Encana improves Montney shale IP rates; may sell more gas assets

Encana Corp. has increased initial production rates by about 75% in its Montney shale drilling program.

The company is using a revised well design in the Cutback Ridge area in northeast British Columbia that involves longer laterals and more intense stimulation.

Michael McAllister, Encana chief operating officer, said the company significantly increased fracture intensity, cut inner frac spacing to 25 m from 50 m, and kept the sand concentration the same.

“It’s somewhat of a game changer for us in the Montney,” McAllister told analysts during a May 13 call to discuss first-quarter results.

Encana is partnered with a subsidiary of Japan’s Mitsubishi Corp. in certain parts of the Cutback Ridge area.

Encana holds nearly 600,000 net acres in the Montney shale, which spans northeast British Columbia and northwest Alberta. This year plans call for accelerating development of the oil and liquids-rich portions of the formation. Eight rigs are expected to drill 80-85 net wells.

Separately, Encana reported net income of $116 million in this year’s first quarter compared with a net loss of $431 million in the same year-ago period.

Company-wide liquids production increased 56% to 67,900 b/d. Gas production slipped 2% to 2.8 bcfd.

Production numbers reflect a strategic shift in emphasis away from dry gas plays and toward developing assets rich in more lucrative oil and NGL. Encana has this year divested gas-rich assets in favor of increasing its position liquids-rich areas.

Encana sold its gas-rich Jonah field operations in Wyoming for $1.8 billion in March and divested East Texas properties for $530 million in April (OGJ Online, Mar. 31, 2014; Apr. 29, 2014). Earlier this month, it established a foothold in the Eagle Ford shale in South Texas, agreeing to pay $1.3 billion to Freeport-McMoRan Oil & Gas for 45,500 net acres in the play’s oil window (OGJ Online, May 8, 2014).

Doug Suttles, Encana president and chief executive officer, hinted that more asset sales could be in store for the months ahead. “I think we will continue to test the market with some of our gas assets,” he told analysts.

Contact Rachael Seeley at rachaels@ogjonline.com.

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