Production growth to exceed forecast
On January 4, 2017, Encana (ECA) announced an update on its five-year growth plan from 2017 to the end of 2021. In the chart below, you can see the details of Encana’s growth plan for the first two years.
The notable change comes from Encana’s core production growth and corporate margin forecasts for 2017. According to ECA’s press release on January 4, 2017, the company now expects core production growth from 4Q16 to 4Q17 at the higher end of or above its original core production growth guidance of 15.0%–20.0%.
Encana also increased its 2017 corporate margin guidance to $10 per boe (barrel of oil equivalent). We’ll take a look at Encana’s corporate margin forecast in Part 3 of this series.
Why Encana expects to exceed its original 2017 guidance
The primary reason for Encana’s revised guidance is higher efficiency and an activity level that resulted from Encana’s reaching its projected 2017 rig count in 4Q16. Encana will provide more details on its 2017 capital program when its 4Q16 and 2016 results are announced on February 16, 2017.
Encana’s peers Devon Energy (DVN) and Pioneer Natural Resources (PXD) have also increased their capital spending and activity levels for 2017. Devon Energy plans to steadily ramp up its activity over the next several quarters to as many as 15 to 20 rigs by the end of 2017.
For 2017, ConocoPhillips (COP) expects growth of flat to 2.0% compared to its disposition-adjusted 2016 estimated production. The Energy Select Sector SPDR ETF (XLE) generally invests at least 95.0% of its total assets in oil and gas companies.
Even though Encana’s 2018 outlook remains unchanged, the company thinks it’s extremely well positioned to deliver its plans into 2018. For 2018, Encana expects total annual production of >400 Mboe (thousand barrels of oil equivalent) per day, while remaining within its cash flow. From 4Q17 to 4Q18, Encana expects production from its core four plays to grow more than 30.0%.
In this series
In the rest of this series, we’ll take a detailed look at Encana’s five-year growth plan, which it presented on October 5, 2016, during its investor day presentation.