CALGARY (CP) -- EnCana Corp. [TSX:ECA; NYSE:ECA] said it expects to produce up to two billion more cubic feet of natural gas from its holdings in emerging unconventional plays in British Columbia and the United States.
The Calgary energy company, which announced last month it would be splitting into two separate oil and gas companies, said Monday it has amassed significant land positions in B.C.'s Horn River Basin and in the Haynesville shale of Louisiana and East Texas.
"Recent exploration wells drilled by EnCana, its partners and industry, indicate these two resource plays hold the potential to eventually become amongst the largest in North America," CEO Randy Eresman said Monday in a statement.
Both of those plays have been compared to the prolific Barnett shale in north central Texas, which produces more than three billion cubic feet per day.
EnCana's has about 890 square kilometres in Horn River and 1,313 square kilometres at Haynesville and said each resource could potentially produce one billion cubic feet of natural gas per day net to EnCana, Eresman said.
EnCana will likely bump up its 2008 capital spending because of soaring commodity prices and increasing exploration in the Horn River and Haynesville areas and its earnings guidance is also expected to rise, Eresman told reporters at an energy conference in Calgary Monday.
The company also plans to shed some of its non-core assets, Eresman said.
"With these more robust prices and a real strong demand for land, we have the opportunity to divest of some of our more mature elements of our portfolio," he said at the conference.
He would not say exactly how much EnCana expected to garner from these sales, but indicated it could be well above C$500 million.
EnCana is North America's largest natural gas producer and has focused a great deal on unlocking unconventional resources - deposits that are expensive and technically difficult to exploit, but can contain vast amounts of natural gas.
A number of major Canadian and U.S. players have been buying up land in the shale gas deposits of Northeastern B.C. as soaring natural gas prices and new technology make developing those resources more economically viable.
"I think what everybody's realizing is what EnCana realized four or five years ago. The future for North American natural gas supply is all about unconventional resources," Eresman told reporters.
EnCana is the largest landholder in the Horn River Basin, which it discovered in 2003. Last year it reached a 50-50 partnership with Houston-based Apache Corp. to drill horizontal wells, which have shown strong early results.
In the Hayesville shale, EnCana has been building up its land base since it began drilling vertical wells there in 2006. It has a 50/50 venture with Shell Exploration & Production in developing that resource.
He said the huge amount of natural gas that could flow into the North American marketplace as a result of these plays should not be cause for concern that prices will plummet to last year's abysmal levels.
In recent months, prices have rebounded to close to US$13 per thousand cubic feet on the New York Mercantile Exchange, but a drop to the $7 or $8 level could still be a "reasonable base," Eresman said.
"This growth in natural gas supply in North America is absolutely required in order to keep the supply in balance. Right now with the higher prices we're seeing, it's already indicative that it's not in the same kind of balance that it was a few months ago," Eresman said.
"I think we're going to be on sort of a knife edge in the years to come. Prices could go either way and very quickly."
EnCana announced May 11 it intends to split into a pure-play natural gas company with a working name of GasCo and an oilsands-based integrated oil company temporarily named IOCo.
On Monday EnCana said the GasCo's board of directors will be chaired by David O'Brien, the current EnCana chair. The other directors are to be CEO Eresman, Claire Farley, Barry Harrison, Dale Lucas, Jane Peverett, Allan Sawin and Clayton Woitas.
Chairing the IOCo board will be Michael Grandin, chairman and CEO of the Fording Canadian Coal Trust. Brian Ferguson will be president and CEO and a member of the board, with other directors including Eresman, Ralph Cunningham, Patrick Daniel, Ian Delaney, Valerie Nielsen, James M. Stanford and Wayne Thomson.
EnCana shares closed up C$1.15 to C$95.21 on the Toronto Stock Exchange Monday.
(c) The Canadian Press 2008
