Encana (TSX:ECA) plans to cut its projected spending in northern B.C.’s Montney gas field by as much as US$130 million but has no plans to shut down rigs or lay off workers, a spokesman said.
Encana had planned to spend between US$600 million and US$700 million on its Cutbank Ridge Montney assets with partner Mitsubishi Corp. (Nasdaq:MSBHY).
That has been revised down to US$570 million in 2015, which includes Encana’s net investment of approximately US$245 million and Cutbank Ridge Partnership’s US$325 million.
The latter’s spending is focused in the northeastern B.C. portion of the development, particularly around Dawson Creek.
Encana announced the cuts after commodity prices fell well below projections made in December.
For 2014’s fourth quarter, the Calgary-based company reported cash flow of US$377 million and operating earnings of US$35 million. That compares with cash flow of US$677 million and operating earnings of US$226 million in 2013’s fourth quarter.
Net earnings were US$198 million, up from a loss of US$251 million in 2013’s fourth quarter.
Encana has now downgraded its expected natural gas price from US$4 per million British thermal units to US$3 on the New York Mercantile Exchange. Natural gas for delivery in April traded at US$2.71 on March 1.
According to spokesman Doug McIntyre, Encana had expected the price of West Texas Intermediate (WTI) crude to stay above US$70. A barrel of WTI, an industry benchmark, had improved slightly to US$51.53 as of March 4.
McIntyre said that the company still intends to operate three rigs in the Montney in 2015 and has “no plans to do layoffs anywhere in the company.”
Encana’s Montney investment was buoyed by a sale late last year of around 500 kilometres of pipeline and seven compressors, most of which were in northeastern B.C., to Veresen Midstream, ahead of new spending upstream. McIntyre said that deal is expected to conclude in a “matter of weeks.” •
