Encana says U.S. energy border tax is no barrier
Natural gas condensate gives unique Canadian advantage, CEO Doug Suttles says
CALGARY— The head of Encana Corp. says it will continue to invest in Canada even if the Donald Trump administration erects border tax barriers to Canadian energy exports into the United States.
Calgary-based Encana has focused its exploration and production activities on four core petroleum-producing formations over the past several years, Permian and Eagle Ford in the southern United States and Montney and Duvernay on the northern B.C.-Alberta border in Canada.
CEO Doug Suttles said Tuesday the company’s geographic “optionality” is a key advantage, but he added the Canadian operations have unique advantages because of light petroleum liquids such as condensate that are produced with natural gas from its Montney and Duvernay wells.
“We’ve been very focused on growing our condensate production in Canada,” he said on a conference call.
“Because condensate is an imported product from the United States, we think that if a border tax raised the price of oil in the United States, it would also raise the price of condensate, so even though we’d be producing it here in Canada, we’d bene- fit from that.”
Condensate is used by oilsands producers to dilute heavy bitumen to allow it to flow in a pipeline. It fetches prices that are typically close to benchmark U.S. crude oil prices. Encana has targeted to grow Montney liquids production by five times to 70,000 barrels per day by 2019.
Suttles said that Encana’s U.S. oil production would benefit if a border tax causes higher prices in the United States, adding that the Canadian dollar would likely also decline in value, thus reducing Encana’s Canadian dollar costs.
Encana handily beat analyst expectations with $431million (U.S.) of net income or 44 cents per share in the first quarter of 2017, while reporting operating earnings of $104 million or 11 cents per share. Analysts had estimated 2 cents per share of net income and 3 cents per share of operating earnings, according to Thomson Reuters data.
During a conference call with financial analysts Tuesday, Suttles said new well technologies in its four core areas will allow it to go from production decline to production growth.
“I’m confident in delivering not only on our mid-year bounce, but also on delivering at least a 20-per-cent production increase in our core assets from the fourth quarter of last year to the fourth quarter of this year,” he said.