January 6, 2011 / 12:08 AM / 7 years ago

UPDATE 2-Encana to lower spending as gas price languishes

* Sees 2011 capex of $4 billion to $4.5 billion

* Single-digit percentage production growth expected

* Weak gas prices can’t sustain previous spending levels (Adds quotes in paragraphs 8-10, byline)

By Braden Reddall

SAN FRANCISCO, Jan 5 (Reuters) - Encana Corp (ECA.TO), North America’s second-largest natural gas producer, will spend less money on operations in 2011 as prices for the fuel remain weak, the head of the company’s U.S. unit said on Wednesday.

Encana expects its capital spending budget to range from $4 billion to $4.5 billion when it is released in about three weeks, according to Jeff Wojahn, the USA Division president.

Production growth for the year would likely be in the single-digit percentage range, Wojahn told investors on the sidelines of a conference in San Francisco.

In October, Encana cut its 2010 budget by $200 million to $4.8 billion and warned that 2011 could be a leaner year if gas prices stay weak. The Calgary-based company is known for its unconventional gas plays in British Columbia, the U.S. Rockies, Texas and Louisiana.

“We haven’t announced it yet, but $4 to $4.5 billion is a good range,” Wojahn said of 2011 capital spending.

Encana shares were pressured late last year as Chief Executive Randy Eresman warned that the stated goal of spending about $6 billion a year for annual production growth of 14 percent would not be sustainable with natural gas prices hovering around $4 per million British thermal units.

Gas settled down 19.6 cents at $4.55 per mmBtu on the New York Mercantile Exchange on Wednesday, while Encana shares, down 19 percent in the past year, closed 17 Canadian cents lower at C$29.14 on the Toronto Stock Exchange.

While many companies are focusing more on liquids production due to the gas glut, Wojahn said Encana would merely increase its oil output on a “grassroots” level.

“We’re not going to go out there and blow our brains out buying an overvalued oil company,” he told the Pritchard Capital Partners Energize conference, saying Encana would only start buying natural gas producers if gas prices remained in their current slump, which would be bad news for the sector.

“We cannot stand these low prices for much longer.” ($1=$1 Canadian) (Reporting by Braden Reddall, writing by Jeffrey Jones; editing by Rob Wilson and Tim Dobbyn)

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