Alberta storms stunt EnCana's 2005 drilling

Feb. 16, 2006
Three heavy rainstorms and severe ensuing floods in June 2005 allowed EnCana Corp., Calgary, to complete only 80% of the gas wells it planned to drill last year and add 80% of its forecast gas production additions.

By OGJ editors
HOUSTON, Feb. 16 -- Three heavy rainstorms and severe ensuing floods in June 2005 allowed EnCana Corp., Calgary, to complete only 80% of the gas wells it planned to drill last year and add 80% of its forecast gas production additions.

Alberta's wettest June ever caused 2-3 months of down time in field operations, the company said.

Nevertheless, the greater company replaced 271% of its 2005 production and hiked proved reserves 18% to 18.5 tcfe. It meanwhile has trimmed its 2006 forecast capital spending by $800 million or 12%. About $500 million of that is to reduce drilling in areas where costs have increased the most.

Record gas and oil prices and overall activity levels in 2005 led to cost increases of 15-30% for goods and services, but the company contained its inflation to the low end of the industry range in 2005 with volume purchasing power and longer term planning initiatives.

EnCana overspent its $6.2 billion 2005 capital budget by $600 million. Items were $200 million for cost inflation, weather delays, and field inefficiencies, $200 million to accelerate coalbed methane drilling and expand in situ oil sands projects, $100 million for land acquisition, and $100 million in foreign exchange.

EnCana has 145 rigs drilling in North America and has negotiated long-term contracts intended to add 60 new fit-for-purpose rigs. The company contracted fixed prices for half its planned 2006 spending.