CALGARY—Encana Corp. is budgeting between US$2.7 billion and US$2.9 billion for capital spending next year, with 80 per cent of the funds directed at four key plays: two in Western Canada and two in the southern United States.
That level of spending would be up slightly from its 2014 budget, most recently estimated at between US$2.6 billion and US$2.7 billion in guidance issued last month, but perhaps less than the company anticipated in November when it predicted a substantial increase in capital spending based on a higher estimated price of oil.
Like other oil and gas producers, Calgary-based Encana is coping with a dramatic decline in the price of crude oil since last summer.
Encana is basing its 2015 estimates on West Texas Intermediate crude averaging US$70 per barrel—above current levels of less than US$55 per barrel but below last summer’s peak at about US$105 per barrel and the 2014 assumed average of US$95 per barrel.
Its projected total cash flow for next year will be substantially less next year, dropping to between US$2.5 billion and US$2.7 billion of cash flow, from an estimated US$3.2 billion to US$3.3 billion in 2014.
“We enter 2015 focused on our long-term strategy, increasing liquids production, capturing new efficiencies throughout the business and protecting our balance sheet,” Encana 1/8resident and CEO Doug Suttles said in a statement Tuesday.
“Built into our 2015 plan is the flexibility to respond to the challenges and act on potential opportunities presented in this volatile price environment.”
Suttles had said on a Nov. 12 conference call, after Encana issued its third-quarter results, that he expected the capital budge to grow “substantially” in 2015 because “even in an US$80 or an US$85 oil price world, we’ll still see substantial cash flow growth from where we started.”
The company estimated in Tuesday’s announcement that its average production for 2015 at the equivalent of between 405,000 and 440,000 barrels of oil per day, about 75 per cent from oil and liquids production.
Its four key areas next year will be in northeastern British Columbia’s Montney formation, Alberta’s Duvernay and the Eagle Ford and the Permian formation in Texas.
Encana has been divesting some of its assets, particularly natural gas holdings, and increasing its focus on liquids production as part of a strategic shift away from natural gas.