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Encana's (ECA) Two Montney Plants Come Online Prior Schedule

Zacks Equity Research
Updated

Exploration and production company Encana Corporation ECA has recently announced operating two of its three Veresen Midstream facilities well ahead of the scheduled time and that too within budget. These production sites are supposed to support Encana’s condensate-focused growth plan, representing the Montney formation located in British Columbia. Notably, Calgary, Canada-based Veresen Midstream has inked an innovative midstream agreement with Encana, helping the latter to build and operate the three plants.

While the Tower and Sunrise facilities in Montney formation came online in September-end, Encana expects the Saturn facility, which is also ahead of schedule, to start before the end of 2017. The plants are supposed to increase the company’s Montney liquids production by more than double its fourth-quarter 2016 level. Per a fee-for-service agreement, Encana pays to use the three Veresen Midstream-owned facilities.

Also, the Towerbirch lateral pipeline, which will aid Encana’s operations in Montney, started functioning from the beginning of this October. The pipeline connects the Tower, Sunrise and Saturn facilities with the NOVA Gas Transmission Ltd. (“NGTL”) system.

Delivering complex projects like those under budget limits and prior to their scheduled dates, shows the company’s competence level. This efficiency will further add stimulus to cement the bond between Encana and Veresen Midstream, thereby opening future building-contract opportunities for the former on behalf of the latter.

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Despite Encana’s production being constrained at an average of 3,500 barrels of oil equivalent per day (BOE/d) in third-quarter 2017 due to Hurricane Harvey’s catastrophic effects in Texan region, the company expects to achieve its current-year production guidance on the back of pre-scheduled startups in Montney.

About Encana

Based in Calgary, Alberta, Encana is a focused pure-play natural gas exploration and production (E&P) company. It is the second largest gas producer in North America, holding a highly competitive land and resource position among a number of most promising shale and tight gas resource plays in the region. This provides the company with a low risk, long-life and a sustainable growth profile.

Encana’s cost-reduction initiative and divestment of high-cost low-profit assets offer financial flexibility to the company to handle the current volatile market condition in a better fashion. However, the company’s huge exposure to natural gas remains a key area of concern with the commodity price still languishing below the key psychological level of $3 per million British Thermal Units.

Price performance

Encana has lost 2.4% of its value year to date, underperforming the 1.2% fall of its industry.

Zacks Rank and Stocks to Consider

Encana currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector are Lonestar Resources US Inc. LONE, Alliance Holdings GP, L.P. AHGP and First Solar, Inc. FSLR, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lonestar Resources’ sales for 2017 are expected to surge 60.2% year over year. The company delivered a positive earnings surprise of 62.5% in the second quarter of 2017.

Alliance Holdings’ earnings for the third quarter of 2017 are expected to increase 12.4% year over year. The company delivered a positive average earnings surprise of 13.6% in the last four quarters.

First Solar’s sales for the third quarter of 2017 are expected to rally 16.1% year over year. The company delivered a positive average earnings surprise of 524.2% in the last four quarters.

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