Company generates free cash flow and growing margins through
cost management and strong production
Second quarter 2019 highlights:
- Financial performance driven by strong liquids production and
cost focus.
-
- Net earnings of $336 million, or
$0.24/share, with non-GAAP operating
earnings of $290 million, or
$0.21/share.
- Cash from operating activities of $906
million with non-GAAP cash flow of $877 million, or $0.64/share.
- Non-GAAP free cash flow of $127
million.
- Increased forecast for annualized G&A and operating cost
synergies to $175 million from
original $125 million target.
- Record oil and condensate production of 235 thousand barrels
per day (Mbbls/d), and total production of 592 thousand barrels of
oil equivalent per day (MBOE/d).
- Anadarko Basin production increased 18 MBOE/d proforma Q1 to Q2
to a record 163 MBOE/d.
- STACK well costs further reduced to $6.5
million, exceeding $1 million
savings target by 40 percent.
- Permian Basin achieves record average quarterly production of
104 MBOE/d.
- Montney liquids production
increased 55 percent year-to-date, Q2 liquids at 54 Mbbls/d.
- Total costs decreased to $12.78
per barrel of oil equivalent (BOE), increasing non-GAAP
consolidated cash flow margin of $16.27/BOE.
- Original guidance ranges for production and capital investments
reiterated, post recent disposition of assets.
- Executing previously announced plan for $1.25 billion share buyback in 2019.
CALGARY, July 31, 2019 /CNW/ - Encana Corporation (NYSE,
TSX: ECA) today announced its second quarter 2019 financial and
operating results and plans to hold a conference call with analysts
and investors today at 7 a.m. MT (9
a.m. ET). Please see dial-in details within this release.
Additional details can be found on the Company's website at
www.encana.com.
"Encana is performing exceptionally well," said Encana President
& CEO Doug Suttles. "The
combination of our high-quality portfolio and relentless focus on
efficiency is delivering strong returns, growth and free cash
flow."
Second Quarter Summary
For the second quarter of 2019, Encana posted net earnings of
$336 million, or $0.24/share. Non-GAAP operating earnings for
the second quarter were $290 million,
or $0.21/share.
Cash from operating activities in the second quarter was
$906 million. Non-GAAP cash flow
increased 50 percent over the comparable period in 2018 to
$877 million, or $0.64/share. Non-GAAP cash flow in the second
quarter was impacted by $19 million
of restructuring and acquisition costs.
Through the end of the second quarter, the Company had
repurchased 149.4 million Encana common shares at an average price
of $6.94 per share. Investment in the
program to date totals $1,037
million.
At the end of the second quarter, Encana had more than
$3.4 billion of total liquidity
including approximately $167 million
in cash and cash equivalents.
Encana's second quarter capital investment totaled $750 million, in line with beginning of the year
expectations for a front-end loaded 2019 investment profile.
Suttles added, "Our business is growing and generating free cash
flow and we are firmly on track to deliver on our capital
investment outlook for this year. Our free cash flow is significant
and will be used to fund the share buyback and strengthen our
balance sheet."
Second Quarter Production and Operating Highlights
Total production in the quarter was 591,800 barrels of oil
equivalent per day (BOE/d), up 11 percent year-over-year on a
proforma basis. Second quarter liquids production increased 16
percent year-over-year proforma, to about 324,000 barrels per day
(bbls/d). Oil and condensate production during the period was
234,600 bbls/d.
Capital Investment and Production
|
Reportable
(1)
|
Proforma
(2)
|
(for the period ended
June 30)
|
Q2
2019
|
Q2 2018
|
Q2
2019
|
Q2 2018
|
Upstream Capital
Expenditures
($
millions)
|
749
|
593
|
749
|
964
|
Oil
(Mbbls/d)
|
179.3
|
84.6
|
179.3
|
166.8
|
NGLs – Plant
Condensate (Mbbls/d)
|
55.3
|
33.7
|
55.3
|
39.3
|
NGLs – Other
(Mbbls/d)
|
89.4
|
37.0
|
89.4
|
74.2
|
Oil and NGLs Total
(Mbbls/d)
|
324.0
|
155.3
|
324.0
|
280.3
|
Natural gas
(MMcf/d)
|
1,607
|
1,095
|
1,607
|
1,518
|
Total production
(MBOE/d)
|
591.8
|
337.9
|
591.8
|
533.2
|
(1)
|
Reportable includes
Encana and Newfield Upstream capital and combined production
volumes for Q2 2019. Q2 2018 includes Encana's capital and
production as previously reported.
|
(2)
|
Proforma includes
Encana and Newfield Upstream capital and combined production
volumes for both Q2 2019 and Q2 2018.
|
Permian
Second quarter production in the Permian Basin
averaged a record 104 MBOE/d (84 percent liquids). Encana continues
to demonstrate efficiency gains with its four-rig program focused
on cube development. A recent 14-well pad in Martin County, Texas, commenced production and
is averaging 14,900 bbls/d after 90 days.
Anadarko
Second quarter Anadarko Basin production
achieved a record 163 MBOE/d. Recent significant growth is largely
attributable to the 31 percent quarter-over-quarter increase in
STACK oil production. Oil and condensate now accounts for about 37
percent of Anadarko Basin production volumes and averaged 60
Mbbls/d in the second quarter.
Importantly, Encana continued to enhance returns in STACK
through additional reductions in completed well costs. Since
closing the acquisition of Newfield in mid-February, well costs
have been reduced by $1.4 million to
$6.5 million (pre-Encana 2018 average
was $7.9 million). Eighty-nine gross
STACK wells in the Meramec completed year to date are tracking type
curve including 18 gross cube-style wells that are showing strong
oil productivity.
Montney
Second quarter Montney production averaged 203 MBOE/d (27
percent liquids). Liquids production during the quarter averaged 54
Mbbls/d. Third-party outages and planned maintenance negatively
impacted quarterly average production by about 6.8 MBOE/d. Cycle
times were reduced by more than 10 percent quarter over quarter,
averaging less than 70 days. Wells on production in the year are
outperforming the oil and condensate type curve by approximately 25
percent.
Outlook
At current commodity prices, Encana expects to
generate significant free cash flow in the second half of 2019.
Capital investment in the second half of 2019 is expected to be
$500–$600 million per quarter with overall production of 565–585
MBOE/d, excluding volumes from Arkoma and China.
For more detailed information on the Company's assets and second
quarter results, please refer to the Corporate Presentation at
https://www.encana.com/investors/.
Risk Management Program
As of June 30, 2019, Encana has hedged approximately
154 Mbbls/d of expected oil and condensate production at an average
price of $59.48 per barrel for the
balance of 2019. The Company also has about 936 million cubic feet
per day (MMcf/d) of its expected remaining 2019 natural gas
production hedged at an average price of $2.73 per thousand cubic feet (Mcf). Encana has
also hedged approximately 80 Mbbls/d of expected oil and condensate
production at an average price of $57.05 per barrel for 2020. The Company also has
about 490 MMcf/d of its expected 2020 natural gas production hedged
at an average price of $2.71 per
Mcf.
Dividend Declared
On July 30,
2019, the Board declared a dividend of $0.01875 per common share payable on September 30, 2019, to common shareholders of
record as of September 13, 2019.
Conference Call Information
A conference call and
webcast to discuss the 2019 second quarter financial and operating
results will be held today at 7 a.m.
MT (9 a.m. ET). To
participate, please dial 888-231-8191 (toll-free in North America) or 647-427-7450 (international)
approximately 10 minutes prior to the conference call. The live
audio webcast of the conference call, including slides, will also
be available on Encana's website, www.encana.com, under
Investors/Presentations & Events. The webcast will be archived
for approximately 90 days.
Second Quarter Summary
(for the period ended
June 30)
($ millions, except
as indicated)
|
Q2
2019
|
Q2 2018
|
Cash from (used
in) operating activities
Deduct (add
back):
Net
change in other assets and liabilities
Net
change in non-cash working capital
|
906
(15)
44
|
475
(5)
(106)
|
Non-GAAP cash
flow1
|
877
|
586
|
Non-GAAP cash flow
margin1 ($/BOE)
|
16.27
|
19.09
|
|
|
|
Non-GAAP cash
flow1
|
877
|
586
|
Less: capital
expenditures
|
750
|
595
|
Non-GAAP free cash
flow1
|
127
|
(9)
|
|
|
|
Net earnings
(loss)
Before-tax (addition)
deduction:
Unrealized gain (loss) on risk management
Restructuring charges
Non-operating foreign exchange gain (loss)
Gain
(loss) on divestitures
|
336
83
(17)
46
-
|
(151)
(326)
-
(32)
1
|
Income tax
|
112
(66)
|
(357)
8
|
After-tax (addition)
deduction
|
46
|
(349)
|
Non-GAAP operating
earnings1
|
290
|
198
|
(1)
|
Non-GAAP cash flow,
non-GAAP cash flow margin, non-GAAP free cash flow and non-GAAP
operating earnings are defined in Note 1.
|
Realized Pricing Summary
|
Q2
2019
|
Q2 2018
|
Liquids ($/bbl)
|
|
|
WTI
|
59.82
|
67.88
|
Encana realized
liquids prices1
|
|
|
Oil
|
60.14
|
58.00
|
NGLs – Plant
Condensate
|
53.57
|
54.48
|
NGLs –
Other
|
14.75
|
23.77
|
Natural
gas
|
|
|
NYMEX
($/MMBtu)
|
2.64
|
2.80
|
Encana realized
natural gas price1 ($/Mcf)
|
2.22
|
3.03
|
(1)
|
Prices include the
impact of realized gain (loss) on risk management.
|
Total Costs Summary
(for the period ended
June 30)
($ per
BOE)
|
Q2
2019
|
Q2 2018
|
Production, Mineral
and Other Taxes
|
1.36
|
1.13
|
Upstream
Transportation and Processing
|
6.54
|
7.73
|
Upstream
Operating1
|
3.40
|
3.40
|
Administrative1
|
1.48
|
1.36
|
Total
Costs(2) ($/BOE)
|
12.78
|
13.62
|
(1)
|
Excluding long-term
incentive costs and restructuring costs.
|
(2)
|
Total costs are a
non-GAAP measure as defined in note 1.
|
NOTE 1: Non-GAAP measures
Certain measures in this news release do not have any
standardized meaning as prescribed by U.S. GAAP and, therefore, are
considered non-GAAP measures. These measures may not be comparable
to similar measures presented by other companies and should not be
viewed as a substitute for measures reported under U.S. GAAP. These
measures are commonly used in the oil and gas industry and/or by
Encana to provide shareholders and potential investors with
additional information regarding the Company's liquidity and its
ability to generate funds to finance its operations. For additional
information regarding non-GAAP measures, see the Company's website.
This news release contains references to non-GAAP measures as
follows:
- Non-GAAP Cash Flow is a non-GAAP measure defined as cash
from (used in) operating activities excluding net change in other
assets and liabilities, net change in non-cash working capital and
current tax on sale of assets. Non-GAAP Cash Flow Margin is
a non-GAAP measure defined as Non-GAAP Cash Flow per BOE of
production. Non-GAAP Free Cash Flow is a non-GAAP measure
defined as Non-GAAP Cash Flow in excess of capital investment,
excluding net acquisitions and divestitures.
- Non-GAAP Operating Earnings (Loss) is a non-GAAP measure
defined as net earnings (loss) excluding non-recurring or non-cash
items that management believes reduces the comparability of the
company's financial performance between periods. These items may
include, but are not limited to, unrealized gains/losses on risk
management, impairments, restructuring charges, non-operating
foreign exchange gains/losses, gains/losses on divestitures and
gains on debt retirement. Income taxes may include valuation
allowances and the provision related to the pre-tax items listed,
as well as income taxes related to divestitures and U.S. tax
reform, and adjustments to normalize the effect of income taxes
calculated using the estimated annual effective income tax
rate.
- Total Costs per BOE is a non-GAAP measure defined as the
summation of production, mineral and other taxes, upstream
transportation and processing expense, upstream operating expense
and administrative expense, excluding the impact of long-term
incentive and restructuring costs, per BOE of production.
Management monitors Total Costs per BOE as a measure of operating
performance.
ADVISORY REGARDING OIL AND GAS INFORMATION - The
conversion of natural gas volumes to barrels of oil equivalent
(BOE) is on the basis of six thousand cubic feet to one barrel. BOE
is based on a generic energy equivalency conversion method
primarily applicable at the burner tip and does not represent
economic value equivalency at the wellhead. Readers are cautioned
that BOE may be misleading, particularly if used in isolation.
ADVISORY REGARDING FORWARD-LOOKING STATEMENTS – This news
release contains forward-looking statements or information
(collectively, "FLS") within the meaning of applicable securities
legislation, including Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. FLS include: meeting Encana's annual guidance,
including capital outlook, returns, free cash flow, production
targets and liquids growth, and repeatable performance in future
years; quality of asset portfolio and commitment to delivering
shareholder value; estimated G&A synergies and additional
savings in well costs; ability to generate free cash flow and
amount and use thereof; amount and timing of share buyback;
benefits of cube development; portfolio refinement and timing of
closing thereof; and outcomes of risk management program. FLS
involve assumptions, risks and uncertainties that may cause such
statements not to occur or results to differ materially. These
assumptions include: future commodity prices and differentials;
assumptions in corporate guidance; data contained in key modeling
statistics; availability of attractive hedges and enforceability of
risk management program; access to transportation and processing
facilities; and expectations and projections made in light of
Encana's historical experience and its perception of historical
trends. Risks and uncertainties include: integration of Newfield's
business and ability to achieve anticipated benefits; ability to
generate sufficient cash flow to meet obligations; commodity price
volatility; ability to secure adequate transportation and potential
pipeline curtailments; variability and discretion to declare and
pay dividends, if any; amount and timing of share repurchases;
timing and costs of well, facilities and pipeline construction;
business interruption, property and casualty losses or unexpected
technical difficulties; counterparty and credit risk; impact of
changes in credit rating and access to liquidity, including ability
to issue commercial paper; currency and interest rates; risks
inherent in Encana's corporate guidance; failure to achieve cost
and efficiency initiatives; risks in marketing operations; risks
associated with technology; changes in or interpretation of laws or
regulations; risks associated with existing or potential lawsuits
and regulatory actions; impact of disputes arising with partners,
including suspension of certain obligations and inability to
dispose of assets or interests in certain arrangements; ability to
acquire or find additional reserves; imprecision of reserves
estimates and estimates of recoverable quantities; and other risks
and uncertainties as described in Encana's Annual Report on Form
10-K and Quarterly Report on Form 10-Q and as described from time
to time in Encana's other periodic filings as filed on SEDAR and
EDGAR.
Although Encana believes such FLS are reasonable, there can be
no assurance they will prove to be correct. The above assumptions,
risks and uncertainties are not exhaustive. FLS are made as of the
date hereof and, except as required by law, Encana undertakes no
obligation to update or revise any FLS.
Further information on Encana Corporation is available on the
company's website, www.encana.com, or by contacting:
Investor
contact:
(281)
210-5110
(403)
645-3550
|
Media
contact:
(281)
210-5253
|
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SOURCE Encana Corporation