More efficient development plans, speedier drilling completions and falling service costs pushed EnCana Corp.’s natural gas production to strong gains in 2Q2007, with output in six of its nine North American gas resource plays showing double-digit growth led by the Deep Bossier at 49%, Cutbank Ridge 31%, and the Jonah Field 16%.

EnCana’s emerging integrated oil sands business also contributed a higher-than-expected $500 million return in operating cash flow, or 14% of the Calgary-based producer’s overall results.

“We are hitting our stride,” CEO Randy Eresman said during a conference call Wednesday. “We had strong production, strong realized hedging gains and lower-than-expected upstream pressures. Now we are focused on continuing our operating efficiency and meeting our guidance.”

Most of EnCana’s fortunes are tied to North American unconventional gas, and total output rose 4% to 3.51 Bcf/d in the quarter. Oil and gas production from continuing operations totaled 4.306 Bcfe/d, compared with 4.154 Bcfe/d in 2Q2006.

Six of EnCana’s nine North American resource plays recorded an average 12% increase in output, rising to 2.67 Bcf/d from 2.38 Bcf/d in 2Q2006. Led by its Deep Bossier success in East Texas, EnCana also scored with rising coalbed methane growth in central and southern Alberta, and gains in the Cutbank Ridge play in northeast British Columbia, the Bighorn field in west-central Alberta, the Jonah Field in the Piceance Basin of Wyoming and the Barnett Shale Basin near Fort Worth, TX.

Declining gas prices last year prompted EnCana and several other gas producers to scale back and to shut in some wells in the Rocky Mountains and in Canada. Eresman said that decision led management this year to reduce EnCana’s full-year production growth target. Originally set at 3% production growth earlier this year, EnCana now expects to achieve 5% growth, which is down from last year’s forecast of 8-10%.

“Our overall portfolio could grow at the higher rate [of 8-10%], but to achieve the higher rate of growth, we would have to go through our inventory at a higher rate,” he explained. “It didn’t provide us the opportunities to have choices in our inventory, and particularly as industry conditions changed, costs changed dynamics. We sort of assessed the situation and started detailing cost implications, and we realized that if we moved at a higher rate, we tended to bring in less efficient equipment at a higher cost.

“It had a very major impact on the returns we were able to get. With a lower growth profile, we are able to achieve close to our higher growth strategy, but we have extra money as well…We have come to the conclusion that having a portfolio with choices is better than the benefit of a higher growth rate.”

EnCana’s quarterly net income dropped by nearly a third following a US$1.3 billion nonoperating gain in 2Q2006. Net income fell to $1.45 billion ($1.89/share) from $2.16 billion ($2.55) in 2Q2006. However, operating profits climbed 67% to $1.38 billion ($1.80/share) from $824 million (98 cents), and cash flow rose to $2.55 billion ($3.33).

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