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EnCana sets sights on ExxonMobil, BP Morgan says independent aims to lead North America in natural gas production Gary Park Petroleum News Calgary Correspondent
Canadian independent EnCana is out to topple ExxonMobil and BP “over the next few years” and claim the top spot among North America’s natural gas producers, President and Chief Executive Officer Gwyn Morgan told the annual meeting of shareholders April 23.
The unwaveringly bullish leader of the Calgary-based company said EnCana “truly is a super-major,” ranking number three ahead of all other independents” on the North American gas front and owning the continent’s largest independent gas storage network at a combined 145 billion cubic feet.
“We are investing a lot of capital in building our gas production because we think that North American gas markets have moved into a sustained period of tighter supply and stronger prices,” he said.
EnCana is targeting produced gas sales of more than 3 billion cubic feet per day this year, a gain of 200 million cubic feet per day from 2002, but a long haul from the continental gas output of its targeted rivals. For 2002, ExxonMobil averaged 3.6 billion cubic feet per day and BP logged 3.48 billion cubic feet.
“It is our assessment that EnCana is capable of average sales growth of 10 percent per share, excluding acquisitions, divestitures or major exploration successes,” Morgan said.
If the goal can be achieved, it will be an “exceptional picture in an industry largely just treading water,” he said.
Unbooked potential of 10 tcf Morgan noted that EnCana’s onshore North American division holds unbooked resource potential of 10 trillion cubic feet, which is “enough to offset production and sustain our 10 percent annual growth target for years to come.”
On top of that, EnCana has a land base in the United States and Canada of 23 million undeveloped net acres to support its role as the leading North American gas explorer, which included 565 net wells in 2002, he said.
The bulk of this year’s capital budget of C$5 billion (US$3.45 billion) is earmarked for developing gas production.
Morgan identified two key elements in EnCana’s future are the U.S. Rocky Mountain region and the Greater Sierra play of northeastern British Columbia, along with southeastern Alberta.
Thomas Driscoll and Philip Skolnick, analysts with Lehman Brothers, said in an April 25 research report that while EnCana is well-positioned to deliver above-average growth “we remain concerned that its long-term (10 percent production per share) annual growth target may be a bit ambitious” compared to its external funding ability.
They agreed with Morgan that the U.S. Rockies and Greater Sierra best exemplify its “resource play” strategy and offer “vast infill drilling opportunities” with multi-trillion cubic foot reserve potential.
The report estimated the Greater Sierra potential at 5 tcf, with EnCana holding an average 90 percent working interest in the region, but they noted that the company has so far booked only 450 billion cubic feet of proved reserves. More than 600 drilling locations identified However, EnCana has identified more than 600 drilling locations “potentially providing it with growth beyond 2005,” boosting production by then to 300 million cubic feet per day from its current 210 million to 220 million cubic feet per day, the analysts said.
They also said “significant additional potential exists north into the Northwest Territories where the company controls some acreage.”
For the U.S. Rockies, Lehman Brothers said production from the deep, tight gas base in the Jonah field and Mamm Creek area has exceeded expectations in the last two quarters and “this upside surprise could continue.”
They rated total gas in place for the Jonah field — acquired in 2000 by EnCana founding partner Alberta Energy Company — at about double the 4 tcf when Alberta Energy made its original purchase.
EnCana plans 380 wells this year in the region, building on expected first-quarter production of 675 million cubic feet per day.
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