Wednesday, August 12, 2009

EnCana: Update & Market Opportunities for Gas

EnCana provided a recent update of its efforts in the Hayesville Shale. There were not a lot of specifics, but the company has been busy. In 2009, the company plans to drill 90 gross wells (50 net). Lately it has seen some strong results (IP rates in dark blue circles below are EnCana wells). One notable well was the Conway Harris 22 in Red River Parish, LA, which physically flowed 20 MMcf/day at 8,400 lbs flowing pressure.

These strong results are mostly a result of EnCana changing its completion program from eight fracture intervals to 12 to 14. As a result, the company talked about shifting its estimated ultimate reserves (EUR) model from 6 Bcf to 9 Bcf (!!!). The company only has data on three to four wells at this time, so they haven't settled on anything yet, but that's a big change. Well costs are around $9 million, but the company hopes to see that slip into the $8.0 to $8.5 million range.

EnCana will probably be able to provide some data on its foray into the Mid-Bossier Shale (above the Haynesville) in its third quarter (November) earnings report.

EnCana is starting to take more of a leadership role in promoting the use of natural gas in North America. As Canada's leading producer, this is not a surprise - the only surprise for any of these companies is why they waited so long. There were two slides in EnCana's recent investor presentation that addressed increasing the use of natural gas in both the transportation and electric generation fields. The two slides below summarize the environmental impacts of introducing 25 Bcf/day into each use. The bigger environmental gain comes from increasing the use of gas in power generation (second slide). But the bigger political gain, which is not specifically addressed in the first slide comes from decreasing the use of foreign oil in transportation. The slide assumes that natural gas is substituted for foreign, or "off continent," oil. It's nice to see that dark red pie slice shrink.

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