Narrowed strategy less risky - EnCana CEO
NEW YORK (Reuters) - EnCana Corp.'s (ECA.TO) strategy of concentrating solely on unconventional oil and gas in North America is far less risky in the current heated energy market than being diversified worldwide, its chief executive said on Wednesday.
EnCana has been selling off billion of dollars worth of conventional oil assets to focus on vast land holdings in western Canada and the U.S. Rocky Mountains.
Some analysts have wondered if EnCana is staking its future on too narrow a set of assets for a company so large, but CEO Gwyn Morgan told the Reuters Energy Summit he is confident the opposite is true.
"The scariest place to be right now in my opinion is a CEO of a company that has to try and find new resources somewhere in the world," Morgan said.
"In the position we're in, there's no reason for me to lose any sleep about our resource position, our ability to develop the company for literally decades to come."
EnCana has shed assets in the North Sea, Gulf of Mexico and Canada, and is now marketing properties in Ecuador as well as gas liquids and storage facilities throughout North America.
The value of asset sales in 2005 could top $5 billion, which is about equal to its capital spending budget. That leaves it with a large cash surplus it is funneling into stock buybacks and dividends, Morgan said.
Several top executives of major oil companies have said in recent days that one of their toughest problems is securing access to new resources to maintain overall corporate output, largely because of political turmoil in oil regions.
That has contributed to oil prices flirting with $60 a barrel in recent days.
EnCana has amassed 18 million acres of land in British Columbia, Alberta, Wyoming and Colorado, where it drills for natural gas, much of it encased in "tight" sands that require busy drilling and advanced well-completion technology.
Reserves are large, but production rates per well are smaller, meaning that output grows slowly over time.
EnCana is also developing oil sands in northern Alberta, where it produces the tar-like crude by pumping steam into the earth instead of mining the resource.
Its land spread, and sky-high prices for assets in the acquisition market, convinced EnCana to focus on boosting production by its target of 10 percent per share annually by drilling.
EnCana is now the continent's largest gas producer, pumping more than 3.2 billion cubic feet a day. Morgan does not believe that fundamentals point to lower gas prices, especially with overall conventional output believed to have peaked two years ago.
"By far the most comfortable, predictable and in fact profitable place to be is North American unconventional. We reached that conclusion, obviously, not without thinking a lot about that question," he said.
EnCana stock rose C$1.60 to C$51.02, which is close to its year high of C$51.19 on the Toronto Stock Exchange. In New York, EnCana was up $1.19, or 3 percent, to $41.36.
($1=$1.23 Canadian)
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