Encana shares plunge as production forecast falls short

Thu Feb 14, 2013 12:19pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Scott Haggett and Krithika Krishnamurthy

CALGARY, Alberta (Reuters) - Encana Corp (ECA.TO: Quote), Canada's largest natural gas producer, said on Thursday its output of valuable crude oil and natural gas liquids this year will double this year. But the target still fell short of investor expectations and its shares dropped nearly five percent.

The company, which reported a 28 percent rise in operating earnings, is looking to increase oil and liquids output as natural gas prices remain low because of abundant shale-gas supplies.

It expects average oil and liquids production for this year will be 50,000 to 60,000 barrels per day, up from an average 31,000 bpd in 2012. But the target was below its prior forecast of 60,000 to 70,000 bpd as it lowered its capital spending forecast to between $3 billion to $3.2 billion, down from a prior target of $4 billion to $5 billion.

"With lower spending comes lower overall production and, most importantly, a slower build of liquids volumes," Andrew Potter, an analyst with CIBC World Markets, said in a research note.

The company's shares were down C$1.02, or 5.2 percent, to C$18.46 by late morning on the Toronto Stock Exchange.

The company plans to direct 80 percent of its capital budget this year towards drilling for oil and gas-liquids but expects little change in its natural gas production in 2013, forecasting output of 2.8 billion to 3 billion cubic feet per day in 2013 compared to 3 bcf/d last year.

"We have an extensive portfolio of emerging oil plays that are under evaluation and a range of established plays that can be profitable at current commodity prices, and those are the areas where we plan to spend our time and money in 2013," said interim Chief Executive Clayton Woitas.

U.S. natural gas prices rose 2 percent from last year to average $3.54 per million British thermal units, well below the $14 per mmBtu they traded at in 2005.   Continued...

An Encana production well for oil and natural gas is seen in a state forest park in Kalkaska, Michigan, in this June 20, 2012, file photo. REUTERS/Rebecca Cook/Files