Encana boosts liquids drilling plans, investments

Encana Corp. plans to invest an additional $600 million yet this year in numerous oil and liquids-rich natural gas plays, and it also expects to increase total liquids production for the year to 30,000 b/d.

Updated plans call for Encana to drill 115-120 wells in 10 plays, primarily oil, this year compared with 40-45 wells under its original 2012 plan. The company expects to drill 350 oil and natural gas liquids wells in 2013.

"With approximately $2 billion of cash currently on the balance sheet and $3.5 billion of expected total cash flow this year, we have significant financial flexibility to support the execution of Encana's planned capital investments," said Randy Eresman, Encana president and chief executive officer.

The Calgary company expects a more balanced cash flow in 2013, having shifted its focus from gas plays to oil and NGLs. Encana expects 2013 liquids production of 60,000-70,000 b/d, about 40% of which will be oil and field condensate. Encana's liquids-prone leases include nearly 3 million net acre.

For 2013, EnCana estimates capital investment of $4-5 billion, cash flow of $2.5-3.5 billion, and net divestitures of up to $1.5 billion.

For both 2012 and 2013, Encana expects gas production will average near current levels of 3 bcfd. During a June 21 investors day presentation in New York, executives said Encana is cautiously optimistic about a recovery in gas prices toward yearend and into 2013. The company plans to minimize natural gas investments until stronger, more sustainable gas prices prevail.

Play details outlined

Encana provided an update on the status of its oil and liquids assets and drilling plans for this year. Key highlights include:

• Duvernay—Encana plans to drill 10 wells in its 400,000 net acres in this play. The recent well flowed at 1,200 b/d of condensate and 3.5 MMcfd of rich gas during its first 2 days on stream.

• Tuscaloosa Marine Shale—Encana plans to drill 12 wells in its 355,000 net acres. The two most recent wells (Anderson 17H-1 and 18H-1) have horizontal lateral lengths of about 7,400 ft and 8,800 ft and produced initial 30-day production rates of 930 b/d and 1,080 b/d.

• Eaglebine—Encana plans to drill 12 wells in its 115,000 net acre position in the light oil play. The company has drilled 4 wells with horizontal lengths of 4,500-6,200 ft. Initial 30-day production rates were 165-230 b/d.

• Mississippian Lime—Encana plans to drill 15 wells on its 360,000 net acres.

• Utica/Collingwood—Encana plans to drill an additional 5 horizontal wells on its 430,000 net acres position in this play, focusing on the liquids rich window.

• San Juan—Encana plans to drill 12 wells across its 174,000 net acre position, targeting the oil window of the Gallup formation. The initial well (Lybrook H36) was drilled with a lateral length of 4,100 ft and yielded a 30-day initial production rate of about 440 b/d of oil.

• DJ Niobrara—Encana plans a two-rig program in Wattenberg field of the DJ basin. The company plans to drill 12 oil wells with a focus on optimizing lateral spacing, orientation, and well length.

• Clearwater Liquids—Encana has identified prospective oil opportunities on about 4.6 million net acres in southern Alberta. Targeting numerous zones, the company plans to drill 30 wells.

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