Encana has reported strong second quarter 2014 results, largely due to rapid portfolio transition and robust liquids growth.
The company continued to make faster than expected progress in the execution of its strategy, with the period highlighted by the acquisition of Eagle Ford assets for a sixth growth area. Encana also noted a successful initial public offering (IPO) of PrairieSky Royalty Ltd. and impressive liquids production growth.
Commenting on the results, Encana CEO Doug Suttles, said: "We had a strong second quarter off of the back of a very good first quarter, and we're meeting or exceeding our targets in every area of our business since announcing our new strategy eight months ago.
"The divestitures that we executed over the past three months have unlocked value from our asset base and simplified our business model, allowing us to stay focused on our highest-value opportunities. This was complemented by strong operating performance that saw our teams deliver on liquids growth targets and achieve significant year-over-year.”
Strong liquids growth
Encana achieved strong Q2 liquids growth from the five growth areas identified in November 2013. Oil production of 34,200 bpd represented a 49% year-over-year increase, while 34,000 bpd of natural gas liquids production represented 38% growth. Year-to-date, the growth areas have received approximately 80% of Encana's total capital investment and recorded a 50% increase in net wells drilled.
Suttles added: "We have been growing our liquids production more quickly than expected. We are making excellent progress in our growth areas while at the same time delivering stronger than expected results from our base assets. Our operational performance and continued attention to cost efficiencies are helping to drive us towards higher margins and more profitable growth."
Natural gas production
Natural gas production for Q2 was approximately 2.5 billion ft3/d, down 8% on a year-over-year basis primarily due to recent divestitures of large natural gas-producing properties.
Encana generated cash flow of approximately US$ 656 million in the second quarter of 2014; operating earnings of US$ 171 million; and net earnings attributable to common shareholders of US$ 271 million.
Year-to-date, the company has reported cash flow of approximately US$ 1.8 billion for a 41% rise year-over-year, while US$ 686 million in operating earnings and US$ 387 million in net earnings attributable to common shareholders are increases of 61% and 29%, respectively, from 2013 levels.
Encana now expects 2014 total liquids production of 86,000 to 91,000 bpd, up from previous guidance projections of 68,000 to 73,000 bpd.
"We continue to successfully execute on our strategy and meet our key benchmarks. We are transitioning our portfolio while delivering strong operating performance and maintaining the balance sheet strength necessary for us to be opportunistic. Our second quarter results have us well positioned for further success in the second half of the year," Suttles concluded.
Image: Copyright © Encana Corporation. All rights reserved.
Adapted from press release by Katie Woodward
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