Encana to Defer Spending, Output
Encana Corp. is tightening the purse strings and slowing output in 2011 because of sustained low prices, an executive said Wednesday.
Jeff Wojahn, who helms the U.S. division for the Calgary-based producer, spoke at the Pritchard Capital Partners Energize 2011 Conference in San Francisco.
Encana’s capital spending budget, which is expected to be unveiled by the end of the month, is projected to be less than planned. “We haven’t announced it yet, but $4 [billion] to $4.5 billion is a good range,” Wojahn said of Encana’s capital spending this year.
Last October Encana cut its 2010 budget by $200 million to $4.8 billion; CEO Randy Eresman said then gas prices were “unsustainably low” (see Daily GPI, Oct. 21, 2010). If the low gas prices persisted Eresman warned, Encana would adjust its growth rate to align with its capacity to generate cash flow.
Gas prices have remained fairly flat since Eresman’s warnings, and that will lead to less output at the gas-weighted independent, said Wojahn. In 3Q2010 Encana’s output was up 17% year/year, but this year expect to see single-digit growth, he said.
Encana’s long-range strategy to spend close to $6 billion a year to achieve an annual production growth rate of 14% collided with gas prices, which have hovered around $4.00/MMBtu, he noted.
However, Encana doesn’t plan to change its production mix, he said. The producer has a leasehold in several of the biggest shale and tight gas plays in North America, including the Haynesville and Horn River/Montney shales, as well as in the Piceance Basin of Colorado.
Many of its peers have boosted liquids output from the gas plays, but Wojahn said Encana only is planning to raise oil and liquids production at a “grassroots” level. The company became a pure-play unconventional gas producer in December 2009 after its integrated oil assets were split off to form Cenovus Energy Inc. (see Daily GPI, Dec. 1, 2009).
“We’re not going to go out there and blow our brains out buying an overvalued oil company,” Wojahn said. However, if gas prices remain in their slump, it would negatively affect the entire gas sector, he added.
“We cannot stand these low prices for much longer,” Wojahn said.
Â©Copyright 2011Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2023 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |