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Encana’s Quarterly Production Hit a 2-Year Low

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Yearly production

For fiscal 2016, Encana (ECA) reported production of 352.7 Mboepd (thousand barrels of oil equivalent per day), which is above the mid-point of its production guidance range of 340–360 Mboepd. In 2016, Encana’s Canadian operations contributed ~188.2 Mboepd (or ~53%) and its USA operations contributed ~164.5 Mboepd (or ~47%) to Encana’s total production.

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Quarterly production

Sequentially, Encana’s 4Q16 production is ~5% lower compared to 3Q16. On a year-over-year basis, Encana’s 4Q16 production is ~21% lower compared to 4Q15. ECA’s year-over-year decline in production could be due to the reduced capital investments and divestitures in the last year. We’ll go over ECA’s capital investments in the next part of this series.

Core assets

In 4Q16, Encana’s core four assets produced 237 Mboepd or ~74% of its total production in the same quarter. For fiscal 2016, Encana’s core four assets produced ~72% of its total production. Encana’s core assets include the Eagle Ford Shale and Permian Basin in the United States and Montney and Duvernay in Canada.

EP Energy (EPE), Diamondback Energy (FANG), Energen Corporation (EGN), Approach Resources (AREX), and Clayton William Energy (CWEI) also operate in the Permian Basin and have a higher percentage of crude oil in their production mix. The SPDR S&P Oil and Gas Exploration & Production ETF (XOP) generally invests at least 80% of its total assets in oil and gas exploration companies.

Encana’s production mix

In 4Q16, Encana reported total liquids production of 108.9 MBbls (thousand barrels) per day, or 34% of total production in the same quarter, and natural gas production of 1,276 MMcf per day (million cubic feet) or 66% of total production in the same quarter. Encana’s core four assets contributed 100.6 MBbls per day or ~92% of 4Q16 liquids production and 819 MMcf per day or ~64% of 4Q16 natural gas production.

By 4Q17, Encana expects liquids production to be at least ~42% of its quarterly production. Next, we’ll take a look at Encana’s production and capital guidance for fiscal 2017.

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