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A Look at Encana’s Production Mix and Realized Prices

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Encana’s production mix

In 1Q16, Encana’s (ECA) production mix was ~66% natural gas, ~21% crude oil, and ~13% natural gas liquids. Its total liquids production was at ~34%. This means that Encana is more tilted toward natural gas production.

Encana’s core assets produced 108.1 Mbbls (thousand barrels), or ~40%, of liquids per day and 966 MMcf (million cubic feet), or ~60%, of natural gas per day.

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Encana’s production mix trend

ECA’s quarterly liquids (crude oil and natural gas liquids) percentage in its production mix has risen from ~4% in 1Q11 to ~34% in 1Q16, with an average rate of increase of ~16% quarter-over-quarter. This has mainly been the result of Encana’s transformation strategy. In 1Q16, the liquids percentage in Encana’s production mix fell by ~4% compared to 1Q15.

Other upstream companies from the S&P 500 (SPY) that have higher liquids percentages in their production mixes are Energen (EGN), Occidental Petroleum (OXY), Murphy Oil (MUR), and Noble Energy (NBL). These companies contain ~78%, ~75%, ~72%, and ~47% liquids, respectively, in their production mixes.

The volatility in oil prices also impacts ETFs and ETNs such as the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the Vanguard Energy ETF (VDE), and the VelocityShares 3x Long Crude Oil ETN (UWTI).

ECA’s realized prices

Excluding the effects of hedges, ECA’s average realized natural gas price was $1.73 per Mcf (thousand cubic feet) in 1Q16, a fall of ~51% compared to $3.53 per Mcf in 1Q15.

In 1Q16, ECA’s average realized price for crude oil production fell by ~31% to $27.84 per barrel, compared to $40.53 per barrel for the same period in 2014.

In 1Q16, ECA’s average realized price for natural gas liquids production fell by ~24% to $16.63 per barrel, compared to $21.92 for the same period in 2014.

ECA’s lower realized prices were compensated partially by its gains on commodity derivatives. We’ll study ECA’s hedges in next part of this series.

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