(Reuters) - Encana Corp (ECA.TO) (ECA.N), Canada’s largest natural gas producer, posted a surprise quarterly operating profit as investments in technology to lower well costs and increase production begin paying off.
Encana has been diversifying into oil production and has invested heavily in technology and drilling techniques, such as applying simultaneous drilling and completions operations on wells, to drive greater productivity and cost efficiencies.
The company said the application of such drilling techniques is increasing initial production rates and delivering stronger well performance.
Encana said production costs in the Permian, Eagle Ford, Duvernay and Montney plays fell in the first quarter ended March 31 from the fourth quarter.
The company has said it would direct most of its investments into these four areas, which its says are its highest margin growth plays.
Still total production averaged about 430,100 barrels of oil equivalent per day (boe/d) during the quarter, down from about 536,100 boe/d a year earlier, reflecting the sale of lower-margin assets and a shift to produce more liquids.
Oil and natural-gas liquids production rose 78 percent to about 120,700 barrels per day (bbls/d) in the quarter. Realized liquids prices fell to $37.83 per barrel from $69.19.
Natural gas output fell 34 percent, while realized natgas prices fell 18 percent.
Encana posted a net loss attributable to shareholders of $1.71 billion compared with a year-ago profit of $116 million, mainly due to $1.22 billion in impairment charges.
The company’s operating profit, which excludes most one-time items, fell 98 percent to $9 million, or 1 cent per share.
Analyst on average were expecting a loss of 9 cents per share, according to Thomson Reuters I/B/E/S.
Encana’s cash flow, an indicator of its ability to pay for new projects and drilling, fell 55 percent to $495 million, or 65 cents per share.
Calgary-based Encana’s shares closed at C$16.82 on the Toronto Stock Exchange on Monday.
Reporting By Shubhankar Chakravorty in Bengaluru; Editing by Savio D'Souza