Encana delivered strong financial performance in the third quarter driven by significant liquids growth, high realized pricing and continued efficiencies. Financial and operating highlights from the quarter include:
Operational performance: Core assets delivering non-GAAP free operating cash flow
Permian: Cube development delivering efficient execution with record production
Montney: Liquids-focused program delivering high-value growth
Eagle Ford and Duvernay: Delivering high return growth
Market diversification: Maximizing realized pricing and ensuring efficient market access
Through a combination of pipeline transportation and term financial basis hedging, Encana has limited its exposure to Midland oil pricing and AECO gas pricing. Including basis hedges, the company's third quarter Permian realized oil price was 101 percent of the WTI average while Canadian realized gas prices were 86 percent of the NYMEX average.
As at September 30, 2018, Encana has hedged approximately 136,500 bbls/d of expected oil and condensate production and 1,017 million cubic feet per day (MMcf/d) of expected natural gas production for the remainder of 2018, using a variety of structures.
Encana adjusted its Corporate Guidance, lowering its expected transportation and processing costs to between $7.20 and $7.40 per BOE for a reduction of about $25 million. In addition, the company updated its expected capital investment to approximately $2.0 billion, which includes current-year expenditures on the Pipestone Liquids Hub and the San Juan assets totaling approximately $55 million as well as modest pressure on diesel fuel costs and steel tariffs.
On October 31, 2018, the Board of Directors declared a dividend of $0.015 per common share payable on December 31, 2018 to common shareholders of record as of December 14, 2018.
Third Quarter Highlights
|(for the period ended September 30)|
|NGLs – Plant Condensate (Mbbls/d)||41.0||27.9||47|
|NGLs – Other (Mbbls/d)||42.2||24.4||73|
|Oil and NGLs Total (Mbbls/d)||178.7||127.5||40|
|Natural gas (MMcf/d)||1,197||939||27|
|Total production (MBOE/d)||378.2||284.0||33|
|Liquids and natural gas prices|
|Q3 2018||Q3 2017|
|Encana realized liquids prices1||49.05||41.86|
|NGLs – Plant Condensate||52.89||45.84|
|NGLs – Other||27.23||19.00|
|Encana realized natural gas price1 ($/Mcf)||2.50||2.23|
1 Prices include the impact of realized gain (loss) on risk management.
|Non-GAAP Cash Flow Reconciliation|
| (for the period ended September 30)|
($ millions, except as indicated)
|Q3 2018||Q3 2017|
|Cash from (used in) operating activities|
Deduct (add back):
Net change in other assets and liabilities
Net change in non-cash working capital
Current tax on sale of assets
|Non-GAAP cash flow1||589||270|
|Divided by Production Volumes (MMBOE)||34.8||26.1|
|Non-GAAP cash flow margin1 ($/BOE)||16.93||10.34|
|Non-GAAP Free Cash Flow Reconciliation|
|Non-GAAP cash flow1|
Less capital expenditures
|Non-GAAP free cash flow1||66||(203)|
|Non-GAAP Operating Earnings Reconciliation|
|Net earnings (loss) |
Before-tax (addition) deduction:
Unrealized gain (loss) on risk management
Non-operating foreign exchange gain (loss)
Gain (loss) on divestiture
|After-tax (addition) deduction||(124)||270|
|Non-GAAP operating earnings 1||163||24|
1 Non-GAAP cash flow, non-GAAP cash flow margin, non-GAAP free cash flow and non-GAAP operating earnings (loss) are non-GAAP measures as defined in Note 1.