EnCana looks to rein in growth

Kay Cashman

Following a Nov. 16 session with analysts in Calgary, EnCana Corp.’s Chief Executive Officer Gwyn Morgan told reporters EnCana was looking to slow its growth from 15 percent to 10 percent per year in an effort to make its share value more sustainable. The move, he said, was in response to ongoing criticism from analysts.

“We’ve been growing at 15 percent levels and this year it will be higher,” he said. “We’re not sure people aren’t worried that it’s a mathematical impossibility to continuously grow at these rates.”

The goal for the next five years is to keep the value of EnCana stock growing by 10 percent per year. How the company will accomplish this has not yet been decided, Morgan said, but he did say it would likely involve drilling fewer wells to lower production and buying back outstanding shares of EnCana stock.

Since the company was created in 2002 from a merger of Alberta Energy and PanCanadian Energy, EnCana has bought back 6 percent of its shares. Morgan said it was looking at buying back 5 to 10 percent more.

In early 2005, the company said it will be reviewing its longer-term growth plan and will likely present the outlook mid-year.

Focusing on North America

The company has already begun to shed international assets. It’s in the process of finalizing the sale of its British North Sea interests for US$2.1 billion in cash and it has put its assets in Ecuador up for sale as part of an ongoing effort to concentrate on North American natural gas, specifically “resource plays.” Such unconventional gas accumulations differ from conventional plays in that they produce gas for a far longer time and can be difficult and expensive to exploit.

“The future is in tight sands, coalbed methane and to some extent gas shales and that is what we call resource plays,” Morgan said in 2003, as EnCana launched a program to produce 200 million cubic feet per day from southern Alberta’s coalbed methane deposits within five years.

EnCana has also put its deepwater Gulf of Mexico properties on the market, including interests in five discoveries. Morgan said the deepwater was not one of EnCana’s core competencies.

The company will “most likely” let six offshore Nova Scotia licenses expire at the end of this year, Morgan said Nov. 16. EnCana does, however, plan to drill one or two appraisal wells at its Deep Panuke gas discovery.

Dropping these assets “will focus EnCana as the leading North American natural gas producer and the premier in-situ oil sands developer,” the company said in late October.

When the Gulf and Ecuador properties are gone, EnCana will be left with some “small programs” in foreign fields. Morgan said Oman and Qatar could “create some upside potential,” but he left no doubt in an Oct. 29 statement that all will have to pay their way on the same terms as the North American operations.

There are no plans to make any major acquisitions over the next year, Morgan said Nov. 16.