April 20, 2011 / 10:38 AM / 7 years ago

UPDATE 3-Encana to focus on oil, NGLs to battle low natgas prices

* Q1 production up 2 pct at 3.34 bcfe/d

* Says will meet 2011 production target of 3.47-3.52 bcfe/d

* Sets 2011 capital investment at $4.6-$4.8 bln

* Q1 cash flow/shr $1.29 vs $1.56 year ago (Adds capital budget details, background)

April 20 (Reuters) - Encana Corp expects to focus on producing high-premium oil and natural gas liquids (NGL) this year, as it battles dipping natural gas prices that led to a 19-fold decline in its first-quarter profit.

The Calgary-based company, known for its unconventional gas plays in British Columbia, Texas and Louisiana, plans to spend about $1 billion — about a fourth of its capital budget — on the development of oil and NGLs, which command a significant price premium over natural gas.

Better technology unlocked massive shale gas reserves and led to a supply glut in North America, pressuring the price of natural gas and prompting energy companies to seek new buyers.

Gas price averaged $4.20 per million British thermal units in the first quarter on the New York Mercantile Exchange, down 16 percent from a year ago. Canadian gas prices were 23 percent lower.

The company, along with the other gas producers like Chesapeake Energy Corp and Apache Corp , has been trying to amplify natural gas demand, as the use of natural gas for transportation gains traction in North America. [ID:nN05154332]

Encana, which recently agreed to supply liquefied natural gas (LNG) to a fleet of heavy-duty trucks, expects to open five compressed natural gas stations and convert about 150 fleet vehicles to natural gas by the year end.

Encana’s first-quarter revenue, net of royalties, more than halved to $1.67 billion.

For 2011, the company forecast an annual growth per share of 5-7 percent, and said natural gas prices remain at unsustainably low levels.

The company’s shares closed at C$31.18 on Tuesday on the Toronto Stock Exchange. (Reporting by Gowri Jayakumar in Bangalore; Editing by Roshni Menon)

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