Encana Q3 profit down 46%; Shale gas key to sustain profits

Randy Eresman, CEO, EnCana Corp. (archive photo)

EnCana Corp reported  Thursday that Q3 profit was down 46% and  state cutting costs and focusing on new shale plays will be key to sustaining profits even if natural gas prices remain low.

EnCana has shut in ~500 million cubic feet of gas per day that EnCana considered too unprofitable to produce. The Company plans to return this production to market during this winter heating season when they expect prices to improve.

In a conference call, EnCana’s CEO, Randy Eresman, stated:

“Natural gas is going to be in abundance for a very long period of time. EnCana is well positioned with a very low cost structure and exposure to significant development opportunities within many of the lowest-cost plays in North America.”

Referring to the shut in production…

“They will be brought back on stream over the course of the winter. Our expectation is that there will be some form of correction in prices next year but the prices we are currently seeing above the $5 range (in the futures market) next year are adequate.”

Pending shareholder approval later this month, the “new” Encana will retain the natural gas assets focusing primarily on shale gas plays in British Columbia’s Horn River, and Montney basin and Haynesville in the U.S. and invest $3.9 billion to boost natural gas output.  The oil sand assets will be spun out into a newco called Cenovus Energy Inc., which will invest up to $2.3 billion to increase oilsands production and build refining capacity.

An interesting point here is that natural gas will receive $1.6B more investment dollars then the oil sands, perhaps providing a clear indication of how important EnCana views shale gas to the long term energy needs of North America and to the long term profitability of the company he manages and directs.

Reuters: Encana profit hit by lower gas prices, production

Vancouver Sun: Encana earmarks $2.3B for oilsands