Encana Corp. posted a first-quarter net loss of $1.7 billion primarily due to a noncash, aftertax ceiling test impairment and a non-operating foreign exchange loss.
First-quarter cash flow totaled $495 million, compared with $1.1 billion in first-quarter 2014, a decrease primarily attributable to sharp declines in oil and natural gas prices. Operating earnings were $9 million, compared with $515 million at the same time last year.
Encana expects to fully fund its 2015 capital program and dividend from anticipated cash flow along with proceeds from previously announced divestitures of certain Clearwater assets (OGJ Online, Oct. 8, 2014); and Montney midstream infrastructure (OGJ Online, Apr. 1, 2015). Both transactions closed during the first quarter generating net proceeds of about $827 million after closing adjustments.
Total company production averaged 430,100 boe/d during the quarter, down from about 536,100 boe/d in the same quarter last year, reflecting the sale of lower margin assets and the company's shift to a higher margin, liquids-weighted production mix.
The company’s liquids volumes increased 78% year-over-year, with 74% of liquids production generated from the Montney, Duvernay, Eagle Ford, and Permian. Encana says its first-quarter investment in these assets is expected to deliver an increase of liquids production in the second half.
Boosting shale efficiency
“We are leveraging the power of our portfolio by taking proven drilling and completion techniques from areas such as the Haynesville, Piceance, and Montney and applying them in the Permian, Eagle Ford, and Duvernay,” said Doug Suttles, Encana president and chief executive officer.
Encana says it continues to evolve its resource play hub (RPH) model, applying simultaneous drilling and completions operations on multiwell pads to drive greater productivity and cost efficiencies. Through the optimization of well completions, and the application of high intensity hydraulic fracturing, the company says it’s increasing initial production rates and delivering stronger well performance.
In the Permian, the company continues to test tighter interwell spacing, stacked laterals and cluster spacing in the play, with the company actively working in the Wolfcamp A, B, and C and Lower Spraberry zones. The company ran six horizontal rigs and seven vertical rigs, drilled 46 net wells, and delivered average liquids production of 26,700 b/d. Encana is on track to grow net annualized production from the basin to 45,000 boe/d.
Encana sees potential for stacked pay in future development in the Eagle Ford with current production performance driven by larger frac designs, higher sand concentration, and tighter cluster spacing, which has been reduced to fewer than 50 ft. The company is seeing promising early results from new wells in the Graben area.
Base optimization efforts reduced Eagle Ford decline rates by 50% over the first quarter. Twenty-seven net wells were drilled in the play during the quarter and liquids production averaged 36,000 b/d. Encana remains on track to grow net annualized production from the shale play to 50,000 boe/d.