Encana veers to expand oil, liquids recoveries

By OGJ editors
-- With natural gas making up 96% of its total production volumes and liquids prices commanding a stout premium over gas, Encana Corp. has begun to position itself to take more advantage of higher-value liquids plays.

The company is directing $1 billion of its 2011 budget towards activities that will increase future liquids recovery in North America, Randy Eresman, president and chief executive officer, told investors on the first quarter conference call in mid-April.

Encana in the past year has begun building facilities to extract more liquids at several of its gas processing plants, drilling liquids-prone targets on its existing lands, expanding developments to liquids-rich areas, exploring for oil, and acquiring large acreage positions in highly prospective liquids-rich lands, Eresman said.

The Encana portfolio’s average liquids content of 10 bbl/MMcf of gas decreases the average supply cost by 30-50¢/Mcf, he said.

Encana in the past year has identified or added to its land base more than 1.7 million net acres of land with oil and liquids production potential.

It plans to drill four wells in 2011 in the Collingwood shale play in Michigan, where it holds 425,000 net acres. Two wells will be vertical pilot holes in the northern, oil-prone area of the play, and two will be horizontal wells in the liquids-rich southern part of the gas play.

Encana holds 190,000 net acres in the Duvernay shale play in the Simonette and Kaybob areas of Alberta. It completed a vertical well in January that confirmed its expectation of achieving results similar to those of other operators when it begins drilling horizontal wells, Eresman said.

The Duvernay play has important liquids potential as a promising complement to the liquids-rich Montney play, in which Encana holds 495,000 acres with liquids potential. The company also holds 380,000 net acres in the Alberta Deep basin.

In Colorado, where Encana has 240,000 net acres in the Piceance and DJ basins, the company has identified liquids potential in the Niobrara and Mancos shales. It plans to test both of these opportunities with recompletions and drilling projects in 2011.

Initial drilling results and indications in each of the plays have shown promise, and Encana sees the ability to add substantial volumes of liquids potential in the next few years, Eresman said.

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