Company increases targeted G&A synergies and achieves Anadarko well cost reductions identified in Newfield acquisition; Full year 2019 capital investment plan and production outlook reiterated
First quarter 2019 highlights:
- Following the successful close of the Newfield acquisition, Encana exceeds annualized general and administrative (G&A) synergies by $25 million; new annualized estimate increased to $150 million
- Anadarko well costs reduced by $1 million since acquisition close in mid-February; Company has line of sight to significantly more savings in months ahead
- Year-to-date share buyback of ~91 million shares at an average price of $7.19 per share
- Company reiterates annual proforma capital outlook of $2.7 to $2.9 billion and reaffirms production targets, including approximately 15 percent liquids growth from its core growth assets
- Generated cash from operating activities in the quarter of $529 million and non-GAAP cash flow of $422 million
CALGARY, Alberta, April 30, 2019 (GLOBE NEWSWIRE) — Encana (NYSE, TSX: ECA) today announced its first quarter 2019 financial and operating results and plans to hold a conference call with analysts and investors at 7:00 a.m. MT (9:00 a.m. ET). Please see dial-in details below. Additional details can be found on the Company’s website at www.encana.com.
“We are off to a very strong start to 2019. Integration of Newfield into Encana has gone exceptionally well, and we now expect to deliver annual G&A synergies of at least $150 million, 20 percent greater than our original commitment,” said Encana President & CEO Doug Suttles. “In addition, we have already achieved our objective of reducing Anadarko well costs by $1 million and our most recent wells have delivered even larger savings. All of this was accomplished within weeks of closing.
“This strong start gives us confidence that we will meet our annual guidance, deliver competitive growth and generate substantial free cash within our stated capital guidance. Year-to-date, we have executed about 61 percent of our share buyback program and increased our dividend by 25 percent. These results demonstrate the quality of our business and our commitment to return cash to shareholders.”
First Quarter Summary
For the first quarter of 2019, Encana posted a net loss of $245 million, or $0.20 per share. The primary drivers associated with the loss before tax were non-cash unrealized losses on risk management of $427 million, restructuring costs of $113 million and acquisition related costs of $31 million. Non-GAAP operating earnings for the first quarter were $165 million, or $0.14 per share.
Cash from operating activities for the first quarter was $529 million. Non-GAAP cash flow was $422 million, a six percent increase over the comparable period of 2018. Non-GAAP cash flow was impacted by $144 million of restructuring and acquisition costs.
Through the end of the first quarter, the Company had repurchased 55.9 million shares of Encana common stock at an average price of $7.16 per share. Encana has continued to execute the buyback in April and year-to-date has repurchased a total of 91.0 million shares at an average price of $7.19 per share. Investment in the program has totaled $654 million.
At the end of the first quarter, Encana had more than $4.4 billion of total liquidity including approximately $479 million in cash and cash equivalents and $4.0 billion available credit on the Company’s undrawn credit facilities.
Encana reiterated its 2019 proforma capital guidance of $2.7 to $2.9 billion. First quarter proforma upstream capital expenditures totaled $913 million and were in line with previous expectations. Investment in the first quarter was primarily driven by high activity levels in the Anadarko Basin at the time of the Newfield acquisition close and front-end weighted capital programs in the other assets.
Production Summary and Asset Highlights
Total combined proforma production in the first quarter of 2019 was approximately 566,600 barrels of oil equivalent per day (BOE/d), up 13 percent year-over-year. First quarter proforma liquids production grew 15 percent year-over-year, to about 292,700 barrels per day (bbls/d).
Capital and Production
|Reportable (1)||Proforma (2)|
|(for the period ended March 31)||Q1 2019||Q1 2018||Q1 2019||Q1 2018|
|Capital Expenditures ($ millions)||736||508||913||859|
|NGLs – Plant Condensate (Mbbls/d)||44.9||30.2||48.2||35.0|
|NGLs – Other (Mbbls/d)||60.7||32.0||79.8||62.3|
|Oil and NGLs Total (Mbbls/d)||231.4||145.2||292.7||254.9|
|Natural gas (MMcf/d)||1,421||1,075||1,644||1,476|
|Total production (MBOE/d)||468.2||324.4||566.6||500.9|
- Reportable: Q1 2019 includes capital and production from Newfield, commencing Feb. 14, 2019. Q1 2018 includes Encana capital and production as previously reported.
- Proforma capital includes Encana and Newfield Upstream capital and combined production volumes for both Q1 2019 and Q1 2018.
With the addition of the Anadarko Basin, Encana’s core growth assets provide leading positions in North America’s top unconventional plays. Proforma first quarter production from these assets grew more than 20 percent from the comparable period in 2018 and averaged 443.3 MBOE/d. Highlights on each asset are below:
First quarter production averaged 91.2 MBOE/d, of which 84 percent was liquids. Production was temporarily impacted by 3.2 MBOE/d due to third party midstream outages that primarily impacted NGL and natural gas volumes. As a pioneer in cube development, Encana has a demonstrated track record of strong operational performance and has lowered drilling and completion costs by approximately 20 percent since entering the basin in 2014.
For the first quarter, proforma total production increased 23 percent year-over-year and averaged 144.8 MBOE/d, of which 61 percent was liquids. Since mid-February, per well costs have been reduced by $1 million. These reductions have come through material changes to completion operations and supply chain management. Additional cost reductions are expected utilizing the cube development approach.
First quarter production averaged 207.3 MBOE/d, of which 24 percent was liquids. Recent wells, drilled and completed for approximately $4.3 million per well, have significantly outperformed type curve with early flow rates of over 1,500 bbls/d of condensate. Montney first quarter production was temporarily impacted by midstream curtailments, with a reduction of about 4.3 MBOE/d.
For more detailed information on the Company’s assets and first quarter results, please refer to the Corporate Presentation at https://www.encana.com/investors/.
Risk management program
As of March 31, 2019, Encana has hedged approximately 106,000 bbls/d of expected oil and condensate production at an average price of $60.42 per barrel for the balance of 2019. The Company also has about 958 MMcf/d of its expected remaining 2019 natural gas production hedged at an average price of $2.76 per thousand cubic feet (Mcf).
On April 29, 2019, the Board declared a dividend of $0.01875 per common share payable on June 28, 2019, to common shareholders of record as of June 14, 2019.
First Quarter Summary
|(for the period ended March 31)
($ millions, except as indicated)
|Q1 2019||Q1 2018|
|Cash from (used in) operating activities||529||381|
|Deduct (add back):|
|Net change in other assets and liabilities||(11||)||(11||)|
|Net change in non-cash working capital||118||(8||)|
|Non-GAAP cash flow1||422||400|
|Non-GAAP cash flow margin1 ($/BOE)||10.02||13.70|
|Non-GAAP cash flow1||422||400|
|Less: capital expenditures||736||508|
|Non-GAAP free cash flow1||(314||)||(108||)|
|Net earnings (loss)||(245||)||151|
|Before-tax (addition) deduction:|
|Unrealized gain (loss) on risk management||(427||)||68|
|Non-operating foreign exchange gain (loss)||37||(100||)|
|Gain (loss) on divestitures||(1||)||3|
|After-tax (addition) deduction||(410||)||(5||)|
|Non-GAAP operating earnings1||165||156|
- Non-GAAP cash flow, non-GAAP cash flow margin, non-GAAP free cash flow and non-GAAP operating earnings are defined in Note 1.
Realized Pricing Summary
|Q1 2019||Q1 2018|
|Encana realized liquids prices1|
|NGLs – Plant Condensate||51.71||52.49|
|NGLs – Other||20.53||23.64|
|Encana realized natural gas price1 ($/Mcf)||2.66||2.94|
- Prices include the impact of realized gain (loss) on risk management.