OREANDA-NEWS. November 20, 2014. Encana (TSX: ECA) (NYSE: ECA) delivered strong results in a pivotal third quarter during which its portfolio transition was swiftly accelerated and key milestones of the company's strategy were achieved within a year of its introduction.

Encana generated third quarter cash flow of approximately USD 807 million or USD 1.09 per share, representing a 22 percent increase year-over-year, and operating earnings of USD 281 million or USD 0.38 per share, an 87 percent increase over the same period last year. Net earnings attributable to common shareholders were USD 2.8 billion or USD 3.79 per share.

"Our third quarter results highlight the tremendous momentum we have built executing our strategy and we are now a full two years ahead of the targets we originally set for 2017," says Doug Suttles, Encana President & CEO. "The steps we have taken to transform our portfolio and drive cost efficiencies have delivered an over 50 percent increase in upstream operating cash flow against an eight percent decline in overall production, compared to the same period in 2013. This highlights our focus on delivering value versus volumes. Consistent with the strategy we announced one year ago, we have built a balanced and resilient portfolio that comprises high-quality oil, natural gas liquids and natural gas investment opportunities."

During the third quarter, Encana announced the transformative acquisition of Texas-based Athlon Energy Inc., which will give the company a premier oil position in the Permian Basin. When combined with other major portfolio adjustments, the transaction puts Encana on track to realizing an expected 75 percent of operating cash flow from liquids production in 2015 -- marking a significant strategic milestone two years ahead of plan.

"The accelerated execution of our strategy has placed us in a position of strength," says Suttles. "We're building sustainable success from the inside-out with a culture built on teamwork, agility and the drive to succeed. Our team continues to take the concrete steps needed to deliver on our growth targets and drive efficiencies into everything we do."

Year-to-date the company has unlocked approximately USD 8 billion in value through the disposition of lower-margin natural gas assets, reinvesting proceeds into higher-margin liquids opportunities. Total netback for divested assets was approximately USD 20 per barrel of oil equivalent (boe) while the expected netback for assets acquired is approximately USD 55/boe. This more liquids-weighted commodity mix, in combination with higher realized year-to-date prices and lower operating and administrative costs, resulted in a 79 percent increase in Encana's netbacks, excluding hedges, compared to the first nine months of 2013.

Encana achieved another major milestone during the third quarter by exceeding 100,000 barrels per day (bbls/d) of total liquids production. Third quarter oil production of approximately 62,100 bbls/d was up 128 percent compared to the same period in 2013 and 82 percent over last quarter. This increase was driven in part by volumes from the recently acquired Eagle Ford position, which accounted for approximately 37,600 bbls/d of liquids production. Natural gas liquids production during the third quarter averaged about 41,900 bbls/d, an increase of 35 percent year-over-year and 23 percent over last quarter. In addition, liquids volumes from the original five growth areas identified by Encana in last year's strategy announcement (the Montney, Duvernay, San Juan Basin, DJ Basin and Tuscaloosa Marine Shale plays) have increased 70 percent year-over-year from approximately 24,000 to 41,000 bbls/d.

"We've achieved significant capital and operational cost improvements in each of our growth areas, resulting in improved capital efficiency and margin growth," says Suttles. "We hit the ground running with a seamless transition into the Eagle Ford, demonstrating the agility of our teams in entering new basins as well as our ability to rapidly apply our operational expertise and integrate with existing asset teams. We are very confident that we will replicate our Eagle Ford success in the Permian once we complete the transaction and are able to combine our expertise with that of the Athlon team."

Encana's disciplined approach has resulted in a USD 326 million reduction in the company's capital investment year-to-date and an increase in cash from operating activities of USD 579 million compared to the same period last year. Approximately 84 percent of year-to-date total capital investment has been focused on the company's growth assets.

Year-to-date, the company has reported cash flow of approximately USD 2.6 billion and USD 3.2 billion in net earnings attributable to common shareholders, with the latter figure reflecting the significant impact of divestiture activity through the year. Encana's year-to-date operating earnings of USD 967 million represent a 68 percent increase when compared to the first nine months of 2013.