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Encana Q4 Loss Narrows On Higher Production, Liquids Price

Canadian Natural gas firm Encana Corp. (ECA,ECA.TO) reported Friday a narrower net loss for its fourth quarter. The results reflects higher production and improved liquids prices, though gas prices recorded a decline from last year. Looking ahead for 2012, the company expects the proposed reduction in capital investment to reduce its natural gas production.

For 2011, Encana achieved its operating production target, up 5 percent from the previous year.

Encana's President & Chief Executive Officer Randy Eresman said, "We just completed one of our best operational years ever, hitting our targets for cash flow and production which offset lower prices and a significant delay to the start-up of our Deep Panuke production facility offshore Nova Scotia."

In a separate statement, Encana said it entered into partnership with Mitsubishi Corp. for developing Cutbank Ridge undeveloped lands in British Columbia. As per the deal, the Japanese business enterprise will invest C$2.9 billion for a 40 percent interest in long-term development of the project. Encana will own 60 percent of the Partnership. Mitsubishi will pay about C$1.45 billion on expected closing later this month, and will invest additional C$1.45 billion for a commitment period, which is expected to be about five years.

Encana's fourth-quarter 2011 net loss was $246 million, narrower than prior year's loss of $469 million. The latest quarter results were impacted by a non-cash asset impairment of $854 million triggered by lower forecasted natural gas prices and a change in future development plans. This was partly offset by gains related to unrealized hedging and non-operating foreign exchange.

The prior year's results mainly reflected asset impairment charge of $371 million and hedging loss of $269 million.

Operating earnings, which excluded special items, dropped to $46 million or $0.06 per share from $50 million or $0.07 per share last year.

On average, 16 analysts polled by Thomson Reuters expected earnings per share of $0.09 for the quarter. Analysts' estimates typically exclude one-time items.

Total production in the fourth quarter was 3.60 billion Bcfe/d, up 7 percent from last year. Production of natural gas increased 7 percent and liquids grew 17 percent.

Realized natural gas price declined to $4.79 per thousand cubic feet or Mcf from $5.03 per Mcf last year, while realized liquids price climbed to $85.44 per barrel from $68.91 per barrel a year ago.

Further, Encana said its Board of Directors has declared a quarterly dividend of 20 cents per share.

Looking ahead for fiscal 2012, the company said its capital investment plan of $2.9 billion represents about 37 percent drop from last year. The reduced investment in dry natural gas programs would lower 2012 natural gas production to about 3.1 Bcf/d.

Eresman said the company is immediately taking action to slow down or shut in production from existing well bores equaling an additional 250 MMcf/d. According to the company, the combined total natural gas volume reduction would remove about 600 MMcf/d off the North American market.

For the year, liquids production is expected to be 28 thousand barrels per day. The company also plans net divestitures of $3 billion in the new year.

In Canada, Encana shares closed Thursday's trading at C$20.15, up C$0.85 or 4.40 percent.

by RTT Staff Writer

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