Encana’s (TSX:ECA) (NYSE:ECA) cube development approach combined
with advanced completion practices have significantly enhanced its
Permian well performance and led to a 20 percent increase in the
company’s Permian type curves and 700 new premium return locations.
The 700 new premium return locations is five times the quantity the
company will drill this year and brings total premium return
locations in the play to 3,450. Encana expects it will develop less
than 30 percent of its Permian premium inventory through 2021.
"Through our focus on operational excellence,
innovation and quality corporate returns we continue to make Encana
more valuable and resilient,” said Doug Suttles, Encana President
and CEO. “The company’s world-class Permian asset comprises
thousands of feet of stacked resource. Our cube development is
delivering leading well performance and efficiencies. We believe
this approach will become the industry standard for stacked pay
development.”
Cube development drives capital
efficiency, boosts well performance and grows premium
inventory. Encana’s fast paced and structured
innovation is changing the way stacked plays are developed. The
company’s cube development approach targets multiple stacked pay
zones from a single location to deliver significant value above
ground as well as below ground in the reservoir.
Above ground, Encana’s cube development drives
significant capital and operational efficiencies which are
delivering drilling and completions savings of approximately $1.2
million per well compared to traditional single well development.
Encana expects to hold its 2017 Permian well costs flat compared to
2016 on a like-for-like basis. Below ground in the reservoir, cube
development maximizes production and resource recovery and
minimizes or eliminates risk of value erosion connected with infill
drilling and offset hydraulic fracturing interference.
The combination of tighter well density,
precision targeting, advanced completion practices and longer
laterals are delivering strong results and improved type curves in
addition to enabling Encana to increase its Permian premium return
inventory by 25 percent.
Innovation that drives value and creates
upside Encana is focused on creating additional value
and upside in its stacked pay Permian assets through the
combination of its advanced completions design and targeting new
benches. The company began applying its advanced completion designs
in the Permian during the second quarter. Advanced completion
designs have delivered up to a 60 percent well performance
improvement in the Eagle Ford and the Montney.
Highly resilient to lower commodity
prices Encana launched its five-year plan in October
2016. This included an expected 300 percent increase in non-GAAP
cash flow, a doubling of corporate margin and a self-funding
capital program post 2017. This plan was built on a flat $55.00 WTI
oil price and $3.00 NYMEX through to 2021. Continued operational
improvements and productivity gains across the portfolio in the
first half of 2017 have further enhanced Encana’s resiliency. The
company now expects it can deliver its five-year growth plan in a
flat $50 WTI oil price environment, with a self-funding capital
program post 2017.
For additional details on Encana’s Permian
asset, view the company’s updated Permian presentation in the
Presentations and Events section of www.encana.com/investors.
Encana CorporationEncana
Corporation ("Encana") is a leading North American energy producer
that is focused on developing its strong portfolio of resource
plays, held directly and indirectly through its subsidiaries,
producing natural gas, oil and natural gas liquids (NGLs). By
partnering with employees, community organizations and other
businesses, Encana contributes to the strength and sustainability
of the communities where it operates. Encana common shares trade on
the Toronto and New York stock exchanges under the symbol ECA.
NON-GAAP MEASURES - Certain
measures in this news release do not have any standardized meaning
as prescribed by U.S. GAAP and, therefore, are considered non-GAAP
measures. These measures may not be comparable to similar measures
presented by other companies and should not be viewed as a
substitute for measures reported under U.S. GAAP. Non-GAAP Cash
Flow is a non-GAAP measure defined as cash from operating
activities excluding net change in other assets and liabilities,
net change in non-cash working capital and current tax on sale of
assets. Non-GAAP Corporate Margin is defined as Non-GAAP Cash Flow
per BOE of production. Management believes these measures are
useful to the Company and its investors as measures of operating
and financial performance across periods and against other
companies in the industry, and are an indication of the Company's
ability to generate cash to finance capital programs, to service
debt and to meet other financial obligations. Non-GAAP Corporate
Return is defined as the project’s after-tax rate of return after
incorporating a burden rate per BOE to cover corporate overhead
costs, such as administrative and interest expenses. Non-GAAP
Corporate Return is used by management as an internal measure of
the profitability of a play. For additional information relating to
non-GAAP measures, see Encana's most recent Annual Report on Form
10-K and as described from time to time in Encana's other periodic
filings as filed on SEDAR and EDGAR.
ADVISORY REGARDING RESERVES & OTHER
OIL AND GAS INFORMATION - The conversion of natural gas
volumes to barrels of oil equivalent (BOE) is on the basis of six
thousand cubic feet to one barrel. BOE is based on a generic energy
equivalency conversion method primarily applicable at the burner
tip and does not represent economic value equivalency at the
wellhead. Readers are cautioned that BOE may be misleading,
particularly if used in isolation. 30-day initial or peak
production and other short-term rates are not necessarily
indicative of long-term performance or of ultimate recovery.
Drilling and completions costs in the Permian
have been normalized based on lateral lengths of 7,500 feet.
Disclosure of estimated well locations include proved, probable,
contingent and unbooked locations. These estimates are prepared
internally based on Encana's prospective acreage and an assumption
as to the number of wells that can be drilled per section based on
industry practice and internal review. Approximately 40 percent of
all locations specified in our core assets are booked as either
reserves or resources, as prepared by internal qualified reserves
evaluators using forecast prices and costs as of December 31, 2016.
Unbooked locations do not have attributed reserves or resources and
have been identified by management as an estimation of Encana's
multi-year drilling activities based on evaluation of applicable
geologic, seismic, engineering, production and reserves
information. There is no certainty that Encana will drill all
unbooked locations and if drilled there is no certainty that such
locations will result in additional oil and gas reserves, resources
or production. The locations on which Encana will actually drill
wells, including the number and timing thereof is ultimately
dependent upon the availability of capital, regulatory and partner
approvals, seasonal restrictions, equipment and personnel, oil and
natural gas prices, costs, actual drilling results, additional
reservoir information that is obtained, production rate recovery,
transportation constraints and other factors. While certain of the
unbooked locations have been de-risked by drilling existing wells
in relative close proximity to such locations, many of other
unbooked locations are farther away from existing wells where
management has less information about the characteristics of the
reservoir and therefore there is more uncertainty whether wells
will be drilled in such locations and if drilled there is more
uncertainty that such wells will result in additional proved or
probable reserves, resources or production. Premium return well
inventory are locations with expected after tax returns greater
than 35 percent at $50/bbl WTI and $3/MMBtu NYMEX.
ADVISORY REGARDING FORWARD-LOOKING
STATEMENTS - This news release contains certain
forward-looking statements or information (collectively, “FLS”)
within the meaning of applicable securities legislation. FLS
include: advancement of and expected growth and returns in Encana’s
five-year plan, including impact of various commodity prices;
source of funding of capital; success of and benefits from
technical innovation and cube development approach, including
enhancements to well performance, type curves, number of wells and
returns; potential premium return locations, ability to develop and
expected drilling; stacked resource potential of assets, including
potential upside; performance relative to peers; expectation of
meeting the targets in Encana’s corporate guidance; anticipated
production, composition of commodity mix, cash flow and corporate
margins; anticipated costs, capital and operational efficiencies;
and timing of and results from advanced completion design,
potential benefits and target of drilling.
Readers are cautioned against unduly relying on
FLS which, by their nature, involve numerous assumptions, risks and
uncertainties that may cause such statements not to occur, or
results to differ materially from those expressed or implied. These
assumptions include: future commodity prices and differentials;
foreign exchange rates; Encana’s ability to access its revolving
credit facilities and shelf prospectuses; assumptions contained in
Encana’s corporate guidance and in the news release; data contained
in key modeling statistics; availability of attractive hedges and
enforceability of risk management program; effectiveness of
Encana's drive to productivity and efficiencies; results from
innovations; expectation that counterparties will fulfill their
obligations under the gathering, midstream and marketing
agreements; access to transportation and processing facilities
where Encana operates; assumed tax, royalty and regulatory regimes;
enforceability of transaction agreements; ability to satisfy
closing conditions and regulatory approvals, successful closing of,
and value of post-closing and other adjustments associated with
announced sale of assets; and expectations and projections made in
light of, and generally consistent with, Encana's historical
experience and its perception of historical trends, including with
respect to the pace of technological development, the benefits
achieved and general industry expectations.
Risks and uncertainties that may affect these
business outcomes include: the ability to generate sufficient cash
flow to meet Encana's obligations; risks inherent to completing
transactions on a timely basis or at all and adjustments that may
impact expected proceeds or value to Encana; commodity price
volatility; ability to secure adequate product transportation and
potential pipeline curtailments; variability and discretion of
Encana's board of directors to declare and pay dividends, if any;
the timing and costs of well, facilities and pipeline construction;
business interruption and casualty losses or unexpected technical
difficulties; counterparty and credit risk; risk and effect of a
downgrade in credit rating and its impact on access to capital
markets and other sources of liquidity; fluctuations in currency
and interest rates; risks inherent in Encana's corporate guidance;
failure to achieve anticipated results from cost and efficiency
initiatives; risks inherent in marketing operations; risks
associated with technology; changes in or interpretation of
royalty, tax, environmental, greenhouse gas, carbon, accounting and
other laws or regulations; risks associated with existing and
potential future lawsuits and regulatory actions made against
Encana; impact to Encana as a result of disputes arising with its
partners, including the suspension by its partners of certain of
their obligations and the inability to dispose of assets or
interests in certain arrangements; Encana's ability to acquire or
find additional reserves; imprecision of reserves estimates and
estimates of recoverable quantities of natural gas and liquids from
plays and other sources not currently classified as proved,
probable or possible reserves or economic contingent resources,
including future net revenue estimates; risks associated with past
and future acquisitions or divestitures of certain assets or other
transactions or receipt of amounts contemplated under the
transaction agreements (such transactions may include third-party
capital investments, farm-outs or partnerships, which Encana may
refer to from time to time as “partnerships” or “joint ventures”
and the funds received in respect thereof which Encana may refer to
from time to time as “proceeds”, “deferred purchase price” and/or
“carry capital”, regardless of the legal form) as a result of
various conditions not being met; and other risks and uncertainties
impacting Encana's business, as described in its most recent Annual
Report on Form 10-K and as described from time to time in Encana’s
other periodic filings as filed on SEDAR and EDGAR.
Although Encana believes the expectations
represented by such FLS are reasonable, there can be no assurance
that such expectations will prove to be correct. Readers are
cautioned that the assumptions, risks and uncertainties referenced
above are not exhaustive. FLS are made as of the date of this news
release and, except as required by law, Encana undertakes no
obligation to update publicly or revise any FLS. The FLS contained
in this news release are expressly qualified by these cautionary
statements.
Further information on Encana Corporation is available on the company’s website, www.encana.com, or by contacting:
Investor contact:
Brendan McCracken
Vice-President, Investor Relations
(403) 645-2978
Patti Posadowski
Sr. Advisor, Investor Relations
(403) 645-2252
Media contact:
Simon Scott
Vice-President, Communications
(403) 645-2526
Jay Averill
Director, External Communications
(403) 645-4747
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