Tag Archives: EnCana Corp.

CNRL sneaks to top Canadian natural gas spot with shopping spree

July 18, 2016 (Source: Globe & Mail) Canadian Natural Resources Ltd has quietly bought up about 12,000 natural gas wells across Alberta over the last two years, a Reuters analysis of regulatory data shows, becoming the country’s largest natural gas producer as rivals sold assets or held steady in a tough market.

The counter-cyclical shopping spree helped CNRL push its Alberta well count up 60 per cent between the end of 2013 and the end of 2015, building a dominant position in the province and overtaking Encana Corp to become Canada’s top producer.

The purchases – some for less than $1.00 per well – came as the company grappled with the biggest oil price slump in a generation, selling land to pay down debt. While CNRL has bought assets during previous downturns, it has never before acquired so many wells, so quickly. The expanded footprint not only increases production, but also gives the company a strategic advantage that will pay off for years to come if the natural gas market improves.

With an extensive network of wells and the gathering pipelines that connect them, it can turn a profit from wells that might lose money in the hands of a smaller producer.

“All these new wells have low production, but they were bought for pennies for the dollar,” said Ramond James analyst Chris Cox, noting the wells are in adjacent properties which offers cost synergies, and “if you are expecting pricing to improve then you get an additional uplift.”

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Kitimat LNG terminal granted export license

Fantastic news. Kitimat LNG has reached a major milestone and is one step closer to exporting liquified natural gas (“LNG”) from Kitimat British Columbia, Canada and dramatically changing the geopolitical landscape of Canada’s energy industry. The National Energy Board granted the 20-year licence Thursday.

The Kitimat LNG export facility will connect Canada’s vast natural gas resources to high-demand markets in Asia – specifically Japan, Korea and China. This is a critical link to diversifying Canada’s energy distribution industry.

In granting its decision the board stated:

“The board recognizes that forecast demand growth for LNG in the Asia Pacific region provides a new opportunity for Canadian producers to diversify their export markets. The board also recognizes that long-term oil-indexed sales contracts could provide for higher netbacks to Canadian producers. The size of Canada’s natural gas resource, proximity to markets in Asia and Canada’s stable political and regulatory environment, the board is of the view that KM LNG has the opportunity to compete in the global LNG market.”

Absolutely.

More work is needed to ensure that the Kitimat LNG facility, and pipelines that connect the BC’s Horn River Basin, and Montenay Basin as well as Alberta’s vast natural gas reserves to Kitimat and Asia. Kitimat LNG is owned by Apache Canada Ltd. , EOG Resources Canada Inc. and Encana Corp. The partner companies are expected make a final investment decision for building the project early next year at an estimated cost over $5-billion.

Kitimat LNG president Janine McArdle is quoted;

“It’s extremely exciting news for the project. This is one of the major milestones that we required for us to take a final investment decision. This puts Canada in a new place in terms of being a new secure supplier to the Asian markets.”

Full Story: Globe & Mail – B.C.’s Kitimat LNG terminal wins export licence

Nexen on the Hunt for Canada Shale-Gas Partner

OTTAWA— (Source: Wall Street Journal) Nexen Inc. said Thursday it plans to follow in Encana Corp.’s footsteps in finding a joint-venture partner to help finance development of new shale-gas reserves in western Canada.

The Calgary oil-and-gas producer, one of Canada’s largest, said it had hired advisors at Bank of America Corp. to solicit interests in developing Nexen’s 300,000 acres of shale-gas land in northeastern British Columbia.

“What we want to do is to find an arrangement and a partnership that looks towards developing those assets over the next 40 years,” Talisman Chief Executive Marvin Romanow said. “Which is about the time frame you have to think about when you look at how much gas has been discovered up there.”

Nexen’s interest in securing a partner follows news earlier this month that Encana, Canada’s largest natural-gas producer, agreed to sell to PetroChina Co. a 50% stake in a 635,000-acre area of shale-gas lands stretched across northeastern British Columbia and northwestern Alberta or C$5.4 billion ($5.45 billion).

Mr. Romanow didn’t specify whether Nexen would seek foreign investments in its shale-gas properties. The Canadian federal government is reviewing PetroChina’s deal with Encana under laws requiring foreign investments to be of “net benefit” to Canada.

Mr. Romanow said Nexen expects to find a partner and close a deal during the second half of this year.

Earlier Thursday, Nexen reported fourth-quarter earnings of C$220 million, or 42 Canadian cents a share, down from C$259 million, or 50 Canadian cents a share, a year earlier, in part due to lower production.

EnCana bets farm on natural gas in North America

Randy Eresman, CEO, EnCana Corp. (archive photo)

It would appear that EnCana is prepared to bet the farm on the future of natural gas in North America and has clearly placed itself on the natural gas team in the emerging divide between oil vs. natural gas within the energy business. Earlier this week, EnCana Corp. announced a significant increase in capital spending in 2010, as part of its strategic plan to double the company’s production of natural gas over the next five years.

According to EnCana’s Chief Executive Officer Randy Eresman, the company has 12.8 trillion cubic feet equivalent of proved reserves,  and will produce 3.16 billion cubic feet of gas a day.

The company increased its 2010 capital budget by $750 million, to a total of $4.5 billion, enough to cover drilling 1,280 wells in 2010 with 60% allocated to projects in the U.S. and 40% for Canadian projects.

Specifically in Canada, EnCana is focusing development on its Horn River Basin property. The company will spend $ 350 million in capital in the Horn River in 2010, and will grow production from 9 to 55 million cubic feet equivalent per day by the end of 2010.

Korea Gas to invest $1.1 billion in BC shale gas

Korea Gas Corp. (“Kogas”) and EnCana Corp. will jointly explore and develop three natural gas with Kogas looking to invest $1.1 billion over the next five years to extract over 1 trillion cubic feet of natural gas from land leases held by EnCana in northeastern BC’s lucrative Horn River Basin and Montney Basin.

The initial agreement is a three-year farm-in deal with  EnCana where Korgas will invest $565-million to acquire a  50%  interest about 10,000 hectares in the Horn River Basin, and roughly 52,000 hectares in the Montney.

The investment is another step towards B.C. becoming a major export hub of natural gas and Kogas’ second major investment into B.C. gas.

South Korea consumed ~1.2 trillion cubic feet (“Tcf”) of natural gas last year – far below the 443 million cubic feet it produces – making it heavily dependent on imported liquefied natural gas (“LNG”). As a result, Korgas is the world’s single largest buyer LNG in the world and currently operates three LNG import terminals and has plans to build two more. To say the least, natural gas is key to meeting Korea’s – and Asia’s – energy requirements. Korgas’ investment brings further international attention to the huge potential that the Horn River Basin represents. In October, another South Korean energy company, Korea National Oil Corp., acquired Calgary-based Harvest Energy Trust for $4.1 billion.

Kogas’ interest in BC’s Horn River Basin may really started back last June, when Kogas committed $20 billion to Kitimat LNG – a planned LNG export facility located in Kitmat, BC. (See HRN Kitimat LNG signs deal with Korea Gas Corp. worth $20 billion). According to the terms of the agreement, Kogas will acquire ~40% of Kitimat LNG’s production, or two million tonnes per year for 20 years with an option to acquire an equity stake in the terminal. The first natural gas to be shipped from Kitimat LNG is expected in 2014 and with the EnCana deal, Kogas will become both an exporter and importer of natural gas.

Apache Corp. acquired a 51% stake in Kitimat LNG in DATE. Apache holds major gas assets in the Horn River Basin and elsewhere. By investing in Kitimat LNG, Apache ensures an alternative customer to the U.S. for their Horn River natural gas.

Bill Gwozd, vice-president of Calgary consulting company Ziff Group is quoted:

“You’ll probably see more companies looking to invest in Canadian natural gas.  The value chain proposition is increased by owning the resources.”

With low natural gas prices, industry players are taking advantage of lower valuations to invest in expanding their holdings and invest both upstream and downstream in the distribution. The reasons are simple. They foresee a bright future for natural gas as a low carbon energy source that is fast becoming a global commodity that can be shipped internationally and will no longer be limited to pipeline distribution.

Globe & Mail: South Korean firm joins EnCana in B.C. gas

Apache Corp acquires majority stake in Kitimat LNG

Opening Canadian natural gas supplies to new markets in Asia took another step forward as Apache Corp. acquired majority control of a planned $3.0 Billion Liquid Natural Gas (“LNG”) facility in Kitimat, British Columbia. Apache, has reportedly purchased a 51% stake in the facility and took the same share of the export capacity.

Kitimat LNG was originally conceived as an import terminal for LNG. But as natural gas was unlocked from shale gas plays across North America, and specifically in the Horn River Basin in northeast  British Columbia where natural gas in place could be as much as 500 trillion cubic feet. The bottom line is that North America is awash in natural gas and natural gas is slowly being recognized as a valued cleaner fuel alternative to oil and gas.

Even with increased domestic consumption through improving economics, and increased demand as natural gas is used as a cleaner alternative (hopefully), there will be excess capacity for export. Canada is the 3rd largest producer of natural gas in the world. After domestic consumption, Canada exports the excess to the U.S. However, shale gas has increased the estimated reserves of natural gas in the U.S. by an estimated 40%. Some see exports to the U.S. declining which justifies the opening of new markets in Asia and elsewhere.

Glove & Mail: Apache bets on B.C. gas

Also see: Apache signs supply deal with Kitimat LNG (August 2009)

Encana pushes for billion dollar natural gas highway

Highway 401

EnCana Corp. has been in discussions with government officials about a plan to build a network of hundreds of compressed and liquid natural gas (“LNG”) fueling stations for Highway 401 – one of Canada’s busiest highways between  Windsor and Quebec City.  At the same time, EnCana has also been negotiating with the B.C. and Alberta governments about building filling stations between Edmonton and Vancouver.

North America’s natural gas reserves have gone through a fundamental shift whereby shale gas has dramatically increased reserves and long term potential of natural gas as a cleaner alternative to oil and coal. There is so much natural gas in North America now, the real question becomes what do we do with it all?

It seems odd that Canada is currently the 3rd largest producer of natural gas in the world and yet there are only 11,500 natural gas vehicles in Canada. (There are over 1.5M compressed natural gas cars in Brazil). For heavy transport vehicles, 18-wheelers there are not battery or hybrid solutions that can meet the horsepower for hauling heavy loads. The only option is natural gas to replace diesel and it will do so with 30% less carbon emissions. And the solution for converting heavy transport vehicles to natural gas is right here in Canada… Vancouver-based Westport Innovations is one of the leaders in natural gas powered engines (See: Westport Innovations signs natgas engine deal with Volvo). Oh, and one of the leaders in compressed natural gas filling stations is also in Canada… IMW Industries is based in Chilliwack, BC, with virtually all sales to the international market.

The U.S. understands the importance of natural gas. Like Canada, shale gas discoveries have increased the natural gas reserves in the U.S. by an estimated 40%. In the U.S., all 50 states offer up to a $32,000 (U.S.) credit to truckers who switch from diesel, and the U.S. is set to pass the bi-partisan Nat Gas Act;

  • It extends the tax credit for natural gas used as a transportation fuel.
  • It provides a tax credit for 80 percent of the additional cost when purchasing a dedicated natural gas vehicle.
  • It extends the tax credit for the installation of natural gas refueling pumps.
  • It creates incentives for the major manufacturers to sell natural gas vehicles in the United States.

If the U.S. passes the Nat Gas Act and starts to increase the number of natural gas-powered 18 wheelers on the road, Canada will have to ensure those heavy trucks can seamlessly and conveniently refuel in Canada.

Canada needs to do a better job at leveraging natural gas and increase the amount of natural gas used in the overall energy mix. Natural gas is the only resource that can meet current energy requirements while reducing carbon emissions. It is a carbon fuel with carbon emissions but they are about 30% less then diesel, and about 50% less then coal. And keep in mind… it takes energy now to build the manufacture and build the renewable sources of tomorrow (yes, that’s right… it takes fossil fuels to build the wind turbines, solar panels etc). On the transport side there are no hybrid or battery power systems that can haul the heavy load of an 18 wheeler.

This is exactly what EnCana is focusing on. The strategic placement of natural gas fueling stations that will provide the necessary natural gas distribution network for heavy transport vehicles on Canada’s busiest highways. Increased distribution of natural gas on Canadian roadways would help address criticism that natural gas is not convenient enough to encourage or warrant its usage in transportation. However, contrary to popular belief CNG fill stations are relatively easy to find in major cities across Canada. (As a side note, all major manufacturers make and sell natural gas vehicles around the world. None are readily available in Canada).

Having natural gas play a bigger role in Canada’s transportation system is a step in the right direction.

Globe & Mail: EnCana pushes for $1-billion highway revamp

See Also:

Horn River News – Natural gas is the way forward (Feb. 2009)

Horn River News – Transition Canadian transport network to natural gas (Feb. 2009)

EnCana concludes Cenovus spinoff; S&P downgrades EnCana debt

EnCana Corp. today completed its transaction to split into two highly focused energy companies: Cenovus Energy Inc., an integrated oil company and EnCana Corp., a pure play natural gas company. On Nov. 25, 2009, shareholders voted more than 99 per cent in favour of the transaction and later that day the Court of Queen’s Bench of Alberta approved the transaction.

EnCana has alos announced that it will divest from conventional natural gas plays to focus on shale gas plays in Northern BC’s Horn River Basin, and the U.S. Following news of the split, Standard & Poor’s ratings agency downgraded EnCana’s debt to “BBB+” from “A-,” reflecting the increased risk to EnCana’s business by focusing more on gas assets as gas prices remain historically depressed.

Wall Street Journal: EnCana, Cenovus Energy Split into Separate Gas, Oil Companies

Encana CEO sees low natural gas prices for next two years

Randy Eresman, CEO, EnCana Corp. (archive photo)

Following their shareholder meeting approving the split of Encana into two companies – EnCana Corp. (natural gas) and Cenovus Energy (oil saneds) – company CEO Randy Eresman gave his prediction that natural gas prices are likely to remain under $5.50 and likely under $6.50 for the foreseeable future as technology improves production costs.

This may be bad news for shareholders of natural gas companies, but Eresman stated that those companies like EnCana positioned in lower cost shale gas properties like the Horn River basin will do fine while higher cost conventional plays may be more challenging. Eresman is quoted as stating:

“The best producers at the lowest cost will be the ones that survive in this new environment. And with our exposure to these lower-cost plays, we are very well-positioned.”

Eresman went on to state:

“We can do well and survive and have a very strong positive cash flow. [But] I expect there will be some difficulty in bottom-line earnings for all corporations that are exposed to natural gas.”

The Horn River basin remains one of the only active basins in Canada, and one of three in North America. And while some may be concerned about their natural gas stocks, the abundance of shale gas and low prices simply reinforces the opportunity to leverage this abundant domestic resource as a low-carbon alternative to oil and coal.

Globe and Mail: EnCana sees tough terrain ahead

 

 

Encana Q3 profit down 46%; Shale gas key to sustain profits

Randy Eresman, CEO of Encana Corp.

Randy Eresman, CEO, EnCana Corp. (archive photo)

EnCana Corp reported  Thursday that Q3 profit was down 46% and  state cutting costs and focusing on new shale plays will be key to sustaining profits even if natural gas prices remain low.

EnCana has shut in ~500 million cubic feet of gas per day that EnCana considered too unprofitable to produce. The Company plans to return this production to market during this winter heating season when they expect prices to improve.

In a conference call, EnCana’s CEO, Randy Eresman, stated:

“Natural gas is going to be in abundance for a very long period of time. EnCana is well positioned with a very low cost structure and exposure to significant development opportunities within many of the lowest-cost plays in North America.”

Referring to the shut in production…

“They will be brought back on stream over the course of the winter. Our expectation is that there will be some form of correction in prices next year but the prices we are currently seeing above the $5 range (in the futures market) next year are adequate.”

Pending shareholder approval later this month, the “new” Encana will retain the natural gas assets focusing primarily on shale gas plays in British Columbia’s Horn River, and Montney basin and Haynesville in the U.S. and invest $3.9 billion to boost natural gas output.  The oil sand assets will be spun out into a newco called Cenovus Energy Inc., which will invest up to $2.3 billion to increase oilsands production and build refining capacity.

An interesting point here is that natural gas will receive $1.6B more investment dollars then the oil sands, perhaps providing a clear indication of how important EnCana views shale gas to the long term energy needs of North America and to the long term profitability of the company he manages and directs.

Reuters: Encana profit hit by lower gas prices, production

Vancouver Sun: Encana earmarks $2.3B for oilsands