Encana has put a former executive of BP at the helm of its ship, which may not be in danger, but is battling severe headwinds.
The board of one of North America’s largest natural gas producers chose Doug Suttles, a 22-year veteran of BP who spent eight years in Alaska, as its new chief executive officer to take over from Randy Eresman who resigned six months ago.
Suttles, most recently chief operating officer of BP Exploration and Production, will move into the top floor of Western Canada’s tallest and newest headquarters tower.
He will need a head for heights.
Encana has posted four straight quarterly losses, is squeezed by natural gas prices, despite signs of a rally this year, and faces disaffected shareholders.
Strategies discussion to come
Suttles told analysts June 11 he is not ready to talk about operational strategies until he has time to develop a vision for the company.
“I want to do that once and I want to do it right,” he said, making it clear that disclosure of the details will have to wait until second-quarter results are released in July.
He told analysts that a mid-year review “may decide to reallocate capital among programs” once he has determined how Encana is “currently performing in each of its key areas.”
“I hope you can appreciate that it will take some time before I’m in a position to articulate a clear and concise vision for Encana,” Suttles said.
“In the meantime, Encana will maintain its purpose of delivering on the 2013 budget plan,” including a “heightened focus on capital discipline and improving efficiency.”
The conference call yielded only two questions, once of which was answered by incoming chairman Clayton Woitas, who said there has been no discussion among directors about changing the company’s divided.
Suttles has been placed by analysts in the same category as new leaders at Suncor Energy, Talisman Energy and Penn West Petroleum in lowering operating costs and attracting investors back to flagging stocks.
During his time with BP he was assigned to Alaska, the North Sea, Trinidad and Sakhalin, Russia, and headed BP’s response to the Deepwater Horizon oil spill in 2010.
Cuts already announced
While the search continued over the past six months for a new CEO, Encana announced plans to cut up to US$150 million in general and administrative costs, with Woitas targeting an additional 10 percent improvement in the “company-wide average capital and operating efficiency number.”
He said Encana is “first and foremost a natural gas company and we’re striving to regain our reputation as the lowest-cost and most efficient developer of natural gas. Encana already has low cost structures in many of its plays, but the status quo is not an option.”
Encana, which has been campaigning for the use of natural gas as a transportation fuel, has also been targeting an increase in its natural gas liquids production to about 75,000 barrels per day by the end of 2013 from a current 43,000 bpd. Its first-quarter gas production was down 12 percent year-over-year at 2.88 billion cubic feet per day. For 2014, it has hedged 1.5 bcf per day of output at US$4.19 per thousand cubic feet.
In the past year, Encana shares have dropped 10 percent, in contrast with mid-size producer such as Tourmaline Oil (up 70 percent), Peyton Exploration (up 77 percent) and Paramount Resources (up 42 percent).
—Gary Park
