CALGARY, Alberta—Canada’s top oil and gas producer EnCana Corp. plans to cut its 2009 capital budget by 18 percent to about $6.1 billion as a result of economic uncertainty, the company said Thursday.
EnCana said that the current quarter’s dramatically lower oil prices and refinery profits have reduced realized margins and inventory values in downstream operations by about $300 million.
“In these challenging economic times, we are highly focused on key business objectives: maintaining financial strength, generating significant free cash flow, further optimizing our capital investments and continuing to pay a stable dividend to shareholders,” stated CEO Randy Eresman.
EnCana said its performance in the Rocky Mountain region of the United States has been strong. It said hedging has protected it from downward pressure on prices there.
The company now projects full-year 2008 cash flow between $9.4 billion and $9.6 billion, or $12.50 to $12.80 per share.
Cash flow is forecast to drop to between $7.1 billion and $8.3 billion in 2009, or $10.25 per share at the midpoint, as the company targets natural gas and oil production at approximately 2008 levels.
EnCana added that the capital program can be adjusted by as much as $500 million on either side of the $6.1 billion capital budget estimate to meet economic conditions.
Next year’s cash flow might be enhanced by up to $1 billion in divestitures, “depending on market conditions,” said Eresman.
“Regardless, EnCana expects that 2009 cash flow and divestiture proceeds will significantly exceed capital expenditures, resulting in free cash flow of between $2 billion and $2.7 billion, well in excess of the company’s $1.2-billion current annualized dividend.”
EnCana, like other energy companies, has scaled back spending because of lower crude prices. Its U.S.-traded shares fell 47 cents to $46.10 in afternoon trading.
