Encana Corp. must make a “radical change” in the way it spends money if it is to turn itself around, according to its new chief executive.
Doug Suttles, who took over the natural gas company in early June, also said Encana has more property than it needs. Mr. Suttles is rewriting the company’s strategy, and on Thursday gave investors a glimpse of where he is headed.
“Our capital allocation process is broken. We’re funding way too many plays, we’re not prioritizing, we’re not focusing our efforts,” he said at a conference. “We have something like 28 or so different asset opportunities in the portfolio, and every single one of them are being funded right now.
“I think we all understand focus and discipline and capital allocation is a real key to performance, and it is one of the things we have to make radical change in if we’re to be successful going forward,” Mr. Suttles said.
Mr. Suttles, once an executive at BP PLC, said he likes the property Encana controls, its cost efficiency, and market fundamentals team. “But there is also a problem here, in that it seems to be completely disconnected from the capital allocation process,” he said.
The executive, who took over as CEO after Randy Eresman abruptly stepped aside, noted the company is especially heavy on dry-gas projects. The price for dry natural gas has been unfavourable.
Encana, he said, does not have to increase the amount of natural gas and its byproducts in order jack up its fortunes.
“The first priority has to be profitability,” Mr. Suttles said. “And, in fact, I think you can grow profitability without growing production.”
This strategy mirrors Hal Kvisle’s approach at Talisman Energy Inc. Mr. Kvisle took over from John Manzoni last September and immediately rolled out plans to steer away from growth if it came at the expense of the bottom line.
Encana’s Mr. Suttles showed enthusiasm for his company’s Duvernay holdings.
“My judgment tells me very shortly, hopefully within the next year, in North America, we’ll be talking about the Big 5 plays, not the Big 4,” he said.