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Latest Headlines
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Mar 16, 2010 12:34:00 PM MST
Encana says natural gas inventories enough to more than double production (Encana)
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CALGARY _ Encana Corp. (TSX:ECA) says its natural gas inventories are large enough for the company to move ahead with plans to more than double its production over the next five years even though prices are expect to dip below historical levels.
The president and chief utive of Canada´s largest natural gas producer said Tuesday the company plans to spend another $750 million this year on ramping up production.
Randy Eresman said technology breakthroughs have unlocked vast new supplies of affordable and clean-burning natural gas.
"We expect natural gas supply to outpace demand and prices to be lower than recent historical averages," said Eresman at a news conference.
The move will increase the company´s total capital investment to $4.5 billion for 2010. About three-quarters of the new capital will go towards a land retention program at the Haynesville shale, which straddles Texas and Louisiana, and ramping up development activity in its other holdings.
"To double in five years _ the math says it´s a 14.4 per cent compound average different growth rate. It´s not a very big step up from where we are," he explained.
"Basically we´ve been holding back the reins on all of our teams for quite some time now. So the question is are we going to be able to do it without changing the marginal supply cost or creating inflation? We´ll have to be careful. There are certain areas that are going to be very active. We know some industry inflation can creep in."
Encana has one of the largest natural gas portfolios in North America with about 12.7 million net acres of land across northeast British Columbia and down to Texas and Louisiana. It is always on the look for more acquisitions.
"We continue to look at some of the newest emerging plays and to try and understand whether they can improve our overall portfolio and whether or not their value is reflected in the prices that are being paid in the market."
Eresman said the company´s strong financial position made it more sensible to boost its growth rate and it is now targeting production of 3.4 billion to 3.5 billion cubic feet per day by the end of this year.
"We are still in the infancy of optimizing the efficiency of our gas factory approach and further improvements over time will help us maintain our position as one of the industry´s lowest-cost producers," Eresman said.
Being a low-cost producer is the reason why Eresman is confident that Encana will thrive in the market even with lower prices.
"We´ll likely be growing at a faster pace than many of our competitors. We´re not going to be growing the overall market _ the market is going to be growing at a much smaller rate. So our expectation is we will be taking market share away from other, higher-cost producers," Eresman said.
Encana is also looking at how to increase the demand side of the equation and is searching for new markets for natural gas in the future.
"We´ve been working towards getting natural gas recognized in environmental legislation both in Canada and the United States to address greenhouse gases. We think more importantly natural gas should be used because it emits so much less toxic emissions," he said.
Earlier this year, Encana split itself into two separate companies, keeping its natural gas assets under the Encana name and spinning off its oil producing and refining operations as Cenovus Energy Inc. (TSX:CVE).
As part of a rebranding effort, the company also said it is ping the upper-case "C" that has long adorned the middle of its name and taking on a logo "and visual identity that retains the company´s brand equity and captures its new spark _ a growth-oriented, pure-play natural gas company focused on applying advanced technology and operational innovation to reduce costs and maximize margins."
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