Encana vows to fight Colorado offset vote, CEO Suttles says move to separate homes and wells is ‘detrimental’ by Dan Healing, July 25, 2014, Calgary Herald
An initiative in Colorado to quadruple minimum offsets to 600 metres between homes and oil and gas operations would be “detrimental” to the industry and should be withdrawn, says the head of Encana Corp. The Calgary-based energy giant has its American headquarters in Denver and counts the DJ (Denver-Julesburg) Basin in the northeastern corner of the state as one of its five primary North American growth plays.
On a conference call with analysts Thursday, Encana president and CEO Doug Suttles was asked about an initiative to be put to a vote during elections in November that would quadruple the minimum space between homes and oil and gas development from 150 metres to 600 metres.
“People realize this is not an oil and gas issue, this is an economic issue for the state,” he responded.
“Us, and I think all the businesses that operate in the state of Colorado, realize this would be quite detrimental if implemented as stated in the initiative. The exact percentage is hard to tell in the implications but it would have a significant impact to all the operators in the DJ Basin if these ballot initiatives came into force.
“But it’s hard to speculate, one, on whether that happens and, two, how it would get implemented and what reaction people would have to it.”
Suttles said the industry in Colorado is fighting to have the initiative withdrawn before it goes to a ballot.
Earlier this week, a municipal ban on hydraulic fracturing in the city of Longmont, Colo., was thrown out by a judge at the request of the Colorado Oil & Gas Association. The judge ruled that Longmont can’t override the Colorado Oil and Gas Conservation Commission. She also overturned a ban on the storage and disposal of fracking waste within city limits. The ruling was then stayed to give environmental groups a chance to appeal. [Emphasis added]
Encana awash in cash as quarterly earnings fall, Calgary energy giant boosts liquids output by 43%, gas down by 8% by Dan Healing, July 24, 2014, Calgary Herald
Encana Corp. met analyst expectations on production in the second quarter but net earnings fell to $271 million US from $730 million a year earlier as an income tax recovery in the 2013 period became an expense this year.
Long known as Canada’s largest gas producer, Encana continued to work at changing that status, cutting its gas output by eight per cent to 2.54 billion cubic feet per day from 2.77 billion cf/d in the second quarter of 2013.
Meanwhile, its production of oil and natural gas liquids climbed 43 per cent to 68,200 barrels per day from 47,600 bpd.
On a conference call with analysts, president and chief executive Doug Suttles said the company is making faster than expected gains thanks to its strategic shift eight months ago to focus on five key growth plays — now absorbing 80 per cent of its development dollars.
“In the fourth quarter of last year, our original five growth assets produced about 29,000 barrels per day of oil and NGLs, whereas in the guidance presented this morning, we expect these same five areas to almost double in liquids production to approximately 56,000 barrels per day in the fourth quarter of 2014,” he said.
“Layering in our recently acquired Eagle Ford asset, total liquids production from our six core growth areas is expected to average 92,000 barrels a day of oil and NGLs in the fourth quarter.”
The company reports its results in U.S. dollars.
During the three months ended June 30, Encana completed the $2.9-billion acquisition of south Texas Eagle Ford assets, agreed to sell its northwestern Alberta Bighorn play for $1.8 billion (expected to close in the third quarter), closed the sale of Wyoming natural gas assets for $1.6 billion, closed the sale of certain East Texas properties for $427 million, agreed to sell its Cavalier power plant near Strathmore and its 50 per cent interest in a power plant in Balzac, and completed the initial public offering of PrairieSky Royalty Ltd. in an IPO that raised $1.67 billion from the sale of 46 per cent of the new company.
Meanwhile, it has been cutting expenses by trimming over a fifth of its staff and withholding funds from the nearly two dozen plays that aren’t considering core holdings. Total expenses in the second quarter were reported as $1.02 billion, down from $1.5 billion in the second quarter of 2013.
The result has been an embarrassment of cash, leading Suttles at one point in the conference call to quip that chief financial officer Sherri Brillon had been “trying to find a bigger closet to put all the money in.”
In the second quarter, the company had positive cash flow of $767 million, up from $554 million in the same period of 2013.
Cash flow is now expected to be between $3.4 billion and $3.6 billion this year compared to the original guidance of $2.9 billion to $3 billion.
Capital spending is expected to rise by about $300 million as Encana adds rigs to beef up output from the Eagle Ford.
Suttles ducked analyst questions about what the company plans to do with free cash flow, leaving that decision to the board of directors. Last year, as part of the strategy change, the dividend was cut by 65 per cent.
He also refused to answer a question on the chance Encana will attempt to sell its offshore Nova Scotia Deep Panuke gas play.
Analysts were impressed with the results. Encana stock closed up 22 cents at $23.92.
Arthur Greyfer of CIBC World Markets said cash flow per share of 89 cents was in line with CIBC expectations and about 11 per cent above consensus of 80 cents, while operating earnings per share of 23 cents missed his and consensus expectations of 24 and 25 cents, respectively.
Production was in line with consensus expectations but slightly missed CIBC’s forecast while beating the forecast of Greg Pardy, an analyst for RBC Dominion Securities.
Net earnings before a $289-million income tax expense were $570 million in the three months ended June 30, compared with net earnings of $486 million in the same period of 2013 before an income tax recovery of $244 million.
Operating earnings came to $171 million, down from $247 million in the year-earlier period.
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