CALGARY — The gas-focused company that will emerge from EnCana Corp.’s (TSX:ECA) split at the end of the month plans to hang onto an East Coast offshore natural gas project for the time being.
The Deep Panuke platform, which is expected to start producing gas next year, is a departure from the new EnCana’s focus on prolific North American shale gas plays.
“We’ve always expressed it as being dissimilar from all the other projects EnCana has been pursuing over the past number of years,” chief executive officer Randy Eresman said Thursday on a conference call to discuss the firm’s third-quarter results.
“But we have not been actively pursuing the sale of the asset. We’re comfortable keeping it in our portfolio as it is approaching production,” Eresman said. “But also, if the situation was right, we’d consider selling it as well.”
Deep Panuke is economically viable at today’s natural gas prices, added Mike Graham, who will head up the Canadian division of EnCana after the split.
EnCana’s breakup into two separate oil and natural gas companies is set to become official Nov. 30, provided shareholders vote in favour of the transaction on Nov. 25.
The energy giant determined the value in each distinct division would be better reflected as separate entities than as part of a larger company.
The gas company will keep the EnCana name and will be led by Eresman. It will focus mainly on its vast unconventional gas holdings in northeastern British Columbia, Louisiana, Texas and elsewhere.
Its preliminary budget calls for 2010 spending of between US$3.6 billion and $3.9 billion, aimed mainly at the Horn River area in northeastern B.C., the Haynesville area in Louisiana and the Deep Panuke project.
The oil company, dubbed Cenovus, will be headed by Brian Ferguson, currently EnCana’s chief financial officer. It will encompass oilsands assets at Foster Creek and Christina Lake, an enhanced oil recovery project in Saskatchewan and refineries in Illinois and Texas.
Cenovus plans to invest between $2 billion and $2.3 billion in 2010, focused mainly on increasing production at Foster Creek and Christina Lake, as well as construction at a refinery at Wood River, Ill.
Earlier Thursday, EnCana said its profit plunged 99 per cent in the third quarter compared with the gang-buster results in the summer of 2008.
The energy company announced Thursday that its third-quarter net income fell to US$25 million, three cents per share, down from $3.5 billion or $4.73 per share a year earlier.
However, after taking into account hedging activities, the year-to-year decline wasn’t so dramatic at 46 per cent — although still sizable.
Operating earnings, which include realized hedging gains and losses, fell to $775 million or $1.03 per share, down from $1.4 billion or $1.92 per share in operating earnings a year earlier.
In hedging contracts, EnCana enters into deals to sell natural gas and other commodities in future at set prices, usually higher than today’s current spot price.
Analysts had pegged earnings per share at $1.17, according to figures compiled by Thomson Reuters.
Cash flow was $2.1 billion or $2.77 per share, down 26 per cent from $2.8 billion or $3.74 per share a year earlier.
In afternoon trading Thursday on the Toronto Stock Exchange, EnCana shares fell C$1.55 to $59.15, a drop of about 2.5 per cent.