Encana: 'We own the Piceance'

Alan Petzet
Chief Editor-Exploration

When listing the public companies that want to be associated with liquids resource plays as opposed to gas plays, don't include Encana Corp.

The Calgary firm has refocused its operations on North America and is a large participant in several resource plays in Canada and the US. The Piceance basin Williams Fork tight sand and the North Louisiana Haynesville shale are two of the company's large US ventures.

In the Piceance basin, Encana owns 869,000 net acres bounded roughly by Rangely, Grand Junction, Rifle, and Meeker, Colo. More than 70% of the lands are undeveloped.

Jeff Wojahn, executive vice-president of Encana and president of its USA Division, told an investment conference Jan. 5, "We own the basin."

In the 2010 third quarter, Encana at about 3.2 bcfd of companywide gas production was behind only ExxonMobil Corp. at 4.2 bcfd in North American gas output.

At its current pace, Encana has a 35-year inventory of drilling locations in the Williams Fork formation alone.

The company has built its Piceance net production to 440 MMcfd of gas in 2010 from 325 MMcfd in 2005, increasing flow every year except 2009, when pipeline capacity was insufficient to take all of its gas. Output grew at a compound rate of more than 30%/year from 2002 to 2008.

"Our capacity-reduced production from 2009 came back on line better than expected, and many of the Piceance wells that we've recently completed are performing well above expectations," Wojahn said.

Using what the company calls a "gas factory" approach, Encana has drilled as many as 52 wells from a single pad in the Piceance basin.

"I am proud to say that in just a few short years, the Piceance gas factory has progressed from the conceptual stage to full implementation…. Since 2005, Encana has reduced its drilling cycle times by as much as 65% in some areas of the Piceance basin."

Encana is expanding the use of its Piceance gas factory approach throughout the company's operations to gain efficiencies. Those include sharply reducing truck trips in the field, fewer pad-to-pad rig moves, shorter drilling and completion cycle time, and optimizing frac efficiency and production via gas lift.

Without giving details, Wojahn said Encana is diversifying its supplier base and is engaging industry players to develop fit for purpose completion equipment.

Encana holds 429,000 net acres in the heart of the Haynesville shale play, where it drilled 90 net wells in 2010.

The company was to average 290 MMcfd of Haynesville net production in 2010 and ended the year at about 400 MMcfd. Output is to rise to more than 1 bcfd by 2014.

"Though our 2010 program focused on drilling for land retention, we're nowhere near optimizing our surface or drilling operations," Wojahn said.

"This year we have one gas factory pilot plant that will see eight wells drilled from a single pad. This will be the first step in a long-term exercise of continued optimization and cost reduction."

The company sees overall field savings of as much as 20% when it fully implements the gas factory method in the Haynesville, Wojahn said.

Encana has attracted more than $4 billion in third party capital to its projects in the last 3 years, Wojahn said.

The company targets total joint venture investment of $1-2 billion/year, and current expected 2011 partner spending on Encana's behalf is about $500 million. A joint venture with China National Petroleum Co. could contribute further.

Such capital infusion enables Encana to drill wells that would otherwise remain dormant in its inventory for far too long, Wojahn said.

In 2010, Encana had more than $900 million in third party joint venture commitments in place. It was involved in more than 30 deals in Canada and had more than 30 partners in the US. The deals involved gross well commitments of more than 760 wells in Canada and 1,784 wells in the US.

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