Core four production set to double
On October 5, 2016, during its investor day presentation, Encana (ECA) outlined its production outlook for the next five years. According to its presentation, Encana expects total production to rise more than 60.0% in the next five years, with more than 90.0% of production to come from its core assets.
During this period, Encana expects production volume from its core assets to almost double. The company presented its production outlook, assuming $55 per barrel for WTI (West Texas Intermediate) crude oil and $3 per mmBtu (million British thermal units) for Henry Hub natural gas pricing.
In 3Q16, Encana’s core four assets produced ~242.8 Mboe per day, or ~72.0% of its total production. Its core assets include the Eagle Ford Shale and the Permian Basin in the United States and Montney and Duvernay in Canada.
Which assets will drive Encana’s production growth?
In the next five years, Encana’s production growth will be dominated by its Permian and Montney assets. Encana expects Permian production to increase three to four times in the next five years. In 3Q16, the company’s Permian assets produced 49.5 Mboe (thousand barrels of oil equivalent) per day, of which 41.1 MBbls (thousand barrels) per day were liquids production.
For its Montney assets, Encana expects liquids production to increase four to five times and natural gas (UNG) production to double in the next five years. In 3Q16, Encana’s Montney assets produced ~669 MMcf (million cubic feet) per day of natural gas and 16,600 barrels per day of liquids. That’s ~50.0% of Encana’s total natural gas production and ~14.0% of its total liquids production.
Encana is the largest producer in Montney. Other upstream companies such as Murphy Oil (MUR), ConocoPhillips (COP), Canadian Natural Resources (CNQ), and NuVista Energy (NVA.TO) are also active in Montney, Canada.