Encana delivered strong performance in the fourth quarter of 2016, and the company now expects that its 2017 plan will exceed forecasts previously shared at its Investor Day in October 2016. The company plans to finalize its 2017 budget and issue guidance along with its 2016 fourth quarter and year-end results on February 16, 2017. Encana now expects to deliver a corporate margin of greater than $10 per barrel of oil equivalent (BOE) in 2017 based on price assumptions of $55.00 WTI and $3.00 NYMEX.
This corporate margin is up from an anticipated $8 per BOE that was outlined during Investor Day at the same price assumptions. This expected 25 percent improvement is a result of anticipated lower costs through the year and increased total volumes expected in the second half of 2017.
Encana anticipates production growth from its core four assets from the fourth quarter of 2016 to the fourth quarter of 2017 will be in the upper range of, or exceed, its previously indicated growth plan of 15 to 20 percent year-over-year.
This represents a strong start to the company's five-year growth plan. Encana is well positioned for 2018 when it expects to grow its corporate margin to $13 per BOE (based on price assumptions of $55.00 WTI and $3.00 NYMEX) and grow production from its core four assets by over 30 percent from the fourth quarter of 2017 to the fourth quarter of 2018.
"Our performance gives us confidence that we can deliver one of the best value creation stories in our industry," said Doug Suttles, Encana President & CEO. "We are one of, if not the highest performing and most efficient companies in each of our core four assets. Through our relentless focus on efficiency, we expect our total 2017 drilling and completion costs will be flat or down year-over-year despite inflation for some services."
"We enter 2017 with a robust hedge position to protect cash flow and support our capital program," added Suttles. "Our culture of innovation, operational capability and proven track record of capturing industry leading efficiencies differentiate Encana. We believe we will be one of the few companies that will combine corporate returns and growth."
Building on its track record of innovation, industry leading performance and efficiency
Following the successful advancement of the five-year plan shared at its Investor Day in October 2016, Encana reached its projected 2017 operational activity and rig count levels in December 2016. The company has firmly established itself as an operational leader in each of its core four assets, including in the Permian and the Montney which are the two most active resource plays in North America. Encana is the only E&P company to hold large premium acreage positions in both the Permian and the Montney.
Encana remains focused on developing its premium return well inventory, targeting stacked pay zones and on continuing to be an operational leader in each of its core four assets in 2017. Recent operational highlights include:
-- In the Permian, Encana is currently operating five horizontal rigs - four rigs in Midland County re-ccupying the Davidson pad and one in Howard County. Four recent Midland County wells (two in the Wolfcamp A zone, one in Wolfcamp B and one in the Lower Spraberry), with an average lateral length of 8,650 feet, delivered an average 30-day initial production rate of 1,050 barrels of oil equivalent per day (BOE/d), including 815 barrels per day (bbls/d) of oil.
-- In the Montney, Encana is currently running one rig in Pipestone. Four recent Pipestone wells, with an average lateral length of 9,000 feet, delivered an average 90-day initial production rate of 1,740 BOE/d, including 1,000 bbls/d of condensate. The company is ramping up activity in the Cutbank Ridge Partnership to prepare for the expected 2017 fourth quarter start-up of the two Veresen Midstream plants at Tower and Sunrise. Construction of both plants is on schedule and under budget.
-- In the Eagle Ford, Encana is currently running two rigs. Two recent Karnes County Eagle Ford wells were completed with the company's thin-fluid tight-cluster design. These wells, with an average lateral length of 4,700 feet, delivered an average 30-day initial production rate of 1,750 BOE/d, including 1,160 bbls/d of oil. Encana's two Austin Chalk wells, with an average lateral length of 3,400 feet, delivered an average 90-day initial production rate of 1,800 BOE/d, including 1,550 bbls/d of oil.
-- In the Duvernay, Encana is currently running four rigs targeting the Duvernay and one rig targeting the Montney zone which overlies the Duvernay zone in this area. Two recent Duvernay wells in the oil window, with an average lateral length of 10,150 feet, delivered an estimated 30-day initial production rate of 1,500 BOE/d, of which 1,000 bbls/d is being sold as condensate. Currently, Encana's premium return inventory in the play does not include any locations in the oil window.
2017 risk management program
The combination of Encana's multi-basin portfolio, 100 percent short-cycle capital program and robust hedge strategy uniquely positions the company to effectively manage risk.
Encana enters 2017 with a robust hedge position. As at December 22, 2016, Encana had hedged approximately 78,000 bbls/d of expected 2017 crude and condensate production using a variety of structures at an average price of $53.93 per barrel. In addition, the company has hedged about 862 million cubic feet per day (MMcf/d) of expected 2017 natural gas production using a variety of structures at an average price of $3.14 per thousand cubic feet (Mcf).