to produce at a rate of 350 b/d and 2 MMcf/d after more than 160 days. To date the well has produced more than 100,000 b/d and 400 MMcf/d. Twelve horizontal wells have been completed with 10 on production and two now being tied in.

In the Gordondale play, two recent oil wells produced 1,100 b/d over the first four days. Two seven-well oil pads, each capable of producing 4,000-5,000 b/d, are expected to be brought online before the end of the year.

Encana also had strong results in the Bighorn area, with three wells in the Falher F/Wilrich formation testing above 19 MMcf/d each, with liquids production at 950 b/d per well, and a Dunvegan well now producing 8 MMcf/d and 170 b/d of field condensate. Improvements in operations have also resulted in a 30% decline in completions costs.

In the San Juan Basin, the most recent four wells had IP rates between 400 b/d and 500 b/d over the first 30 days. Well costs have continued to decrease “and the newer wells have been drilled twice as fast as the original wells, some with total well costs under $4 million per well,” management said. Encana drilled nine wells in the basin during the quarter and it now has 23 wells on production in the play.

Management also confirmed that its operations experienced no reportable spills or major environmental issues following the severe flooding that affected the Denver-Julesburg Basin in Colorado. The annual production impact is estimated to be minimal, with a reduction of less than 250 b/d.

At the end of September, Encana had hedged 2,255 MMcf/d of expected October-December 2013 natural gas production using New York Mercantile Exchange fixed price contracts at an average price of $4.37/Mcf; 1,538 MMcf/d of expected 2014 production at an average price of $4.19; and 825 MMcf/d of expected 2015 production at an average price of $4.37.

In addition, about 16,890 b/d of expected October-December 2013 oil production was hedged using a West Texas Intermediate (WTI) equivalent price of $100.00/bbl and 9,470 b/d of expected 2014 oil production at a WTI price of $94.19/bbl.