In order to transition to a more balanced commodity portfolio and achieve a goal of deriving 75% of its cash flow from oil and natural gas liquids by 2017, Encana will focus three quarters of its planned $2.4 billion to $2.5 billion capital investment in 2014 on five oil and liquids-rich assets: the Montney, Duvernay, DJ Basin, San Juan Basin and the Tuscaloosa Marine Shale (TMS). These five assets are expected to make up about 25%t of total production in 2014 while generating 45% of total upstream operating cash flow before the impact of commodity price hedging.
In 2014, the company will maintain its balance sheet integrity by aligning its capital expenditures with cash flow and unlocking value from its asset base through an initial public offering (IPO) of its Clearwater Royalty business. The company also plans to repay from cash a US$1 billion, 5.8% note maturity due May 1, 2014.
As a result of the company's focused strategy and capital investment plan, Encana projects its full-year 2014 upstream operating cash flow, including hedging, to be between $3 billion and $3.2 billion. Total cash flow is expected to range between $2.4 and $2.5 billion. Natural gas production is expected to average between 2.6 billion cubic feet per day (Bcf/d) and 2.8 Bcf/d and total liquids production between 70 thousand barrels per day (bbl/d) and 75 thousand bbl/d.
Encana's key deliverables for 2014
Growing high-quality total liquids production
Completing appraisal of two high-potential emerging liquids plays, the TMS and the Willesden Green area in the southern portion of the Duvernay
Continuing to reduce costs and improve capital efficiency
Optimizing the performance of base production areas by reducing production decline to a rate between 25 and 27 percent
Unlocking value from its portfolio through an IPO of its Clearwater royalty business
Source: Encana Corp.
Through its disciplined and focused growth strategy, the company thinks it can average a more than 10% compound annual growth rate in cash flow per share through 2017.
Encana Corp. and its subsidiaries engage in the exploration for, development, production, and marketing of natural gas, oil, and NGLs in Canada and the U.S. The company is headquartered in Calgary.