EnCana budgets $6.9 billion for 2008 plan

EnCana Corp. reported it has budgeted $6.9 billion for its 2008 capital spending plan, which is up about 13% from 2007.

By OGJ editors
HOUSTON, Dec. 12 -- EnCana Corp. reported it has budgeted $6.9 billion for its 2008 capital spending plan, which is up about 13% from 2007.

EnCana said its 2008 capital investment plan targets US natural gas growth, as well as longer lead time projects such as Canadian oilsands, expanded downstream refining capacity, and the advancement of the Deep Panuke natural gas project off Nova Scotia.

EnCana expects to grow 2008 gas production by about 7%, while oil and natural gas liquids production is expected to decrease about 8%, mostly due to natural decline in mature properties. EnCana's total production is expected to increase about 5% to about 4.6 bcfd in 2008.

"With the geological and economic success in our unconventional gas fields in Wyoming and Texas, we are substantially increasing investment in our US natural gas production, which is expected to grow by about 25% this year. Our gas growth is largely driven by our leading-return projects—Jonah in Wyoming and the Amoruso field in East Texas, where a planned investment increase of about 65%, to more than $1 billion, is expected to boost production more than 45%," said Randy Eresman, EnCana's
president and chief executive officer.

EnCana's integrated oilsands production is expected to grow about 25% in 2008 to about 34,000 b/d. The company plans to double its investment in integrated oilsands to about $1.2 billion in 2008, split about evenly between growing upstream production and expanding downstream heavy oil processing capacity.

In addition, the planned Alberta royalty increases starting in 2009 have significantly diminished returns for deep gas well drilling and new and emerging resource plays. Compared to EnCana's preliminary capital investment plan for 2008, increases in Alberta royalties have resulted in a reduction of about $500 million of EnCana's Alberta investment next year.

EnCana's Alberta drilling for shallow gas, deep gas, coalbed methane, and its delineation drilling of new oilsands plays will be lower than in previous years. Investment in British Columbia in 2008 is expected to be about the same as in 2007. In Canada, excluding integrated oilsands, about $3 billion is planned for upstream investment, about 10% lower than in 2007.

Downstream investment is focused on a long-term refinery expansion (subject to regulatory approval) to add 65,000 b/d (gross) of coking capacity and 55,000 b/d (gross) of refining capacity at the ConocoPhillips-EnCana Wood River refinery in Illinois. Off Canada's East Coast, EnCana plans to invest about $40 million in 2008 on the Deep Panuke gas development, which is expected to produce first gas in late 2010.

EnCana said it also expects to generate an estimated $500 million from divestitures in 2008.

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