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Why Encana’s 4Q16 Crude Oil Price Underperformed NYMEX Settlements

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Crude oil’s realized price performance

Excluding the effect of hedges, Encana’s (ECA) average realized crude oil (USO) price in 4Q16 was ~22% higher than its price in 4Q15. Sequentially, ECA’s average realized crude oil price in 4Q16 was ~10% higher than its price in 3Q16.

The sequential increase in ECA’s average realized crude oil price in 4Q16 can be attributed to the higher trending crude oil prices during the same period. ECA’s peer W&T Offshore (WTI) reported a crude oil realized price of $45.10 per barrel in 4Q16, an ~22% increase from $36.99 per barrel in 4Q15.

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Crude oil’s realized price compared to benchmark

Encana sells its crude oil production at a discount to NYMEX crude oil prices. As a result, ECA’s average realized crude oil price in 4Q16 underperformed the average NYMEX crude oil settlement prices during the same period.

ECA’s average realized crude oil price in 4Q16 was $3.38 per barrel lower than the average NYMEX crude oil price of $49.29 per barrel for the same period.

Natural gas and natural gas liquids: Realized prices

For 4Q16, Encana’s (ECA) average realized price for natural gas (UNG) production increased ~21% to $2.58 per Mcf (thousand cubic feet) compared to $2.13 for the same period in 2015.

For 4Q16, ECA’s average realized price for natural gas liquids production increased ~45% to $30.87 per barrel compared to $21.36 per barrel for the same period in 2015.

Next, let’s take a look at the effectiveness of Encana’s realized price when compared to ECA’s production costs.

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