CALGARY _ Encana Corp. (TSX:ECA) has no plans to spend more to increase production despite recent world oil price increases linked to unrest in Saudi Arabia, CEO Doug Suttles said Wednesday.
He said the Calgary-based oil and gas company, which has a capital spending budget of about $1.7 billion this year, is wary of cost inflation and unconvinced that recent price increases will last.
“If we ramp up activity, if we believe prices are strong, we’d only do that if we believe it’s going to generate quality returns and we’re not going to see erosion through higher cost,” Suttles told analysts on a quarterly conference call.
“In the shorter term, I’d be surprised if we adjusted our plans based on near-term movements in price. In the longer term, it would (require) being convinced that the price is going to be sustained and we’re actually going to generate quality returns, quality margins.”
Crude prices have been gradually rising since mid-October and jumped by nearly $2 a barrel over the weekend amid after the Saudi government arrested dozens of influential people, including 11 princes and 38 officials and businessmen.
The government said the arrests were aimed at eliminating corruption but observers suggested they may also stamp out potential rivals or critics of Saudi Crown prince Mohammed bin Salman, the son of King Salman.
Benchmark New York oil prices closed Tuesday at US$57.20 per barrel on Tuesday, well ahead of the US$50 assumption in Encana’s recently updated five-year plan.
The Calgary-based company said production in October recovered to more than 325,000 oil-equivalent barrels per day after matching analyst expectations at just 284,000 boe/d in the third quarter.
The decline from 338,000 boe/d in the same period of 2016 was blamed on well shutdowns from Hurricane Harvey flooding in Texas, third-party pipeline and gas processing plant curtailments in Western Canada and the closing in July of a deal to sell natural gas assets in Colorado.
Natural gas production fell 29 per cent from the same three months of 2016, but liquids production, which includes high-value oil and condensate, grew nine per cent. The company is maintaining its full-year 2017 forecast of 315,000 boe/d.
Encana, which reports its results in American currency, noted a third-quarter profit of US$294 million or 30 cents per share, down from US$317 million or 37 cents a year ago.
Revenue totalled US$861 million compared with US$979 million a year ago.