Company increases targeted G&A synergies and
achieves Anadarko well cost reductions identified in Newfield
acquisition; Full year 2019 capital investment plan and production
outlook reiterated
Encana (NYSE, TSX: ECA) today announced its first quarter 2019
financial and operating results and plans to hold a conference call
with analysts and investors at 7:00 a.m. MT (9:00 a.m. ET). Please
see dial-in details below. Additional details can be found on the
Company’s website at www.encana.com.
“We are off to a very strong start to 2019.
Integration of Newfield into Encana has gone exceptionally well,
and we now expect to deliver annual G&A synergies of at least
$150 million, 20 percent greater than our original commitment,”
said Encana President & CEO Doug Suttles. “In addition, we
have already achieved our objective of reducing Anadarko well costs
by $1 million and our most recent wells have delivered even larger
savings. All of this was accomplished within weeks of closing.
“This strong start gives us confidence that we
will meet our annual guidance, deliver competitive growth and
generate substantial free cash within our stated capital guidance.
Year-to-date, we have executed about 61 percent of our share
buyback program and increased our dividend by 25 percent. These
results demonstrate the quality of our business and our commitment
to return cash to shareholders.”
First Quarter Summary
For the first quarter of 2019, Encana posted a
net loss of $245 million, or $0.20 per share. The primary
drivers associated with the loss before tax were non-cash
unrealized losses on risk management of $427 million, restructuring
costs of $113 million and acquisition related costs of $31 million.
Non-GAAP operating earnings for the first quarter were $165
million, or $0.14 per share.
Cash from operating activities for the first
quarter was $529 million. Non-GAAP cash flow was $422 million,
a six percent increase over the comparable period of 2018.
Non-GAAP cash flow was impacted by $144 million of restructuring
and acquisition costs.
Through the end of the first quarter, the
Company had repurchased 55.9 million shares of Encana common stock
at an average price of $7.16 per share. Encana has continued to
execute the buyback in April and year-to-date has repurchased a
total of 91.0 million shares at an average price of $7.19 per
share. Investment in the program has totaled $654 million.
At the end of the first quarter, Encana had more
than $4.4 billion of total liquidity including approximately $479
million in cash and cash equivalents and $4.0 billion available
credit on the Company’s undrawn credit facilities.
Encana reiterated its 2019 proforma capital
guidance of $2.7 to $2.9 billion. First quarter proforma upstream
capital expenditures totaled $913 million and were in line with
previous expectations. Investment in the first quarter was
primarily driven by high activity levels in the Anadarko Basin at
the time of the Newfield acquisition close and front-end weighted
capital programs in the other assets.
Production Summary and Asset
Highlights
Total combined proforma production in the first
quarter of 2019 was approximately 566,600 barrels of oil equivalent
per day (BOE/d), up 13 percent year-over-year. First quarter
proforma liquids production grew 15 percent year-over-year, to
about 292,700 barrels per day (bbls/d).
Capital and Production
|
Reportable (1) |
Proforma (2) |
(for the period
ended March 31) |
Q1
2019 |
Q1 2018 |
Q1
2019 |
Q1 2018 |
Capital Expenditures ($ millions) |
736 |
508 |
913 |
859 |
Oil (Mbbls/d) |
125.8 |
83.0 |
164.7 |
157.6 |
NGLs – Plant Condensate (Mbbls/d) |
44.9 |
30.2 |
48.2 |
35.0 |
NGLs – Other (Mbbls/d) |
60.7 |
32.0 |
79.8 |
62.3 |
Oil and NGLs Total (Mbbls/d) |
231.4 |
145.2 |
292.7 |
254.9 |
Natural gas (MMcf/d) |
1,421 |
1,075 |
1,644 |
1,476 |
Total production (MBOE/d) |
468.2 |
324.4 |
566.6 |
500.9 |
- Reportable: Q1 2019 includes
capital and production from Newfield, commencing Feb. 14, 2019. Q1
2018 includes Encana capital and production as previously
reported.
- Proforma capital includes Encana
and Newfield Upstream capital and combined production volumes for
both Q1 2019 and Q1 2018.
With the addition of the Anadarko Basin,
Encana’s core growth assets provide leading positions in North
America’s top unconventional plays. Proforma first quarter
production from these assets grew more than 20 percent from the
comparable period in 2018 and averaged 443.3 MBOE/d. Highlights on
each asset are below:
PermianFirst quarter production
averaged 91.2 MBOE/d, of which 84 percent was liquids. Production
was temporarily impacted by 3.2 MBOE/d due to third party midstream
outages that primarily impacted NGL and natural gas volumes. As a
pioneer in cube development, Encana has a demonstrated track record
of strong operational performance and has lowered drilling and
completion costs by approximately 20 percent since entering the
basin in 2014.
AnadarkoFor
the first quarter, proforma total production increased 23 percent
year-over-year and averaged 144.8 MBOE/d, of which 61 percent was
liquids. Since mid-February, per well costs have been reduced by $1
million. These reductions have come through material changes to
completion operations and supply chain management. Additional cost
reductions are expected utilizing the cube development
approach.
Montney First quarter
production averaged 207.3 MBOE/d, of which 24 percent was liquids.
Recent wells, drilled and completed for approximately $4.3 million
per well, have significantly outperformed type curve with early
flow rates of over 1,500 bbls/d of condensate. Montney first
quarter production was temporarily impacted by midstream
curtailments, with a reduction of about 4.3 MBOE/d.
For more detailed information on the Company’s
assets and first quarter results, please refer to the Corporate
Presentation at https://www.encana.com/investors/.
Risk management programAs of
March 31, 2019, Encana has hedged approximately 106,000 bbls/d of
expected oil and condensate production at an average price of
$60.42 per barrel for the balance of 2019. The Company also has
about 958 MMcf/d of its expected remaining 2019 natural gas
production hedged at an average price of $2.76 per thousand cubic
feet (Mcf).
Dividend declaredOn April 29,
2019, the Board declared a dividend of $0.01875 per common share
payable on June 28, 2019, to common shareholders of record as of
June 14, 2019.
First Quarter Summary
(for the period
ended March 31)($ millions, except as indicated) |
Q1
2019 |
|
Q1 2018 |
|
Cash from (used in) operating activities |
529 |
|
381 |
|
Deduct (add back): |
|
|
|
|
Net change in other assets and liabilities |
(11 |
) |
(11 |
) |
Net change in non-cash working capital |
118 |
|
(8 |
) |
Non-GAAP cash flow1 |
422 |
|
400 |
|
Non-GAAP cash flow margin1
($/BOE) |
10.02 |
|
13.70 |
|
|
|
|
Non-GAAP cash flow1 |
422 |
|
400 |
|
Less: capital expenditures |
736 |
|
508 |
|
Non-GAAP free cash flow1 |
(314 |
) |
(108 |
) |
|
|
|
Net earnings (loss) |
(245 |
) |
151 |
|
Before-tax (addition) deduction: |
|
|
|
|
Unrealized gain (loss) on risk management |
(427 |
) |
68 |
|
Restructuring charges |
(113 |
) |
- |
|
Non-operating foreign exchange gain (loss) |
37 |
|
(100 |
) |
Gain (loss) on divestitures |
(1 |
) |
3 |
|
|
(504 |
) |
(29 |
) |
Income tax |
94 |
|
24 |
|
After-tax (addition) deduction |
(410 |
) |
(5 |
) |
Non-GAAP operating earnings1 |
165 |
|
156 |
|
- Non-GAAP cash flow, non-GAAP cash flow margin, non-GAAP free
cash flow and non-GAAP operating earnings are defined in Note
1.
Realized Pricing Summary
|
Q1
2019 |
Q1 2018 |
Liquids ($/bbl) |
|
|
WTI |
54.90 |
62.87 |
Encana realized liquids prices1 |
|
|
Oil |
57.34 |
55.74 |
NGLs – Plant Condensate |
51.71 |
52.49 |
NGLs – Other |
20.53 |
23.64 |
Natural gas |
|
|
NYMEX ($/MMBtu) |
3.15 |
3.00 |
Encana realized natural gas price1 ($/Mcf) |
2.66 |
2.94 |
- Prices include the impact of realized gain (loss) on risk
management.
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.
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, production
targets and liquids growth; estimated G&A synergies and
additional savings in well costs; ability to generate substantial
free cash flow; and amount and timing of share buyback. 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; amount and timing of share repurchases;
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; 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 |
|
|
SOURCE: Encana Corporation