- Proved reserves additions replace close to 200% of North American production
- Quarterly dividend doubled to 20 cents per share
EnCana Corporation has reported a 3 percent increase in 2006 cash flow per share diluted to US$8.56, or $7.2 billion. Total operating earnings per share diluted in 2006 increased 7 percent to $3.91, or $3.27 billion. Net earnings per share diluted were $6.76, or $5.65 billion, which includes after-tax gains of $2.38 billion due to unrealized mark-to-market accounting for commodity price hedges, gains on sales of discontinued operations and tax rate changes.
Natural gas and oil reserves added through drilling replaced 197 percent of EnCana's 2006 production in continuing operations and increased North American proved reserves by 9 percent to 19.2 trillion cubic feet of gas equivalent (Tcfe). Finding and development costs in total operations were $1.99 per thousand cubic feet equivalent (Mcfe).
"EnCana achieved strong financial results and solid operating performance in 2006. We continued to fortify our future by adding close to double the proved reserves that we produced in 2006, at a competitive cost of about $2 per thousand cubic feet equivalent. Our natural gas production was up 4 percent, while our key resource play production grew 12 percent year-over-year. We achieved all this in a tough operating environment for the industry marked by record breaking activity levels," said Randy Eresman, EnCana's President & Chief Executive Officer.
Transformation to unconventional gas and oil complete
"The year also marked the completion of EnCana's transformation into essentially a pure North American producer focused on unconventional natural gas and integrated oilsands - a strategic position that we believe will create sustainable profitable growth for our company. All of EnCana's production and reserves are now onshore North America," Eresman said.
Operating
- Key resource play production up 12 percent
- Natural gas production of 3.37 billion cubic feet per day (Bcf/d), up 4 percent
- Oil and natural gas liquids (NGLs) production of about 167,100 barrels per day (bbls/d), down 26 percent, primarily due to the sale of Ecuador oil assets, which produced an average of 12,366 bbls/d in 2006
- Operating costs of 86 cents per thousand cubic feet equivalent (Mcfe) for continuing operations, up 21 percent due to inflation, a stronger Canadian dollar and higher electricity costs
- Upstream capital investment in continuing operations of $6.2 billion
Reserves
- Added 3.1 Tcfe of proved reserves with drill bit additions and revisions in continuing operations
- Added 2.3 Tcfe of proved reserves in total operations, taking into account the sale of about 822 billion cubic feet equivalent (Bcfe) of proved reserves largely as a result of the Ecuador divestiture
- Proved reserves additions included 160 million bbls (960 Bcfe) at the Foster Creek and Christina Lake oilsands key resource plays
- Proved reserves increased 9 percent in continuing operations and 4 percent in total operations to 19.2 Tcfe
- Finding and development (F&D) costs averaged $1.99 per Mcfe for
total operations
- Production replacement of 197 percent for continuing operations; 144 percent for total operations, which includes the sale of Ecuador reserves
- Average three-year reserve replacement cost of $1.56 per Mcfe for continuing operations; $1.34 per Mcfe for total operations
2006 strategic results
- Created an integrated heavy oil business with ConocoPhillips composed of two 50/50 entities - one upstream and one downstream - which became effective January 2, 2007. The integrated business intends to produce 400,000 barrels of Canadian bitumen and refine 275,000 barrels of bitumen at two U.S. refineries by 2015.
- Completed sale of Ecuador assets for $1.1 billion and sale of interest in Brazil oil discovery for proceeds of $367 million
- Sold natural gas storage business for $1.5 billion
- Received environmental impact statement approval for Jonah gas field, which enables advancing toward full development of this key resource play
Resource play growth
Key resource play production grows 12 percent in 2006 EnCana's production growth continues to be led by its 12 key resource plays, which grew by about 12 percent in 2006 and comprise about 62 percent of total production. The strongest growth came from the company's coalbed methane (CBM) production in central and southern Alberta, Bighorn in west central Alberta, Cutbank Ridge in northeast British Columbia and Fort Worth in Texas.
In-situ oilsands production from EnCana's Foster Creek steam-assisted gravity drainage project grew about 27 percent in 2006.
Year-end 2006 proved reserves
EnCana achieved 9 percent growth in proved reserves from continuing operations at a competitive finding and development cost of less than $2.00 per Mcfe
Total natural gas and liquids proved reserves
- Proved reserves increased 4 percent to 19.2 Tcfe
- Proved reserves in North America (continuing operations) increased 9 percent
- Proved reserves additions were 3.1 Tcfe in continuing operations, compared to production of 1.6 Tcfe
Natural gas reserves
- Proved gas reserves increased 5 percent to 12.4 Tcf
- Proved gas additions were 1.9 Tcf, compared to production of 1.2 Tcf
- Gas production replacement of 152 percent
Oil and NGLs reserves
- Proved oil and NGLs reserves in continuing operations increased 15 percent to 1.1 billion bbls
- Proved oil and NGLs additions in continuing operations were 205 million bbls, compared to production of 57 million bbls
- Oil and NGLs production replacement of 357 percent in continuing operations
Bitumen reserves (included in oil and NGLs)
- Bitumen reserves up 22 percent to 800 million bbls
- Proved bitumen additions were 160 million bbls compared to production of 17 million bbls
Reserves additions costs
- Total three-year reserves replacement cost averaged $1.34 per Mcfe
- Total 2006 finding and development cost of $1.99 per Mcfe
Financial strength
EnCana targets a net debt-to-capitalization ratio between 30 and 40 percent. EnCana's balance sheet strengthened during 2006. At December 31, 2006, the company's net debt-to-capitalization ratio was 27:73, down from 33:67 at the end of 2005. EnCana's net debt-to-adjusted EBITDA multiple, on a trailing 12-month basis, was 0.6 times at the end of 2006, down from 1.1 times at the end of 2005.