CALGARY – Encana Corp. says it’s not actively shopping around its Deep Panuke natural gas project in Nova Scotia — an asset CEO Doug Suttles said “rocked” during the first quarter.
After repeated delays, the platform finally started producing gas in December — just in time for unusually frigid temperatures to drive up demand in the northeastern United States for the home-heating fuel.
However, the offshore platform, 250 kilometres southeast of Halifax, is not among the half dozen core areas where Encana is focused, leading to speculation it could be sold.
“As we sit here right now, we’re not marketing Panuke,” Suttles told reporters following his first annual meeting as Encana’s boss.
Gas from Deep Panuke fetched average prices above US$19 per 1,000 cubic feet during the three months of the year. Company-wide, Encana realized gas prices of $5.82 during that period.
“Boy, Panuke rocked in the first quarter,” the third-generation Texas oilman told a shareholder inquiring about a potential Deep Panuke sale.
“Today, our focus on Panuke is to get it to deliver at the highest levels possible.”
Encana benefited from selling output from Deep Panuke into the daily spot market during the unusually cold winter in the U.S. Northeast, rather than entering into monthly contracts to sell it at a set price.
Deep Panuke prices should, however, more closely follow New York Mercantile Exchange pricing during the summer. In the first quarter, NYMEX natural gas prices averaged $4.94, and they’ve since dropped.
Encana sees natural gas prices in North America as a whole hovering between $4 and $5 per 1,000 cubic feet long term, said Renee Zemljak, executive vice-president of midstream, marketing and fundamentals.
Earlier Tuesday, Encana announced a boost in its 2014 cash flow projections and profits.
The Calgary-based oil and gas producer (TSX:ECA) is expecting total cash flow to come in at between $2.9 billion and $3 billion for 2014, up from its previous target between $2.4 billion and $2.5 billion.
The change reflects stronger natural gas prices during the first quarter and the sale of natural gas properties in Wyoming that closed Monday.
It does not, however, include the sale of Encana’s East Texas gas lands, the upcoming initial public offering of its PrairieSky royalty spinoff or its acquisition of oil-rich properties in the Eagle Ford shale in Texas. A further update to Encana’s 2014 guidance is expected once those transactions close in the second quarter.
Net earnings, which account for one-time items, were $116 million, or 16 cents per share, compared to a net loss of $431 million or 59 cents per share a year earlier.
First-quarter operating earnings totalled $515 million, up from $179 million year earlier. On a per-share basis, that amounted to 70 cents per share, well above the 55 cents per share analysts surveyed by Thomson Reuters had on average been expecting.
Revenue totalled $1.89 billion compared with $1.06 billion year-over-year.
Encana announced last week that it was spending $3.1 billion to enter the oil-rich Eagle Ford shale in Texas.
Building on the newly acquired Eagle Ford position is a possibility, but Encana is in no rush to do it, Suttles said.
“I can tell you our focus is not on maximizing production, but it’s on maximizing value and it’s about how can we get the best performance out of the existing base production and how can we get the best potential from the development opportunities that exist there,” said Suttles.
But if the right opportunity comes up to grow Encana’s Eagle Ford footprint, the company has the ability to pounce, Suttles said.
“I think we’ve shown we can be opportunistic. We have the financial strength to do that and I think we have the organizational capability to act quickly,” he said.
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