Company continues to generate significant free cash flow
through capital discipline and strong operational
performance
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.
CALGARY, Oct. 31, 2019 /CNW/ - Encana Corporation (NYSE,
TSX: ECA) today announced its third quarter 2019 financial and
operating results and plans to hold a conference call with analysts
and investors today at 7 a.m. MT (9
a.m. ET). Please see dial-in details within this release.
Additional details can be found on the Company's website at
www.encana.com.
"Encana continues to deliver consistently strong financial
performance," said Encana CEO Doug
Suttles. "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."
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
$2.8 billion, unchanged from the
midpoint of its previous guidance range.
Suttles added, "Our ability to drive efficiency improvements
ensures that we can continue to deliver competitive returns despite
volatility in commodity prices. Our business is resilient,
sustainable and competitive both within and outside of our
industry. Our free cash flow in 2019 continues to grow and will be
used to strengthen our balance sheet."
Third Quarter Production and Operating Highlights
Total production in the quarter was 605,100 barrels of oil
equivalent per day (BOE/d), up four percent year-over-year on a
proforma basis. Production in the quarter exceeded the second half
guidance. Total production excluding the volumes from Arkoma and
China was over 596,000 BOE/d,
exceeding the top end of the second half guided range of 565,000 to
585,000 BOE/d. Liquids production also exceeded the second
half run-rate of 310,000 – 320,000 barrels per day (bbls/d), coming
in over 328,000 bbls/d excluding Arkoma and China volumes. Third quarter total liquids
production increased eight percent year-over-year proforma, to
329,200 bbls/d. Oil and condensate production during the period was
237,300 bbls/d.
Capital Investment and Production
|
|
|
|
Reportable
(1)
|
Proforma
(2)
|
(for the period ended
September 30)
|
Q3
2019
|
Q3 2018
|
Q3
2019
|
Q3 2018
|
Upstream Capital
Expenditures
($
millions)
|
563
|
519
|
563
|
890
|
Oil
(Mbbls/d)
|
178.8
|
95.5
|
178.8
|
172.7
|
NGLs – Plant
Condensate (Mbbls/d)
|
58.5
|
41.0
|
58.5
|
47.5
|
NGLs – Other
(Mbbls/d)
|
91.9
|
42.2
|
91.9
|
83.6
|
Oil and NGLs Total
(Mbbls/d)
|
329.2
|
178.7
|
329.2
|
303.8
|
Natural gas
(MMcf/d)
|
1,655
|
1,197
|
1,655
|
1,659
|
Total production
(MBOE/d)
|
605.1
|
378.2
|
605.1
|
580.3
|
(1)
|
Reportable includes
Encana and Newfield Upstream capital and combined production
volumes for Q3 2019. Q3 2018 includes Encana's capital and
production as previously reported.
|
(2)
|
Proforma includes
Encana and Newfield Upstream capital and combined production
volumes for both Q3 2019 and Q3 2018.
|
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.
For more detailed information on the Company's assets and third
quarter results, please refer to the Corporate Presentation at
http://investor.encana.com/presentations-events.
Risk Management Program
As of September 30, 2019, Encana has hedged
approximately 175.5 Mbbls/d of expected oil and condensate
production at an average price of $57.37 per barrel for the balance of 2019. The
Company also has about 864 million cubic feet per day (MMcf/d) of
its expected remaining 2019 natural gas production hedged at an
average price of $2.75 per thousand
cubic feet (Mcf). Encana has also hedged approximately 119 Mbbls/d
of expected oil and condensate production at an average price of
$54.83 per barrel for 2020. The
Company also has about 1,038 MMcf/d of its expected 2020 natural
gas production hedged at an average price of $2.65 per Mcf.
Dividend Declared
On October
30, 2019, the Board declared a dividend of $0.01875 per common share payable on December 31, 2019, to common shareholders of
record as of December 13, 2019.
Conference Call Information
A conference call and
webcast to discuss the 2019 third quarter financial and operating
results will be held today at 7 a.m.
MT (9 a.m. ET). To
participate, please dial 888-231-8191 (toll-free in North America) or 647-427-7450 (international)
approximately 10 minutes prior to the conference call. The live
audio webcast of the conference call, including slides, will also
be available on Encana's website, www.encana.com, under
Investors/Presentations & Events. The webcast will be archived
for approximately 90 days.
Third Quarter Summary
|
|
|
(for the period ended
September 30)
($ millions, except
as indicated)
|
Q3
2019
|
Q3 2018
|
Cash from (used
in) operating activities
|
756
|
885
|
Deduct (add
back):
|
|
|
Net change in other
assets and liabilities
|
(29)
|
(17)
|
Net change in non-cash
working capital
|
(32)
|
313
|
Non-GAAP cash
flow1
|
817
|
589
|
Non-GAAP cash flow
margin1 ($/BOE)
|
14.67
|
16.93
|
|
|
|
Non-GAAP cash
flow1
|
817
|
589
|
Less: capital
expenditures
|
566
|
523
|
Non-GAAP free cash
flow1
|
251
|
66
|
|
|
|
Net earnings
(loss)
|
149
|
39
|
Before-tax (addition)
deduction:
|
|
|
Unrealized gain (loss)
on risk management
|
(41)
|
(164)
|
Restructuring
charges
|
(4)
|
-
|
Non-operating foreign
exchange gain (loss)
|
(41)
|
24
|
Gain (loss) on
divestitures
|
5
|
-
|
|
(81)
|
(140)
|
Income tax
|
35
|
16
|
After-tax (addition)
deduction
|
(46)
|
(124)
|
Non-GAAP operating
earnings1
|
195
|
163
|
(1)
|
Non-GAAP cash flow,
non-GAAP cash flow margin, non-GAAP free cash flow and non-GAAP
operating earnings are defined in Note 1.
|
Realized Pricing Summary (1)
|
|
|
|
Q3
2019
|
Q3 2018
|
Liquids ($/bbl)
|
|
|
WTI
|
56.45
|
69.50
|
Encana realized
liquids prices1
|
42.24
|
49.05
|
Oil
|
55.92
|
57.05
|
NGLs – Plant
Condensate
|
50.55
|
52.89
|
NGLs –
Other
|
10.37
|
27.23
|
Natural
gas
|
|
|
NYMEX
($/MMBtu)
|
2.23
|
2.90
|
Encana realized
natural gas price1 ($/Mcf)
|
2.07
|
2.50
|
(1)
|
Realized prices
include the impact of realized gain (loss) on risk
management.
|
Total Costs Summary
|
|
|
(for the period ended
September 30)
($ per
BOE)
|
Q3
2019
|
Q3 2018
|
Production, Mineral
and Other Taxes
|
1.18
|
1.31
|
Upstream
Transportation and Processing
|
6.05
|
7.05
|
Upstream
Operating1
|
3.34
|
3.07
|
Administrative1
|
1.38
|
1.17
|
Total
Costs(2) ($/BOE)
|
11.95
|
12.60
|
(1)
|
Excluding long-term
incentive costs and restructuring costs.
|
(2)
|
Total costs are a
non-GAAP measure as defined in note 1.
|
NOTE 1: Non-GAAP measures
Certain measures in this news release do not have any
standardized meaning as prescribed by U.S. GAAP and, therefore, are
considered non-GAAP measures. These measures may not be comparable
to similar measures presented by other companies and should not be
viewed as a substitute for measures reported under U.S. GAAP. These
measures are commonly used in the oil and gas industry and/or by
Encana to provide shareholders and potential investors with
additional information regarding the Company's liquidity and its
ability to generate funds to finance its operations. For additional
information regarding non-GAAP measures, see the Company's website.
This news release contains references to non-GAAP measures as
follows:
- Non-GAAP Cash Flow is a non-GAAP measure defined as cash
from (used in) operating activities excluding net change in other
assets and liabilities, net change in non-cash working capital and
current tax on sale of assets. Non-GAAP Cash Flow Margin is
a non-GAAP measure defined as Non-GAAP Cash Flow per BOE of
production. Non-GAAP Free Cash Flow is a non-GAAP measure
defined as Non-GAAP Cash Flow in excess of capital investment,
excluding net acquisitions and divestitures.
- Non-GAAP Operating Earnings (Loss) is a non-GAAP
measure defined as net earnings (loss) excluding non-recurring or
non-cash items that management believes reduces the comparability
of the company's financial performance between periods. These items
may include, but are not limited to, unrealized gains/losses on
risk management, impairments, restructuring charges, non-operating
foreign exchange gains/losses, gains/losses on divestitures and
gains on debt retirement. Income taxes may include valuation
allowances and the provision related to the pre-tax items listed,
as well as income taxes related to divestitures and U.S. tax
reform, and adjustments to normalize the effect of income taxes
calculated using the estimated annual effective income tax
rate.
- Total Costs per BOE is a non-GAAP measure defined as the
summation of production, mineral and other taxes, upstream
transportation and processing expense, upstream operating expense
and administrative expense, excluding the impact of long-term
incentive and restructuring costs, per BOE of production.
Management monitors Total Costs per BOE as a measure of operating
performance.
ADVISORY REGARDING OIL AND GAS INFORMATION - The
conversion of natural gas volumes to barrels of oil equivalent
(BOE) is on the basis of six thousand cubic feet to one barrel. BOE
is based on a generic energy equivalency conversion method
primarily applicable at the burner tip and does not represent
economic value equivalency at the wellhead. Readers are cautioned
that BOE may be misleading, particularly if used in isolation.
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS – This news
release contains forward-looking statements or information
(collectively, "FLS") within the meaning of applicable securities
legislation, including Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. FLS include: meeting Encana's annual guidance,
including capital outlook, returns, free cash flow, production
targets and liquids growth, and repeatable performance in future
years; quality of asset portfolio and commitment to delivering
shareholder value; estimated G&A and operating cost synergies
and additional savings in well costs; ability to generate free cash
flow and amount and use thereof; ability to lower costs and improve
efficiencies to deliver competitive returns; benefits of cube
development; and outcomes of risk management program. FLS involve
assumptions, risks and uncertainties that may cause such statements
not to occur or results to differ materially. These assumptions
include: future commodity prices and differentials; assumptions in
corporate guidance; data contained in key modeling statistics;
availability of attractive hedges and enforceability of risk
management program; access to transportation and processing
facilities; and expectations and projections made in light of
Encana's historical experience and its perception of historical
trends. Risks and uncertainties include: integration of Newfield's
business and ability to achieve anticipated benefits; ability to
generate sufficient cash flow to meet obligations; commodity price
volatility; ability to secure adequate transportation and potential
pipeline curtailments; variability and discretion to declare and
pay dividends, if any; timing and costs of well, facilities and
pipeline construction; business interruption, property and casualty
losses or unexpected technical difficulties; counterparty and
credit risk; impact of changes in credit rating and access to
liquidity, including ability to issue commercial paper; currency
and interest rates; risks inherent in Encana's corporate guidance;
failure to achieve cost and efficiency initiatives; risks in
marketing operations; risks associated with technology; changes in
or interpretation of laws or regulations; risks associated with
existing or potential lawsuits and regulatory actions; impact of
disputes arising with partners, including suspension of certain
obligations and inability to dispose of assets or interests in
certain arrangements; ability to acquire or find additional
reserves; imprecision of reserves estimates and estimates of
recoverable quantities; and other risks and uncertainties as
described in Encana's Annual Report on Form 10-K and Quarterly
Report on Form 10-Q and as described from time to time in Encana's
other periodic filings as filed on SEDAR and EDGAR.
Although Encana believes such FLS are reasonable, there can be
no assurance they will prove to be correct. The above assumptions,
risks and uncertainties are not exhaustive. FLS are made as of the
date hereof and, except as required by law, Encana undertakes no
obligation to update or revise any FLS.
Further information on Encana Corporation is available on the
company's website, www.encana.com, or by contacting:
Investor
contact:
(281)
210-5110
(403)
645-3550
|
Media
contact:
(281)
210-5253
|
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SOURCE Encana Corporation