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Encana Cuts 2013 Spending as Company Seeks Oil Output

Feb. 14 (Bloomberg) -- Encana Corp. cut its planned spending and lowered its forecast for oil and petroleum liquids output this year as Canada’s biggest natural gas producer seeks to sell higher-priced fuels.

Encana plans $3.75 billion to $3.95 billion in capital expenditures with the majority focused on almost doubling oil and liquids production to as much as 60,000 barrels a day this year, the Calgary-based company said in a statement today. Both figures are lower than the company gave at its investor day in June, when it forecast $4 billion to $5 billion in spending and 70,000 barrels a day of liquids output.

“It’s disappointing that they can’t grow their liquids production which is where they’re focusing their capital in this low gas price environment,” said Daniel Cheng, a money manager at Matco Financial Inc. in Calgary who helps oversee C$375 million ($374 million), including Encana shares.

A glut in North American supply because of shale-gas drilling has reduced profits for producers of the heating- and power-plant fuel, which fell to a 10-year low in April. Oil and petroleum liquids typically fetch higher prices than gas.

Encana fell 6.6 percent to C$18.20 at the close in Toronto, the lowest since April 24.

The company sees gas production remaining near current levels this year, at about 2.8 billion to 3 billion cubic feet a day.

Balancing Portfolio

The company “is expected to still remain roughly 90 percent natural gas this year, confirming our concern that it will be a struggle to balance the portfolio organically,” Phil Skolnick, a New York-based analyst for Canaccord Genuity, wrote in a note today.

Cash flow will be $2.3 billion to $2.5 billion and Encana plans to sell $500 million to $1 billion in assets this year.

Encana reduced its reserves as of the end of last year by 7.7 percent to 13.1 trillion cubic feet, primarily because of lower gas prices.

The company reported a narrower net loss in the fourth quarter, down to $80 million, or 11 cents a share, from $476 million, or 65 cents, a year earlier. Excluding losses from hedging, foreign exchange and impairments, profit was 40 cents a share, 1 cent above the average of 18 analysts’ estimates compiled by Bloomberg.

Sales fell 35 percent in the fourth quarter to $1.61 billion.

Encana, which had its last profitable fourth quarter in 2009, has three buy, 17 hold and five sell recommendations from analysts.

CEO Search

Chief Executive Officer Randy Eresman stepped down last month after seven years in charge of the company. The search for a new chief executive is under way and may take three to six months, interim CEO Clayton Woitas said on a conference call today.

Encana has brought in several joint venture partners, including PetroChina Co., to help fund development costs. PetroChina, Asia’s biggest oil producer, in December agreed to pay C$1.18 billion ($1.18 billion) for a 49.9 percent stake in Encana’s Duvernay acreage, which holds petroleum liquids.

The 2013 spending plan includes $3 billion to $3.2 billion from Encana, with its joint-venture partners adding another $750 million.

“We had tremendous success last year with joint venture and other third-party agreements and we expect that joint ventures and strategic divestitures will remain a key aspect of our strategy,” Woitas said in the statement.

To contact the reporter on this story: Rebecca Penty in Calgary at

To contact the editor responsible for this story: Susan Warren at

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