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Encana Reports First Quarter 2013 Results

Encana Reports First Quarter 2013 Results 
CALGARY, ALBERTA -- (Marketwired) -- 04/23/13 -- In the first quarter
of 2013 Encana (TSX:ECA)(NYSE:ECA) achieved significant milestones in
a number of its oil and liquids-rich natural gas plays including
strong well results from the Duvernay and Peace River Arch plays and
confirmation of the commerciality of its San Juan play. Solid
operational performance resulted in a 48 percent increase in oil and
natural gas liquids (NGL) volumes with average production rising to
43,500 barrels per day (bbls/d) in the first quarter of 2013 compared
to 29,300 bbls/d in the first quarter of last year. Encana's average
natural gas production volumes for the first quarter were 2,877
million cubic feet per day (MMcf/d). 
"We are pleased with the progress made to date in a number of our
emerging plays and the growth in our overall liquids production,"
says Clayton Woitas, Interim President & CEO. "Proving the commercial
success of emerging plays is one of our main goals this year and we
intend to do so while preserving the financial strength and
flexibility of the company." 
Encana generated $579 million in cash flow, or $0.79 per share, in
the first quarter of 2013 and operating earnings were $179 million or
$0.24 per share. The company reported a first quarter net loss of
$431 million largely due to mark-to-market accounting of the
company's unrealized risk management position and a non-operating
foreign exchange loss. Encana finished the quarter with approximately
$2.9 billion in cash and cash equivalents and expects to finish the
year with approximately $1.5 billion to $2.0 billion of cash and cash
equivalents. 
"Our focus remains on reducing costs and increasing our
profitability," says Woitas. "Through the first quarter we identified
several areas where we can become more efficient in our business. We
expect the cost reduction efforts we've made at the beginning of this
year to have an impact on our financial results during the second
half of the year."  
Search for Next President & CEO Progressing 
The selection committee in search of Encana's next President & CEO,
made up of Board Chairman David O'Brien, Clayton Woitas and Suzanne
Nimocks, Chair of the Human Resources and Compensation Committee, has
created a short list of external and internal candidates and
interviews for the position have commenced. The committee plans to
complete its search by the end of June. The Board has endorsed a plan
for Mr. O'Brien to continue in his current role and step down as
Chairman after a new President & CEO is firmly in place. At that
time, Clayton Woitas will move into the Chairman's role. 
Striving to be the Most Efficient Developer of Natural Gas 
"During my time as Interim President & CEO, I have had the
opportunity to see firsthand the ingenuity of the people at Encana
and their commitment to making this company the most efficient
producer of natural gas in North America," adds Woitas. "I have a
stronger appreciation for the suite of world-class assets Encana
holds and I'm optimistic about the future of this company." 
"While we are adding diversity to our commodity and cash flow mix,
Encana's primary business is natural gas and we will succeed over the
long term by striving to improve capital efficiency and lower costs
across our portfolio of assets," says Woitas. 
Update on Operations 
During the quarter Encana continued to focus development on its oil
and liquids-rich natural gas plays. The company expects that total
liquids production will increase from an exit rate of about 37,000
bbls/d at the end of 2012 to between 70,000 bbls/d and 75,000 bbls/d
by the end of 2013 with the growth driven from well-established
commercial plays such as the Peace River Arch, Jonah, Piceance, DJ
Basin and Bighorn. The projected growth only includes minimal volumes
from the portfolio of emerging plays. 
"Until our emerging plays are proven to be commercial, we are taking
a conservative approach to forecasting volume growth," says Woitas.
"That being said, we have taken some positive strides in the
development of our emerging plays this quarter." 
Operational highlights in the quarter: 


 
--  Encana started production from the strongest industry well to date in
    the liquids-rich Duvernay play with a restricted 30-day initial
    production rate of 1,400 bbls/d and 4.0 MMcf/d of natural gas. The
    company is in the early stages of its Duvernay development with its
    joint venture partner, a subsidiary of PetroChina Company Limited.
    Initial test results have exceeded the company's expectations and a
    multi-year development plan is in place that has the potential to
    significantly lower drilling and completion costs. Field condensate
    yield results are within a range of 45 to 350 barrels per million cubic
    feet (bbls/MMcf) of natural gas production. 
    
--  In the Peace River Arch play, Encana completed a six-well pad at
    Gordondale producing oil at a rate of 7,000 bbls/d during initial
    testing. Also in the Peace River Arch, a three-well pad was tested in
    the Pipestone area that flowed at a rate of about 1,000 bbls/d of field
    condensate during initial testing. 
    
--  In the Clearwater area, Encana drilled 26 net oil wells in the first
    quarter. Total liquids production from the area is expected to average
    about 8,700 bbls/d in 2013. 
    
--  Encana has determined that its core acreage in the San Juan Basin has
    reached commerciality with 2013 production expected to reach over 1,700
    barrels of oil equivalent per day (boe/d) in the play. The company is in
    the process of adding to its current 166,000 net acres. The last five
    wells the company completed have initial 30-day production rates ranging
    from 150 boe/d to 700 boe/d with 80 percent oil and current well costs
    average approximately $5.0 million to $6.0 million per well. Encana is
    running two rigs in the play and may add an additional rig by year-end. 
    
--  In April, the State of Mississippi approved a severance tax reduction
    that reduces the tax rate from 6.0 percent to 1.3 percent on new
    horizontal wells commencing production on or after July 1, 2013 for the
    first 30 months of production of a well. This five-year program supports
    the pursuit of commerciality by positively impacting Encana's economics
    for the emerging Tuscaloosa Marine Shale (TMS) play. With six wells
    producing in the TMS and two additional wells expected to begin
    production in the second quarter of 2013, the company is gaining
    confidence in the potential of the play as it nears commerciality. 
    
--  With initial results of the 2013 Niobrara Horizontal program in the DJ
    Basin, Encana is expecting to grow oil production in the area from 3,800
    bbls/d to approximately 6,100 bbls/d by the end of 2013. Total liquids
    production from the play is expected to average about 8,200 bbls/d for
    the year. 

 
Encana Added to its Risk Management Program in the Quarter 
At March 31, 2013, Encana has hedged approximately 1,515 MMcf/d of
expected April to December 2013 natural gas production using NYMEX
fixed price contracts at an average price of $4.39 per thousand cubic
feet (Mcf), approximately 1,498 MMcf/d of expected 2014 production at
an average price of $4.19 per Mcf and approximately 825 MMcf/d of
expected 2015 production at an average price of $4.37 per Mcf. In
addition, Encana has hedged 15,000 bbls/d of expected April to
December 2013 oil production at a WTI equivalent price of $98.08 per
barrel and approximately 5,800 bbls/d of expected 2014 oil production
at a WTI equivalent price of $93.80 per barrel. 
Other Activities in the Quarter 


 
--  The company amended its dividend reinvestment plan (DRIP). Beginning in
    the second quarter of 2013, Encana's Board of Directors has determined
    that all common shares distributed to participating shareholders
    pursuant to the DRIP will be newly issued from Encana's treasury at a
    discount of two percent. The two percent discount will remain in effect
    for all cash dividends that may be declared by Encana's Board of
    Directors until otherwise announced by Encana. 
 
--  Encana commissioned its Cavalier liquefied natural gas (LNG) facility,
    the first LNG facility in Alberta, Canada. The Cavalier LNG facility
    will play a key role in providing an alternative fuel for heavy-duty
    transportation including rail and long-haul trucking in the province. 
 
--  Encana received the President's Award in the Canadian Association of
    Petroleum Producers' (CAPP) 2013 Responsible Canadian Energy Awards, the
    association's top honour, in recognition of the company's commitment to
    exceptional environmental, health and safety and social performance.
    Encana's Responsible Products Program, a company-wide program to manage
    chemical additives used in hydraulic fracturing, was cited as one of the
    reasons for the CAPP award. 

 
Dividend Declared 
On April 22, 2013, the Board declared a dividend of $0.20 per share
payable on June 28, 2013 to common shareholders of record as of June
14, 2013. 
First Quarter Highlights 


 
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                              Financial Summary                             
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(for the period ended March 31)                                             
($ millions, except per share amounts)             Q1 2013           Q1 2012
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Cash flow(1)                                           579             1,021
  Per share diluted                                   0.79              1.39
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Operating earnings(1)                                  179               240
  Per share diluted                                   0.24              0.33
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                       Earnings Reconciliation Summary                      
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Net earnings (loss)                                  (431)                12
After tax (addition) deduction:                                             
  Unrealized hedging gain (loss)                     (266)                45
  Non-operating foreign exchange gain                                       
  (loss)                                             (101)                86
  Income tax adjustments                             (243)             (359)
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Operating earnings(1)                                  179               240
  Per share diluted                                   0.24              0.33
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(1) Cash flow and operating earnings are non-GAAP measures as defined in    
Note 1.                                                                     
                                                                            
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                             Production Summary                             
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(for the period ended March 31)                                             
(after royalties)                                 Q1 2013  Q1 2012  % change
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Natural gas (MMcf/d)                                2,877    3,272       -12
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Liquids (Mbbls/d)                                    43.5     29.3        48
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                First Quarter Natural Gas and Liquids Prices                
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                                                     Q1 2013         Q1 2012
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Natural gas                                                                 
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NYMEX ($/MMBtu)                                         3.34            2.74
Encana realized gas price(1)($/Mcf)                     3.86            4.58
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Oil and NGLs($/bbl)                                                         
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WTI                                                    94.36          103.03
Encana realized liquids price(1)                       69.45           83.77
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(1) Realized prices include the impact of financial hedging.                

 
A conference call and webcast to discuss the first quarter results
will be held for the investment community today at 11 a.m. MT (1 p.m.
ET). To participate, please dial (888) 231-8191 (toll-free in North
America) or (647) 427-7450 approximately 10 minutes prior to the
conference call. An archived recording of the call will be available
from approximately 4 p.m. ET on April 23 until midnight April 30,
2013 by dialing (855) 859-2056 or (416) 849-0833 and entering
passcode 27369990. Media are invited to attend the conference call in
a listen-only mode. 
Encana's Annual Meeting of Shareholders is being held today (Tuesday,
April 23) at Hotel Arts, Spectrum Ballroom, 119 - 12 Avenue S.W.,
Calgary, Alberta, beginning at 2 p.m. MT (4 p.m. ET). Live audio
webcasts of the conference call and the Annual Meeting of
Shareholders, as well as presentation slides from the Annual Meeting,
will also be available on Encana's website, www.encana.com, under
Investors/Presentations & Events. The webcasts will be archived for
approximately 90 days. 
Encana Corporation  
Encana is a leading North American energy producer that is focused on
growing its strong portfolio of diverse resource plays producing
natural gas, oil and natural gas liquids. By partnering with
employees, community organizations and other businesses, Encana
contributes to the strength and sustainability of the communities
where it operates. Encana common shares trade on the Toronto and New
York stock exchanges under the symbol ECA. 
Important Information  
Encana reports in U.S. dollars unless otherwise noted. Production,
sales and reserves estimates are reported on an after-royalties
basis, unless otherwise noted. Per share amounts for cash flow and
earnings are on a diluted basis. The term liquids is used to
represent oil, NGLs and condensate. The term liquids rich is used to
represent natural gas streams with associated liquids volumes. Unless
otherwise specified or the context otherwise requires, reference to
Encana or to the company includes reference to subsidiaries of and
partnership interests held by Encana Corporation and its
subsidiaries.  
NOTE 1: Non-GAAP measures  
This news release contains references to non-GAAP measures as
follows:  


 
--  Cash flow is a non-GAAP measure defined as cash from operating
    activities excluding net change in other assets and liabilities, net
    change in non-cash working capital and cash tax on sale of assets. 
--  Operating earnings is a non-GAAP measure defined as net earnings
    excluding non-recurring or non-cash items that management believes
    reduces the comparability of the company's financial performance between
    periods. These after-tax items may include, but are not limited to,
    unrealized hedging gains/losses, impairments, foreign exchange
    gains/losses, income taxes related to divestitures and adjustments to
    normalize the effect of income taxes calculated using the estimated
    annual effective tax rate. 

 
These measures have been described and presented in this news release
in order to provide shareholders and potential investors with
additional information regarding Encana's liquidity and its ability
to generate funds to finance its operations. 
ADVISORY REGARDING OIL AND GAS INFORMATION - Encana uses the term
resource play. Resource play is a term used by Encana to describe an
accumulation of hydrocarbons known to exist over a large areal
expanse and/or thick vertical section, which when compared to a
conventional play, typically has a lower geological and/or commercial
development risk and lower average decline rate. 
30-day initial production and short-term rates are not necessarily
indicative of long-term performance or of ultimate recovery.  
In this news release, certain oil and NGLs volumes have been
converted to cubic feet equivalent (cfe) on the basis of one barrel
(bbl) to six thousand cubic feet (Mcf). Cfe may be misleading,
particularly if used in isolation. A conversion ratio of one bbl to
six Mcf is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent value equivalency
at the well head. Given that the value ratio based on the current
price of oil as compared to natural gas is significantly different
from the energy equivalency of 6:1, utilizing a conversion on a 6:1
basis may be misleading as an indication of value.  
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS - In the interests of
providing Encana shareholders and potential investors with
information regarding Encana, including management's assessment of
Encana's and its subsidiaries' future plans and operations, certain
statements contained in this news release are forward-looking
statements or information within the meaning of applicable securities
legislation, collectively referred to herein as "forward-looking
statements." Forward-looking statements in this news release include,
but are not limited to: ability to reduce costs and increase
profitability, including the amounts of possible general and
administrative, indirect costs, and capital and operating cost
reductions and their expected impact on financial results in the
second half of the year; expected date to complete search for
President & CEO; expected amount of cash and cash equivalents by year
end; achieving 2013 Corporate Guidance, including having financial
flexibility; successful exploration and delineation of the company's
emerging NGL and oil plays; expected total liquids production exit
rate at the end of 2013; and number of wells to be drilled and well
locations, expected liquids production, estimated average total well
cost, expected costs reductions, and future developments in the
various emerging NGL and oil plays, including proving commerciality
of these plays. 
Readers are cautioned not to place undue reliance on forward-looking
statements, as there can be no assurance that the plans, intentions
or expectations upon which they are based will occur. By their
nature, forward-looking statements involve numerous assumptions,
known and unknown risks and uncertainties, both general and specific,
that contribute to the possibility that the predictions, forecasts,
projections and other forward-looking statements will not occur,
which may cause the company's actual performance and financial
results in future periods to differ materially from any estimates or
projections of future performance or results expressed or implied by
such forward-looking statements. These assumptions, risks and
uncertainties include, among other things: volatility of, and
assumptions regarding natural gas and liquids prices, including
substantial or extended decline of the same and their adverse effect
on the company's operations and financial condition and the value and
amount of its reserves; assumptions based upon the company's current
guidance; fluctuations in currency and interest rates; risk that the
company may not conclude divestitures of certain assets or other
transactions or receive amounts contemplated under the transaction
agreements (such transactions may include third-party capital
investments, farm-outs or partnerships, which Encana may refer to
from time to time as "partnerships" or "joint ventures" and the funds
received in respect thereof which Encana may refer to from time to
time as "proceeds", "deferred purchase price" and/or "carry capital",
regardless of the legal form) as a result of various conditions not
being met; product supply and demand; 
market competition; risks inherent in the company's and its
subsidiaries' marketing operations, including credit risks;
imprecision of reserves estimates and estimates of recoverable
quantities of natural gas and liquids from resource plays and other
sources not currently classified as proved, probable or possible
reserves or economic contingent resources, including future net
revenue estimates; marketing margins; potential disruption or
unexpected technical difficulties in developing new facilities;
unexpected cost increases or technical difficulties in constructing
or modifying processing facilities; risks associated with technology;
the company's ability to acquire or find additional reserves; hedging
activities resulting in realized and unrealized losses; business
interruption and casualty losses; risk of the company not operating
all of its properties and assets; counterparty risk; risk of
downgrade in credit rating and its adverse effects; liability for
indemnification obligations to third parties; variability of
dividends to be paid; its ability to generate sufficient cash flow
from operations to meet its current and future obligations; its
ability to access external sources of debt and equity capital; the
timing and the costs of well and pipeline construction; the company's
ability to secure adequate product transportation; changes in
royalty, tax, environmental, greenhouse gas, carbon, accounting and
other laws or regulations or the interpretations of such laws or
regulations; political and economic conditions in the countries in
which the company operates; terrorist threats; risks associated with
existing and potential future lawsuits and regulatory actions made
against the company; risk arising from price basis differential; risk
arising from inability to enter into attractive hedges to protect the
company's capital program; and other risks and uncertainties
described from time to time in the reports and filings made with
securities regulatory authorities by Encana. Although Encana believes
that the expectations represented by such forward-looking statements
are reasonable, there can be no assurance that such expectations will
prove to be correct. Readers are cautioned that the foregoing list of
important factors is not exhaustive. In addition, assumptions
relating to such forward-looking statements generally include
Encana's current expectations and projections made in light of, and
generally consistent with, its historical experience and its
perception of historical trends, including the conversion of
resources into reserves and production as well as expectations
regarding rates of advancement and innovation, generally consistent
with and informed by its past experience, all of which are subject to
the risk factors identified elsewhere in this news release.  
Assumptions with respect to forward-looking information regarding
expanding Encana's oil and NGLs production and extraction volumes are
based on existing expansion of natural gas processing facilities in
areas where Encana operates and the continued expansion and
development of oil and NGL production from existing properties within
its asset portfolio.  
Forward-looking information respecting anticipated 2013 cash flow for
Encana is based upon, among other things, achieving average
production for 2013 of between 2.8 Bcf/d and 3.0 Bcf/d of natural gas
and 50,000 bbls/d to 60,000 bbls/d of liquids, commodity prices for
natural gas and liquids based on NYMEX $3.75 per Mcf and WTI of $95
per bbl, an estimated U.S./Canadian dollar foreign exchange rate of
$1.00 and a weighted average number of outstanding shares for Encana
of approximately 736 million.  
Furthermore, the forward-looking statements contained in this news
release are made as of the date hereof and, except as required by
law, Encana undertakes no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. The forward-looking statements contained
in this news release are expressly qualified by this cautionary
statement. 
SOURCE: Encana Corporation
Contacts:
Investor contact:
Lorna Klose
Manager, Investor Relations
(403) 645-6977 
Media contact:
Jay Averill
Manager, Media Relations
(403) 645-4747 
Patti Posadowski
Advisor, Investor Relations
(403) 645-2252
www.encana.com