Plan to deliver unique combination of free cash flow, return of
cash to shareholders and high-margin liquids growth
Encana (NYSE, TSX: ECA) announced its 2019 capital investment
program. The outlook is aligned with Encana’s strategy which
returns cash to shareholders through disciplined investments to
profitably grow liquids in its Core 3 plays. In addition, the
Company’s fourth quarter and year-end 2018 financial and operating
results were issued in a separate release today and a conference
call with analysts and investors is scheduled for 7 a.m. MT (9 a.m.
ET). Please see dial-in details within this release. For more
detailed information on the Company’s assets, please refer to the
2019 Guidance and 2018 Results presentation and asset overviews at
https://www.encana.com/investors/.
“We are confident that Encana has the building
blocks to drive future value creation for our owners,” said Doug
Suttles, Encana President & CEO. “Our people have a strong
track record of execution and are leading the industry in efficient
development of our Core 3 plays. Our 2019 proforma outlook
maximizes returns, profitably grows liquids production, generates
free cash flow and returns cash to shareholders through our share
buyback and expanded dividend programs.
“Our recent merger with Newfield Exploration is
aligned with our strategy and provides Encana with a leading
position in the Anadarko Basin of Oklahoma. We’ve moved rapidly to
integrate Newfield with Encana. Since closing, we have reorganized
the combined company and are on track to exceed the G&A savings
we identified at the time of the transaction announcement. We have
eliminated duplicative roles and streamlined the combined
business,” added Suttles. “Our focus today has moved to operations
where we are applying our core competencies in cube development,
optimized completions, and using our proven supply chain management
practices to rapidly reduce Anadarko well costs by at least $1
million per well. Today’s Encana provides multi-basin investment
optionality and large, premium positions in the liquids-rich
Permian, Anadarko and Montney.”
2019 full-year proforma outlook
highlightsEncana’s 2019 full-year proforma outlook
includes estimates of Newfield activity, including capital
expenditures and production volumes from January 1, 2019 through to
the close of the transaction on February 13, 2019. See the table on
page two of this news release and visit Encana’s website for a
reconciliation of 2019 full-year proforma results and 2019
reportable results.
- Encana’s full-year proforma capital
budget for 2019 is $2.7 to $2.9 billion (includes approximately
$200 million associated with Newfield operations from January 1,
2019 through to the close of the transaction on February 13, 2019).
More than 75 percent of the capital investments will be allocated
to its Core 3 liquids plays – Permian, Anadarko and Montney. The
remainder of the budget will be allocated to maximize cash flow
from its other high-margin liquids assets.
- The Company is proceeding with its
previously announced programs to return cash to shareholders
through a $1.25 billion share buyback and its 25 percent dividend
increase.
- Under the 2019 proforma outlook,
liquids are expected to comprise over half of total proforma
production. Full-year proforma liquids production is expected to be
300,000 to 320,000 barrels per day (bbls/d) and total company
production is expected to be 560,000 to 600,000 barrels of oil
equivalent per day (BOE/d).
- The Company’s Core 3 assets are
expected to generate approximately 15 percent year-over-year
proforma liquids growth in 2019.
- Encana’s streamlined organizational
structure positions it to surpass the original target of $125
million in annualized G&A cost savings.
- The 2019 proforma outlook is
expected to maintain Encana’s strong capital structure. Since 2013,
long-term debt has been reduced by nearly $3 billion and the
Company intends to manage its mid-cycle leverage target of 1.5x. At
year-end 2018, Encana had more than $5 billion of total liquidity
including approximately $1.1 billion in cash and cash equivalents
on hand and $4 billion available through the Company’s undrawn
credit facilities.
Encana and Newfield transaction
updateEncana closed its acquisition of Newfield
Exploration Company on February 13, 2019. Newfield’s average
production during the fourth quarter of 2018 was more than 200,000
BOE/d, including over 125,000 bbls/d of liquids. On a
proforma basis, 2018 combined Encana and Newfield production would
have averaged more than 555,000 BOE/d including approximately
290,000 bbls/d of liquids.
On a reportable basis, Encana’s 2019 results
will exclude Newfield legacy activity for the period January 1,
2019 to February 13, 2019. Visit Encana’s website for
additional details on the 2019 Guidance.
Reconciliation of Full-Year Proforma
Guidance to Reportable
2019 Guidance: Reportable Versus Full Year
Proforma |
|
2019F Reportable |
Impact of Newfield |
Full Year Proforma |
Capital Investments ($ Billion) |
$2.5 - $2.7 |
$0.2 |
$2.7 - $2.9 |
Total Liquids (Mbbls/d) |
290 - 310 |
13 |
300 - 320 |
Natural Gas (MMcf/d) |
1,500 - 1,600 |
50 |
1,550 - 1,650 |
Total Production (MBOE/d) |
540 - 580 |
22 |
560 - 600 |
Total Costs per BOE*(Upstream Transportation and
Processing, Operating, Production and Mineral Taxes plus Corporate
G&A) |
$12.75 - $13.25 |
- |
$12.75 - $13.25 |
2019F Reportable: ECA plus Newfield post close
February 13, 2019Impact of Newfield: Estimated Newfield activity
January 1, 2019 – February 13, 2019Full year Proforma: Results of
ECA + Newfield combined for all of 2019
*Combined operating, T&P and G&A costs
per BOE excludes the impact of long-term incentive costs and
restructuring costs. Bow office building lease costs are included
in these combined costs.
Risk management programAs of
February 15, 2019, on a full-year proforma basis, Encana has hedged
approximately 87,500 bbls/d of expected oil and condensate
production at an average price of $59.92 per barrel. The Company
has about 1,043 MMcf/d of its expected natural gas production for
the year hedged at an average price of $2.87 per thousand cubic
feet (Mcf).
Conference call informationA
conference call and webcast to discuss the 2018 fourth quarter and
year-end results will be held for the investment community the same
day 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 2018 fourth
quarter and year-end conference call, including slides, will also
be available on Encana's website, under Investor/Presentations
& Events. The webcast will be archived for approximately 90
days.
Encana CorporationEncana
Corporation ("Encana") is a leading North American energy producer
that is focused on developing its strong portfolio of resource
plays, held directly and indirectly through its subsidiaries,
producing oil, natural gas liquids (NGLs) and natural gas. By
partnering with employees, community organizations and other
businesses, Encana contributes to the strength and sustainability
of the communities where it operates. Encana common shares trade on
the Toronto and New York stock exchanges under the symbol ECA.
Important informationEncana
reports in U.S. dollars unless otherwise noted. Production, sales
and reserves estimates are reported on an after-royalties basis,
unless otherwise noted. The term liquids is used to represent oil,
NGLs and condensate. The term liquids-rich is used to represent
natural gas streams with associated liquids volumes. Unless
otherwise specified or the context otherwise requires, references
to Encana or to the company includes reference to subsidiaries of
and partnership interests held by Encana Corporation and its
subsidiaries.
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. 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 Free Cash Flow is a non-GAAP
measure defined as Non-GAAP Cash Flow in excess of capital
investment, excluding net acquisitions and divestitures.
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 certain
forward-looking statements or information (collectively, "FLS")
within the meaning of applicable securities legislation, including
the United States Private Securities Litigation Reform Act of 1995.
FLS include: 2019 capital investment plan and allocation thereof;
plan to return cash to shareholders, including anticipated
dividends and amount of share buyback, including timing thereof;
production, growth and commodity composition of total production;
development of plays; commitment to maximizing returns, growing
high-margin liquids production, generating free cash flow, and
returning cash to shareholders, including impact of certain
commodity prices; timing of integration and application of cube
development approach to acquired assets; anticipated costs;
optimized completions and supply chain management practices to
reduce costs; and maintaining capital structure including
anticipated leverage target. Readers are cautioned against unduly
relying on FLS which, by their nature, involve numerous
assumptions, risks and uncertainties that may cause such statements
not to occur, or results to differ materially from those expressed
or implied. These assumptions include: future commodity prices and
differentials; foreign exchange rates; assumptions contained in the
Company's corporate guidance; data contained in key modeling
statistics; results from innovations; availability of attractive
hedges and enforceability of risk management program; access to
transportation and processing facilities; assumed tax, royalty and
regulatory regimes; and expectations and projections made in light
of, and generally consistent with, Encana's historical experience
and its perception of historical trends. Risks and uncertainties
that may affect these outcomes include: ability to generate
sufficient cash flow to meet obligations; commodity price
volatility; ability to secure adequate transportation and potential
pipeline curtailments; variability and discretion of Encana's board
of directors 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 sources of liquidity; fluctuations in
currency and interest rates; risks inherent in Encana's corporate
guidance; failure to achieve cost and efficiency initiatives; risks
inherent in marketing operations; risks associated with technology;
changes in or interpretation of royalty, tax, environmental,
greenhouse gas, carbon, accounting and other laws or regulations;
risks associated with existing and potential lawsuits and
regulatory actions made against Encana; impact of disputes arising
with its partners, including suspension of certain obligations and
inability to dispose of assets or interests in certain
arrangements; Encana's ability to acquire or find additional
reserves; imprecision of reserves estimates and estimates of
recoverable quantities of liquids and natural gas; risks associated
with past and future acquisitions or divestitures of certain assets
or other transactions or receipt of amounts contemplated under the
transaction agreements (such transactions may include third-party
capital investments, farm-outs or partnerships, which Encana may
refer to from time to time as "partnerships" or "joint ventures"
and the funds received in respect thereof which Encana may refer to
from time to time as "proceeds", "deferred purchase price" and/or
"carry capital", regardless of the legal form) as a result of
various conditions not being met; and other risks and uncertainties
impacting Encana's business, as described in its most recent Annual
Report on Form 10-K and as described from time to time in Encana's
other periodic filings as filed on SEDAR and EDGAR.
Although Encana believes the expectations
represented by such FLS are reasonable, there can be no assurance
that such expectations will prove to be correct. Readers are
cautioned that the assumptions, risks and uncertainties referenced
above are not exhaustive. FLS are made as of the date of this news
release and, except as required by law, Encana undertakes no
obligation to update publicly or revise any FLS. FLS contained in
this news release are expressly qualified by these cautionary
statements.
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 |
SOURCE: Encana Corporation