Encana Corp.'s chief executive says the company's Canadian operations would see little to no impact from a possible U.S. levy on energy imports contemplated as part of President Donald Trump's tax overhaul.
CEO Doug Suttles said on Tuesday that impacts of a potential border-adjustment tax would be offset by increases to U.S. oil prices, which he said would likely lift prices for condensate produced by the company in Western Canada. Condensate is an ultra-light oil.
While Canadian natural gas prices could see some "degradation" under a tax, he said a weakening Canadian dollar would further offset costs, as would strong production from the company's growing operations in Texas.
"We think we'd be well positioned if it happened, but it feels like there's a lot to go on before we know what, if anything's, going to happen in this space," he told reporters on a conference call.
The threat of new trade tariffs – including an implicit 20-per-cent tax on imports – considered by U.S. Republicans has been a major preoccupation for the Canadian energy industry as well as its provincial and federal backers since the start of the year.
The prospect has weighed heavily on energy shares, as investors fret about the possible effects, although Mr. Trump has shown mixed support for the idea.
Calgary-based Encana has in recent years has shifted spending from its home base in Canada south to the booming shale fields in Texas, following a pair of pricey acquisitions in the region.
The company has also sought to cut costs by jettisoning assets that fall outside of its core holdings in British Columbia's Montney, the Duvernay region in Alberta, as well as the Eagle Ford and Permian zones in West Texas.
Mr. Suttles said the company's operations in multiple regions would help offset the impact of a border levy, were one imposed. It forecasts output of more valuable liquids in the Montney region is expected to reach 70,000 barrels per day by 2019, and would benefit from an increase in oil prices, he said.
"We think our Canadian business still does well in that environment, because we've been very focused on growing our condensate production in Canada," he said. "And because condensate's an imported product from the United States, we think that if a border tax raised the price of oil in the United States it would also raise the price of condensate.
"So even though we'd be producing it here in Canada we'd benefit from that."
Encana shares rose slightly in midday trading Tuesday on the Toronto Stock Exchange after the company posted first-quarter results that showed a return to profitability, helped by rising oil prices and strong production from its U.S. operations.
Encana said earnings for the three months ended March 31 were $431-million (U.S.) or 44 cents per share, compared to a year-ago loss of $379-million or 45 cents.
Production in the period fell 17 per cent to 317,900 barrels of oil equivalent per day boe/d. However, the company said it pumped out 110,900 barrels of higher-priced liquids, and that it was on track to meet or exceed its output target for the year.
Encana said its main assets generated 75 per cent of total output, or 237,300 boe/d. Natural gas output fell to 1.2 billion cubic feet a day from 1.5 bcf/d a year ago.