Quarterly / Earnings Reports | Third Quarter (3Q) Update

Encana Details Q3 2019 Results; Permian, SCOOP/STACK, Montney

Share Print Bookmark    |    Thursday,October 31,2019

Encana Corp. reported its Q3 2019 results.

Third quarter 2019 highlights:

• Financial performance driven by strong liquids production and cost focus.
• Net earnings of $149 million, or $0.11/share, with non-GAAP operating earnings of $195 million, or $0.15/share.
• Cash from operating activities of $756 million with non-GAAP cash flow of $817 million.
• Non-GAAP free cash flow of $251 million.
• Raised 2019 production outlook while maintaining original capital guidance and reducing costs.
• Increased forecast for annualized G&A synergies to $200 million from original target of $125 million.
• Strong oil and condensate production of 237 thousand barrels per day (Mbbls/d), and total production of 605 thousand barrels of oil equivalent per day (MBOE/d).
• Anadarko Basin continued strong production; currently producing 162 MBOE/d, up 13 percent over one year ago proforma.
• STACK pacesetter well costs under $6.0 million and 90-day cycle times driven by increased completion efficiencies and operational performance.
• Permian Basin achieves record average quarterly production of 111 MBOE/d.
• Montney liquids production of 54 Mbbls/d, up 22 percent over one year ago.
• Total costs decreased to $11.95 per barrel of oil equivalent (BOE). Lowered full year guidance for costs.
• Non-GAAP cash flow margin of $14.67/BOE.
• Completed 2019 share buyback program of $1.25 billion, reducing share count by approximately 13 percent.

Encana CEO Doug Suttles said: "Encana continues to deliver consistently strong financial performance. Our business is delivering free cash flow today. We have been very disciplined with our capital allocation and today increased our outlook for 2019 volumes while maintaining our capital investment guidance. We have a unique combination of profitable liquids growth, the generation of free cash and a track record of returning cash to our shareholders. We are confident that our business model is sustainable and that it will ultimately be differentiated by the market."

Q3 Production and Operating Highlights

Total production in the quarter was 605,100 barrels of oil equivalent per day (BOE/d), up four percent year-over-year on a proforma basis. Production in the quarter exceeded the second half guidance. Total production excluding the volumes from Arkoma and China was over 596,000 BOE/d, exceeding the top end of the second half guided range of 565,000 to 585,000 BOE/d. Liquids production also exceeded the second half run-rate of 310,000 - 320,000 barrels per day (bbls/d), coming in over 328,000 bbls/d excluding Arkoma and China volumes. Third quarter total liquids production increased eight percent year-over-year proforma, to 329,200 bbls/d. Oil and condensate production during the period was 237,300 bbls/d.

Permian

Third quarter production in the Permian Basin averaged a record 111 MBOE/d (83 percent liquids). Encana continues to demonstrate efficiency gains with its four-rig program focused on cube development. Recent wells in Howard County are contributing to the Permian's strong Q3 production, with wells out-performing their type curve. Encana's third quarter cubes employed 100 percent recycled water leading to lower water costs, and continued drilling efficiencies are being realized, resulting in an 11 percent reduction in cost per lateral foot versus the prior quarter.

Anadarko

Third quarter Anadarko Basin production averaged 162 MBOE/d (62 percent liquids). Oil and condensate volumes averaged 57 Mbbls/d in the third quarter. Production results are further enhanced with continued completion efficiency gains, with pace-setter wells under $6 million and cycle times reduced to 90 days as a result of deploying our cube development model across the asset. Longer dated production data from 2019 wells continues to track type curve.

Montney

Third quarter Montney production averaged 210 MBOE/d (26 percent liquids). Liquids production during the quarter averaged 54 Mbbls/d. The continued outperformance of the Montney condensate type curve paired with sub 80-day cycle times is accelerating well payouts and further enhancing returns.

Outlook

Encana expects to continue generating significant free cash flow in the fourth quarter of 2019. Strong production results year to date have more than offset the impact of disposition volumes and Encana has increased annual production guidance, lowered cost guidance, and maintained mid-point of original capital guidance. Cost performance has been strong and Encana is now guiding to the bottom end of the previous $12.75 - $13.25 per BOE range.

Capital Investment and Production

Third Quarter Summary

For the third quarter of 2019, Encana posted net earnings of $149 million, or $0.11/share. Non-GAAP operating earnings for the third quarter were $195 million, or $0.15/share.

Cash from operating activities in the third quarter was $756 million. Non-GAAP cash flow increased 39 percent over the comparable period in 2018 to $817 million.

The Company has completed the repurchase of 196.7 million Encana common shares at an average price of $6.35/share. Investment in the program totaled $1,250 million.

At the end of the third quarter, Encana had nearly $3.4 billion of total liquidity including approximately $138 million in cash and cash equivalents.

Encana's third quarter capital investments totaled $566 million. In the quarter, the company also completed the sale of the Arkoma assets and the exit of operations in China. The Company expects proforma 2019 capital investments to total approximately $2.8 billion, unchanged from the midpoint of its previous guidance range.

Suttles added, "Our ability to drive efficiency improvements ensures that we can continue to deliver competitive returns despite volatility in commodity prices. Our business is resilient, sustainable and competitive both within and outside of our industry. Our free cash flow in 2019 continues to grow and will be used to strengthen our balance sheet."