Encana (ECA) Tops Q2 EPS Views

Encana (NYSE: ECA) reported Q2 EPS of $0.10, $0.19 better than the analyst estimate of ($0.09).

ncreased capital efficiency and operational performance in core four assets

Encana beat its 2016 drilling and completions cost reduction targets in the first quarter. In the second quarter the company continued to lower drilling and completion costs across its four core assets and they are now over 30 percent lower compared to the 2015 full-year average. In addition, Encana delivered new pacesetter performance and has a track record of rapidly converting pacesetter benchmarks into average costs.

In the Permian, Encana built on its track record as a leading innovator by completing the Midland Basin's first 14-well pad. This peaked at 12,000 BOE/d and is currently producing over 10,000 BOE/d gross. In addition, it delivered a 10 percent quarter-over-quarter reduction in average drilling and completions costs. These costs are 31 percent lower than the full-year 2015 average. Encana is now the second largest producer in the core of the Midland Basin.

In the Eagle Ford, Encana delivered a new pacesetter well at a cost of $3 million. Average drilling and completions costs in the second quarter in the play were 38 percent lower than the 2015 average.

In the Duvernay, Encana delivered a $6.8 million pacesetter well. The second quarter average drilling and completions costs were approximately 40 percent lower than the company's 2015 average.

In the Montney, Encana continued to deliver strong results from its condensate-rich wells in the Tower, Dawson South and Pipestone areas. Combined, these areas offer a potential inventory of almost 6,000 condensate-rich well locations. Second quarter average drilling and completions costs were down 14 percent compared to the first quarter and 33 percent lower than the full-year 2015 average.

Continued cost and capital efficiency and disciplined balance sheet management

Encana continued to capture significant cost savings during the second quarter. As a result, the company is lowering its guidance for transportation, processing and operating costs by $100 million for the year. Encana expects the full-year benefit of these savings will be even greater in 2017.

Encana is reinvesting savings from continued capital efficiency improvements and expects to use a portion of proceeds from its Gordondale and DJ Basin divestitures to increase its 2016 capital program by $200 million. As a result, after adjusting for the Gordondale divestiture, the company is increasing its 2016 production guidance and expects fourth quarter exit production decline from its core four assets to be cut from 10 percent to five percent. Encana's Gordondale and DJ Basin divestitures are expected to close by the end of July delivering proceeds of approximately $1.1 billion.

For earnings history and earnings-related data on Encana (ECA) click here.

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