Encana to boost spending, drill more wells

OREANDA-NEWS. July 22, 2016. Independent producer Encana is boosting its 2016 capital spending budget by \\$200mn and plans to drill eight more wells this year amid a recovery in energy prices and recent divestitures that have given the company more breathing room.

Nymex natural gas prompt-month prices dropped to a 17-year settlement low in March on mild weather and high inventories, prompting producers to rein in their output and lower capital spending budgets. But as prices fell, power generation demand for gas rose. Prices reached a 13-month high near \\$3/mmBtu in early July.

Divestitures in the Gordondale field in Alberta and the Denver-Julesberg basin in Colorado are expected to close by the end of the month and deliver proceeds of about \\$1.1bn, allowing the company to increase its spending and production guidance for the year.

Encana's 13pc increase to its capital spending program will be focused across assets in its four main production areas: the Permian basin, Eagle Ford shale, Duvernay shale and Montney shale, with the lion's share of spending going to its operations in the Permian basin. The company expects output to stay relatively flat through the remainder of 2016, and increase by up to 35,000 b/d of oil equivalent per day (boe/d) in 2017. In the second quarter the company produced 368,300 boe/d.

"Demand is increasing, but you have to be in a great place that's inexpensive to operate in with highly productive wells," chief executive Doug Suttles said during the company's earnings call today.

Encana's natural gas production averaged 1.4 Bcf/d (40mn m?/d) during the quarter, down by 10pc from the corresponding year earlier period.