Replies to This Discussion

Permalink Reply by Les Bamburg on July 23, 2009 at 2:46

Skip, just to clarify - EnCana did not put 134,000 acres up for auction. I can't remember the total but it was more like 2000 acres and it was in the far southeast corner of Red River Parish.

Permalink Reply by w.r. frank on July 23, 2009 at 2:54

Excerpt from TODAY'S July 23, 2009 ECA press release:

"EnCana generates second quarter cash flow of US$2.2 billion,
or $2.87 per share – down 25 percent
Natural gas hedges deliver $900 million of realized after-tax gains

Calgary, Alberta, (July 23, 2009) – EnCana Corporation (TSX & NYSE: ECA) continued to deliver strong financial and
operating performance in the second quarter of 2009 – a period of very low natural gas prices. Cash flow was $2.2 billion,
or $2.87 per share, and operating earnings were $917 million, or $1.22 per share – down 25 and 38 percent respectively on
a per share basis compared to the second quarter of 2008. EnCana’s financial performance was greatly enhanced by its
commodity price hedges, which contributed a $900 million after-tax gain, or $1.20 per share, to cash flow in the second
quarter. Second quarter natural gas and oil production remained flat at 4.6 billion cubic feet equivalent per day (Bcfe/d)
compared to the second quarter of 2008. "

IMO, tight credit markets are not the issue for ECA when cash flow in one quarter is $2.2 BILLION. ECA will allocate capital to the area of highest return. SWEPI isn't burdened by lack of capital either.

ECA and SWEPI are just making allocations of capital to the area of highest economic return.

Permalink Reply by Les Bamburg on July 23, 2009 at 2:52

WR, during a more recent conference call EnCana revised the 134,000 acres down to ~ 30,000 acres. This was at the same time they doubled their 2009 Haynesville Shale budget from $290MM to $580MM to support a "lease retainage" strategy.

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Permalink Reply by Skip Peel - Mineral Consultant on July 23, 2009 at 3:08

Encana is a well run and financially sound E&P company. And they are tough as nails to deal with. But every energy company has a need for access to credit. ECA has maintained a better than average cash flow by judicious hedging of future production. The ability to hedge is currently significantly reduced and prior hedge positions are expiring. The need for investment capital in this play in Encana's case will come next year. Some positive news for the southern portions of their joint leasehold with SWEPI would be to their advantage.

Permalink Reply by buckmaster on July 23, 2009 at 2:38

skip i think your probably right. if you look at the grid map you will see everything runs from the northeast to the southwest.there has been no activity in the east and southother than the messenger and the two sweppi wells that were screwed up.maybe they learned something who knows. they have already permitted the wells in sabine parish. i agree i think encanna will get permits real soon. i live in sec 23 11n 11w so these posssible wells will be very intresting to me. also iheard encanna and sweppi had afalling out and were no longer partners. may explain why encanna is taking the bull by the horns. i want to thank every body for all the info that we get. i go to the site several times a day. dont have much to say but i take a lot in. THANKS

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Permalink Reply by Skip Peel - Mineral Consultant on July 23, 2009 at 2:55

You're welcome, buckmaster. For some time now I have suspected that the Haynesville Shale Play was of greater importance to Encana's future plans than to Shell's. I think Encana has made a commitment to the exploration and production of shale gas that Shell (SWEPI) has not. In a way, I agree with your comment concerning the two partners "falling out". I think ECA has been pushing to be more aggressive with development and Shell has been hesitant. It is a positive turn of events IMO that ECA now seems to be taking the lead.

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Permalink Reply by w.r. frank on July 23, 2009 at 3:02

To say SWEPI is hesitant is an understatement. As the guard on Blackstone Ivery 10 & 15 said, "those SWEPI guys have gone fishing."

As a case in point, Calhoun 21 (#238,720) reached total depth and was reported WOC on February 17, 2009. On July 9, 2009, it was reported as waiting on frac. Five months after reaching TD, SWEPI still hasn't gotten the well completed!!! Time is money!

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