Encana to focus 2015 spending on Montney, Duvernay, Eagle Ford and Permian

Encana to focus 2015 spending on Montney, Duvernay, Eagle Ford and Permian

CALGARY, Alberta -- Encana has announced a highly focused 2015 capital program of between $2.7 billion and $2.9 billion, with approximately 80% directed to four of its highest margin growth plays; the Montney, Duvernay, Eagle Ford and Permian.

“We enter 2015 focused on our long-term strategy, increasing liquids production, capturing new efficiencies throughout the business and protecting our balance sheet.” says Doug Suttles, Encana President & CEO. “We're well positioned as the steps we've taken have given us the resilient portfolio, organizational agility and operational expertise needed to thrive throughout the commodity price cycle. Built into our 2015 plan is the flexibility to respond to the challenges and act on potential opportunities presented in this volatile price environment."

Encana expects to generate approximately 75% of its 2015 cash flow from oil and liquids production. The company estimates total liquids production will grow approximately 70% compared to 2014 to between 140,000 and 160,000 bpd and anticipates overall production of between 405,000 and 440,000 boed.

Encana expects total cash flow between $2.5 billion and $2.7 billion, reflecting the impact of higher margin production and continued cost efficiencies, partially offset by anticipated lower commodity prices.

"In 2015, we plan to continue to execute our strategy and capitalize on the portfolio we have built by investing in our highest margin plays and highest impact projects to keep us on track to reach our long-term strategic goals," adds Suttles. "Operational excellence will continue to lie at the heart of all we do and we believe the current lower commodity price environment will create opportunities to drive further cost efficiencies throughout the supply chain."

The company's 2015 capital program is based on assumptions of $70 WTI oil prices and NYMEX natural gas prices of $4 per MMBtu.

In addition, the company expects to generate net proceeds of around $800 million in the first quarter of 2015 through the completion of its divestiture of the majority of its Clearwater assets and other anticipated transactions.

Approximately 80% of Encana’s 2015 capital program will be invested in four of its highest margin assets, the Montney, Duvernay, Eagle Ford and Permian. These assets have low supply costs averaging about $35 to $55/boe and are capable of delivering quality returns in a lower commodity price environment. The company expects them to contribute about 60% of total production and 70% of total upstream operating cash flow in 2015.

Montney: The Montney gives Encana a more than 25-year drilling inventory and large contiguous land positions with the potential of more than 2 Bcfd and 50,000 bpd of natural gas and liquids production. In 2015, the company plans to invest between $250 million and $350 million and expects to run two to three rigs and drill between 20 and 30 net wells. An additional $350 million is expected to be invested through Encana's Cutbank Ridge Partnership with Mitsubishi Corporation, representing a total gross investment of between $600 million and $700 million. Liquids production is expected to grow 5% to between 19,000 and 20,500 bpd while low-cost, high rate of return natural gas production is expected to range between 580 and 620 MMcfd.

Duvernay: Encana plans to build on milestones achieved in the Duvernay throughout 2014, including significant reductions in drilling costs and cycle times as well as increased market takeaway capacity. In 2015, the company plans to invest between $250 million and $350 million and continue to accelerate development in the Simonette area where it expects to run about three to five rigs and drill 15 to 25 net wells. An additional $800 million is expected to be invested in the play through Encana's joint venture with Brion Duvernay Gas (formerly named Phoenix Duvernay Gas), representing a gross investment of between $1.0 billion and $1.2 billion. Net liquids production from the Duvernay is expected to grow about 200% to an average of 6,000 to 7,000 bpd.

Eagle Ford: Since entering the substantially liquids-weighted Eagle Ford in the second quarter of 2014, Encana has leveraged its resource play expertise to increase liquids volumes while reducing drilling and completions costs. The company's largely contiguous land position is in the core of the play, offering premium oil netbacks and good market access. Encana plans to invest between $650 million and $750 million in 2015, running three to five rigs and drilling 75 to 85 net wells. The company plans to achieve further operational efficiencies while growing liquids production to an average of 44,000 to 49,000 bpd.

Permian: Since closing its acquisition of Athlon Energy in the fourth quarter of 2014, Encana has begun implementing the resource play hub approach in what is widely recognized as one of North America's top oil plays. The asset includes a more than 10-year drilling inventory with up to 11 potential productive horizons of high margin liquids. In 2015, Encana plans to invest between $850 million and $950 million in the play and run between nine and 13 rigs. The company plans to drill between 180 and 200 net wells. Projected volumes are expected to grow to approximately 50,000 boed.

DJ Basin, San Juan and Tuscaloosa Marine Shale (TMS): These three assets underline the flexibility of Encana's portfolio and represent further high-quality investment opportunities. Collectively, the company plans to invest approximately $350 million to $450 million in these assets in 2015 with combined total liquids production expected to be between 25,000 and 28,000 bpd.