The south of France may be the next natural gas exploration frontier for EnCana Corp., the company said yesterday as it announced first-quarter results that showed production rising more than 10 per cent from last year.
The Calgary company, which is North America's largest gas producer, is considering buying land in France, near Spain, and is mulling a move in Europe in general.
"We have been looking for the past couple years," Randy Eresman, EnCana chief operating officer, said after the company's annual meeting in Calgary.
Gas prospects in Europe are unclear. According to the BP PLC Statistical Review of World Energy, France isn't even listed as having notable proved natural gas reserves. In Europe, the Netherlands has about the same gas reserves as Canada, while Norway has about 50 per cent more.
EnCana's idea in France and Europe would be to use its expertise exploiting so-called tight gas reservoirs in a region where there is high demand for gas and low political risk, said Gwyn Morgan, EnCana president and chief executive officer.
But while EnCana eyes potential opportunities overseas, its focus remains decidedly on North America, the source of all its production from continuing operations. The company yesterday updated what its calls its "resource potential," that is the gas and oil it may book as proved reserves within five years.
A new estimate of that potential suggests the company has "more than a quarter century" of drilling prospects, Mr. Eresman said.
In the first quarter, EnCana production from continuing operations rose 11 per cent to 4.1 billion cubic feet a day, which is the equivalent of about 680,000 barrels of oil. Some drilling was delayed in Alberta because of an unusually early spring, EnCana said, but that isn't expected to affect full-year goals.
Although production rose, revenue fell, dragged down by unrealized losses on hedging, and the company booked a loss in the quarter, despite near-record prices for oil and gas. Sales in the quarter, net of royalty payments, were $2.66-billion (U.S.), down from $2.73-billion last year. EnCana lost $45-million or 10 cents a share in the January-March period, compared with a profit of $290-million or 62 cents last year.
The company booked a $628-million after-tax loss on hedging, though it noted hedging didn't hurt cash flow. A company's hedge book must be assessed at the end of every quarter, using commodity prices at that moment. Mr. Morgan said operating profit is a more important gauge.
On an operating basis, EnCana made $518-million, up 12 per cent from $462-million a year ago.
EnCana is looking to sell $3-billion or more of assets this year and said bids for its business in Ecuador are due next month. EnCana said it believes it can close a sale this year, despite political instability in the country. It said it would soon have news on the sale of assets in the Gulf of Mexico, as well as older production in Western Canada. It is still thinking of creating an energy trust out of those domestic assets.
EnCana yesterday said it is also trying to sell its natural gas liquids business, though that deal would be smaller than the others.
EnCana shareholders approved a two-for-one stock split yesterday. The company increased its dividend by 50 per cent but the yield on the stock remains less than 1 per cent.