EnCana says still studying Alberta royalty change

Mon Nov 5, 2007 12:35pm EST

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(In U.S. dollars)

By Scott Haggett

CALGARY, Alberta Nov 5 (Reuters) - EnCana Corp (ECA.TO) has not yet detailed how it will respond to a hike in Alberta's royalty rates, the company's chief executive said on Monday.

The firm, Canada's biggest oil and gas producer, had threatened in September to slash 2008 spending in Alberta by $1 billion if the province adopted a panel's recommendation to hike taxes and levies on oil and gas production.

Last month the western Canadian province decided to raise rates beginning in 2009, but not to the extent recommended by the review panel.

In a conference call, EnCana Chief Executive Randy Eresman, said the company has done only a preliminary review of the changes. It is still working out the impact of the hike on its operations in the province and would detail its response next month when it releases its capital spending plans for 2008.

Though shy on specifics, Eresman did say the changes could make some projects unprofitable.

"The new royalty regime will increase EnCana's natural gas and oil royalties but the effect will not be felt evenly across all our projects," Eresman said. "High risk exploration and development activity, particularly for projects that require higher commodity price to be economic will be challenged under the new regime."

Eresman also said that the $2.55 billion acquisition of Leor Energy's 50 percent stake in the Amoruso field in east Texas, announced on Monday, wasn't a signal that the company wanted to boost investment outside Alberta.

"It is a normal strategic event," he said. "This transaction has nothing to do with EnCana's future plans as they relate to the Alberta government's new royalty framework." (Editing by Rob Wilson)

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