(Releads, adds quotes, detail on asset sales and acquisitions)
By Nia Williams
July 24 Canada's Encana Corp, which is
restructuring operations to end its reliance on low-value
natural gas, said on Thursday oil and natural gas liquids
production climbed 43 percent year-on-year in the second quarter
Canada's largest natural gas producer, also reported a
steeper-than-expected 31 percent fall in quarterly operating
profit, hurt by lower natural gas production and prices.
Analysts said overall the outlook for the company was
positive given rapid progress in switching to more liquids
production and cutting drilling costs.
Encana shares climbed 1.8 percent on the Toronto Stock
Exchange to C$24.14.
"If you look at the headline numbers there was a slight miss
relative to market consensus but look at it more from an
operating perspective and the big picture is this was a good
quarter," said Lanny Pendill, senior energy analyst at Edward
After years of weak profits caused by its reliance on
natural gas, Encana Chief Executive Doug Suttles has moved to
rapidly boost oil production.
The company acquired properties in the booming Eagle Ford
shale oil play in south Texas earlier this year, where it will
have four drilling rigs by the end of 2014, and is also boosting
production in areas such as the liquids-rich Montney in Canada.
Encana is paying for its oil acquisitions by selling gas
fields as it concentrates its operations on six oil and
natural-gas liquids-rich regions.
In June, the company said it would sell its Bighorn gas
properties in Alberta and in March, it sold off properties in
Wyoming's Jonah natural gas field.
In May, it completed the spinoff of PrairieSky Royalty Ltd
, which holds the company's wholly owned lands in
Western Canada, through an initial public offering.
Suttles declined to comment on speculation that Encana may
sell its Deep Panuke natural gas project off Nova Scotia's
Atlantic coast by the end of 2014.
Despite Encana's strategy of shifting towards more oil
production, the company is not exiting the gas business
completely, he added.
"We have some real high quality gas assets in our portfolio.
But today under today's market conditions, we don't think is the
time to invest into those," Suttles said, pointing to the
Haynesville gas play in the southern United States.
Operating profit, which excludes one-time items, fell to
$171 million, or 23 cents per share, in the second quarter, from
$247 million, or 34 cents per share, a year earlier.
Analysts on average had expected the company to earn 24
cents per share, according to Thomson Reuters I/B/E/S.
Encana said net income attributable to shareholders fell to
$271 million from $730 million a year earlier.
Output of oil and natural gas liquids rose 43 percent to
average 68,200 barrels per day (bpd) in the quarter. Natural gas
production fell 8 percent to 2.54 billion cubic feet per day.
The company raised its 2014 total liquids production
forecast to 86,000 to 91,000 bpd from 68,000 to 73,000 bpd.
Encana's cash flow, a key indicator of its ability to pay
for new projects and drilling, fell to $656 million, or 89 cents
per share, from $665 million, or 90 cents per share.
(Additional reporting Ashutosh Pandey in Bangalore; Editing by
Savio D'Souza and Marguerita Choy)